DARKE COUNTY – The wildfires in Canada are causing gas prices to rise due to expensive crude oil costs and supply disruptions in other oil-producing countries, reported AAA.
The national average price of gasoline increased slightly over the past week, and it is likely that prices are heading for a new 2016 high in the coming days. Monday’s average price of $2.22 per gallon for regular unleaded gasoline represents an increase of 11 cents per gallon on the month, though drivers continue to enjoy a substantial year-over-year discount of 48 cents per gallon.
Gasoline demand regularly increases leading into the summer driving season, and this year has been no exception. According to last week’s supply report from the Energy Information Administration, U.S. gasoline demand hit its highest mark of the year at 9.66 million barrels per day, which was the highest number since August and 4.4 percent higher than the same period last year.
While domestic gasoline inventories reportedly decreased by about one million barrels, supplies are still some 14 million barrels higher than a year ago. In response to this seasonal increase in demand, refineries nationwide are ramping up production, although some facilities, particularly in the Great Lakes region, have been impacted by the fires in Alberta, Canada.
As has often been the case, volatility has characterized pump prices in the Midwest in recent weeks. Many states in the region reflected double-digit increases two weeks ago, then drops of 10 cents or more last week, only to see large gains over the past seven days, led by Indiana (+9 cents), Ohio (+8 cents) and Kentucky (+8 cents).
The fires in Alberta have been burning in a part of Canada that is rich in oil sands, and there has been a significant decline in production. Canadian oil is often cheaper than crude from other parts of the world, and in recent years U.S. refiners have increasingly relied on Canadian imports. Midwestern refineries in particular have changed their production methods to take advantage of heavy Canadian crude oil, which arrives by pipeline. The recent decline in Canadian production has impacted the regional cost of oil and is likely contributing to more expensive gas prices in the Midwest.
Miami Valley prices have moved higher over the past week as well. The current average in the Dayton/Springfield area is $2.24 a gallon, up nine cents from a week ago and 12 cents from a month ago. The price is down 40 cents from this date last year.
Oil Market Dynamics
Global oil prices began this week pointed higher as market watchers continue to evaluate how recent supply disruptions may impact the glut of global crude oil. This includes the impact of wildfires in Canada and ongoing issues in the Middle East, North Africa, Nigeria and Venezuela.