A combination of geopolitical events, environmental regulations, and rising demand will beset U.S. commuters with higher-than-average gas prices this summer.
Pump prices typically rise during the summer months as Americans take to the open roads for vacation trips. Currently, the national average price for gasoline is about $2.80 a gallon — a sharp uptick from $2.40 during the same time in 2017. Almost half of all gas stations across the country are selling gas at $2.76 a gallon or higher, and 17 percent of stations are selling at $3.01 or higher, according to a May 4 Axios report. Pump prices are expected to climb even higher in the coming months.
Four main factors are driving prices: OPEC, Venezuela’s economic collapse, environmental regulations and higher demand.
After several years of falling oil prices, the Organization of the Petroleum Exporting Countries, more commonly known as OPEC, reached an agreement with Russia two years ago to limit global oil production. Their deal has proven largely successful. Global oil prices have risen from around $30 a barrel in January 2016 to over $65 today.
Venezuela sits atop the greatest oil reserves in the world, but socialism has a way of complicating the easiest of jobs. Once an oil exporting behemoth, the South American country has watched production screech to a halt as the rest of its economy shutters. Output fell by 100,000 barrels a day in February. Production has reached its lowest point in 70 years, according to The Central University of Venezuela. The situation has aided OPEC’s goal in cutting global production.
Non-geopolitical factors will also lead to higher prices this summer. State and federal regulations require the use of summer-grade gasoline, which is more expensive to manufacture. These environmental rules obligate refineries to switch to a cleaner, higher-priced form of gasoline every summer compared to the winter season. Additionally, the summer months are indicative of travel season. Thousands of American families will be driving and flying across the country, consuming more gas and driving demand.
There are fears in President Donald Trump’s administration that costly gas prices will hamper the economic gains made in the past year. GOP-led tax cuts have boosted growth, but pain at the pump could stymie economic progress. In fact, Trump took to social media to voice ire at OPEC for manipulating prices:
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
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