U.S. gas prices climbed to their highest point in nine months on Wednesday, driven by rising oil prices that show no signs of easing in the months ahead.
The national average stood at $3.80 per gallon on Wednesday, according to AAA, well below the prices seen last summer, which saw a record-high national average of more than $5 per gallon but still a 27-cent increase from last month.
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The increase is due largely to higher oil prices, which have climbed on the backs of production cuts from OPEC+ members, including Saudi Arabia, which announced it would extend its voluntary cut of 1 million barrels per day through September. Russia also took some supply off the market, reducing global output by 1.5%.
The rise in oil prices is significant, since crude factors into more than half of retail gasoline prices in the United States, according to the Energy Information Administration. (It made up 57% of prices in 2022.)
“The heat is slowing down refining operations, and it's leading to some outages,” Patrick De Haan, the head of petroleum analytics at GasBuddy, said in an interview last week. "In fact, July gas supplies were at their tightest last month since 2015.”
Meanwhile, experts said prices could climb even higher in the months ahead due to extreme heat conditions, lower OPEC+ output, and an expected uptick in Chinese demand. Supply could also be shut in because of a hurricane as fall, and the most active part of hurricane season, begins.
With the strategic petroleum reserve at its lowest point in 40 years, with enough supply to last roughly 18 days, any hurricane that threatens Gulf Coast refiners could put the U.S. in a dangerous position. “We may actually see gas prices inching up this fall, especially considering the unknown surrounding hurricane season,” De Haan said.
The heat has curtailed output at oil refineries in the Gulf of Mexico, including Texas, which is experiencing one of its hottest summers on record.
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When temperatures are as high as in recent weeks, equipment risks breaking down and malfunctioning, forcing refineries offline and crippling their ability to refine oil into gasoline.
ExxonMobil’s refinery in Baytown, Texas, has had problems recently with the heat tripping its units off. Restarting a refining plant after an outage is a careful and extremely deliberate process.