Americans should prepare for gas prices to continue to rise, analysts warn

American consumers should expect gasoline prices to continue to rise due to various national and global factors, according to energy analysts who spoke to FOX Business.

Analysts said major bottlenecks at oil refineries and policies that discourage more fossil fuel production or refinery capacity nationwide have contributed to rising prices. Additionally, the powerful Middle East oil cartel, the Organization of the Petroleum Exporting Countries (OPEC) and Russia are expected to announce massive production cuts of up to 1-2 million barrels per day on Wednesday, Reuters reported.

“What OPEC could really do could determine where we go by the end of the year,” Patrick De Haan, head of oil analysis at GasBuddy, told FOX Business.

“I was expecting at least good potential that the national average could drop below $ 3 a gallon, but I think OPEC just threw a bucket of cold water on this by signaling its intentions to be well ahead of any economic slowdown.” has continued. “Global oil stocks remain extremely limited and it is very clear that OPEC is becoming dependent on triple-digit oil.”

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The Organization of Petroleum Exporting Countries and Russia are expected to announce massive production cuts to 1-2 million barrels per day on Wednesday, Reuters reported. (Reuters / Dado Ruvic / File Photo / Reuters Photos)

The national average price of gasoline rose for the 14th consecutive day Tuesday, reaching $ 3.81 per gallon, according to an AAA database. Pump prices fell for 99 consecutive days between June and mid-September after hitting an all-time high of $ 5.02 per gallon.

Both the WTI index, the US benchmark, and the global Brent crude oil benchmark traded 3% higher on Tuesday pending the OPEC announcement on Wednesday. Rising oil prices could signal more pain at the pump for consumers in the United States and abroad.

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“If they do something really specific where the Saudis, Kuwait and the UAE would take the cut, because other countries are having a hard time getting the quota, then I think we will march significantly higher for crude,” Tom Klaza, the global chief of energy analysis at the research firm Oil Price Information Service (OPIS), told FOX Business in an interview.

“I think we will still go higher for crude in the next three or four months, but that’s more or less what will happen in the next three or four days,” he continued. “So, I’d say the lowest expectation is that they will announce a million barrels per day cut, but it’s through a subscription that includes lower performance.”

OPEC

OPEC members meet in Vienna, Austria on December 7, 2018. (Joe Klamar / AFP / Getty Images)

At the same time, a series of routine and unexpected outages at US refineries, which produce petroleum products such as gasoline and diesel, have played a major role in rising gasoline prices. The closures had a particular impact on prices in California, where the average price at the pump skyrocketed to $ 6.41 per gallon, more than a dollar more than a month ago.

“What has really driven prices up over the past two weeks has been more related to an exceptional amount of refinery hitches,” De Haan told FOX Business. “But now that OPEC appears on the verge of cutting oil production it could start setting prices a bit higher as well.”

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OPIS predicts that about 3 million barrels per day of domestic refinery capacity, the equivalent of nearly 20 percent of total inputs, will decline at some point in October, Klaza said. “This is a lot,” she added.

Overall, US refineries are churning out about 90 percent of their total operational capacity, according to the most recent data from the Energy Information Administration. This figure is down from the utilization rate of around 95% recorded in June.

AAA said on Monday that consumers should “brace themselves for rising prices at the pump” if demand remains high as refinery closures and maintenance forces reduce supply. Domestic demand for gasoline increased from 8.32 million barrels per day to 8.83 million barrels per day last week, according to EIA data.

A refinery in Indiana

A refinery is pictured in Whiting, Indiana on October 10, 2021. (Luke Sharrett / Bloomberg via Getty Images / Getty Images)

De Haan has also targeted several government policies that, according to him, have contributed to refinery problems and rising gasoline prices more broadly. He specifically criticized the Biden administration saying oil companies should increase refining capacity while he openly advocated a transition from fossil fuels.

“The White House is basically picking a winner,” he continued. “He’s choosing electric vehicles and he’s choosing a loser: fossil fuels. Which oil company will invest billions of dollars in building a new refinery? In this climate, that would be silly.”

“Talk about doublespeak. ‘We need to build more and we’ll shut you down in 10 years.’ That confusion won’t build trust in oil companies by saying, “Hey, you know what, we’re going to expand our refinery by 100-“. No, nobody will. ”

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President Biden wrote to seven major oil companies in June, warning that he was ready to act if they did not increase production at the refinery. However, the administration kept quiet about companies needing to increase refinery capacity as gas prices fell over the summer. Such refinery expansions are extremely expensive and are increasingly risky in light of increasingly stringent environmental regulations.

President Biden in a photographic illustration with a petrol pump and oil refinery

President Biden asked oil companies to increase refinery capacity in June. Since then, the White House has been silent about supporting even more competing refineries online. (FOX Business / Fox News)

Over the past two weeks, Biden has again directed his ire against the oil industry, blaming companies for rising prices. The White House, however, took credit for the price cuts in July, August and September.

In light of rising energy prices, a coalition of business groups including the Chamber of Commerce, 204 local Chambers of Commerce representing 47 states and 14 national trade associations wrote a letter to Biden on Tuesday urging him to increase offshore and onshore energy production. The Biden administration continued to push its federal ban on the new oil and gas leasing, including asking foreign producers to increase production.

The letter noted that both small and large companies face increased costs for goods, services and transport resulting from higher energy costs.

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“With analysts forecasting a return to high oil and natural gas prices this fall and winter, companies are bracing for even greater pressure,” said Marty Durbin, president of the Chamber of Commerce’s Global Energy Institute on Tuesday.

“While we recognize that policies to support increased production will not solve our challenges overnight, they will send important market signals that could help unlock investment, helping to avoid long-term supply shortages and high prices.” .

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