The average price of a gallon of regular unleaded gasoline in New Jersey is now $4.54, up more than 20 cents a gallon a week ago and more than 40 cents a month ago. .
According to industry analysts, gasoline prices continue to climb for several reasons.
When the pandemic started in March 2020, demand for oil plummeted and production was curtailed.
Demand has returned, but Tom Kloza, global head of energy analysis for the Oil Price Information Service, said gas prices have risen because increasing oil production takes time.
Not enough refining capacity
The latest jumps are really on a lack of refining capacity, on top of some of the shutdowns you’ve had in the United States over the last few years,” he said.
Some companies are also hesitant to step up their oil production efforts as there is growing support for expanding green, solar and wind energy efforts, in particular, in the future.
He said refining output in Europe has also been cut and many countries are now promising not to use Russian oil anymore, so prices have risen.
Kloza said demand continues to be lower than it has been for years, but another reason prices have risen is an automated market system.
“The markets are broken, the people who are normally the market breakers, who keep prices from going higher are not there,” he said.
As a result, “you have a lot of artificial intelligence and black box trading and momentum and so on, it gets disconnected.”
So what happens next?
Kloza expects prices to stabilize, at least for the next few weeks.
“Most of the increases you’ve seen recently have to do with the fact that it’s now summer gasoline that’s being traded everywhere,” he said.
“I expect the U.S. government to provide a federal tax holiday, so that will be an 18-cent drop when that happens.”
Wholesale gasoline prices traditionally peak in early to mid-May and can then drop a little.
“I think you’ll see prices flatten out, so summer is anyone’s guess. If we get hurricanes on the Gulf Coast, we could see $100 a barrel of crude but $200 a barrel of gasoline, and that’s one of the things we’re worried about,” Kloza said.
David Matthau is a reporter for New Jersey 101.5. You can reach him at email@example.com
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