Gasoline prices will hover around $2.46 per gallon this summer, 23 cents higher than last summer, according to a report by the Energy Information Administration (EIA) published today.
Still, the price is 70 cents lower than the five-year average, which now includes the effects of 2.5 years of bearish oil markets. The EIA said the higher prices this summer reflect recovering oil prices from the Organization of Petroleum Exporting Countries' (OPEC) recent deal to cut oil output by 1.2 million barrels for the first half of 2017.
"Gasoline prices reflect four main components: crude oil prices, wholesale margins, retail distribution costs, and taxes," the agency said. "Because the latter two are generally stable, movements in gasoline prices are primarily the result of changes in crude oil prices and wholesale margins. Each dollar per barrel of sustained price change in crude oil or gasoline wholesale margins translates into a change of 2.4 cents per gallon in product prices."
The 23-cent increase will lead to a $200 increase in energy costs for the average American household over the summer compared to 2016, the EIA estimates. Last year, gasoline prices were the lowest since 2004.
Gasoline prices will vary across the country based on each state's energy infrastructure and regulatory framework.
"Prices on the West Coast are often the highest in the country because California requires a blend of gasoline that is relatively costly to produce and some states in the region have relatively high state gasoline tax rates," the report said. "Gasoline prices in Gulf Coast states are often among the lowest in the country because of relatively low state tax rates and abundant gasoline supplies, as the region is home to about half of U.S. petroleum refining capacity."
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More
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