U.S. gas prices jumped to a thirteen month high this week amid a surge in crude oil markets powered by a crippling cold snap in Texas and ongoing crude production cuts from OPEC.
The average price at the pump for most Americans has risen more than 20% over the past three months to $2.55 a gallon, according to the consumer advocate website Gasbuddy.com. That's the highest since January of 2020 and a 46.5% increase from the five year lows recorded during the peak of the pandemic lockdown in April.
Rising oil prices are the most significant factor in the pump price surge, with U.S. crude adding to recent gains Wednesday to trade at $61.05 per barrel, the highest since New Year's Eve 2020, amid refinery shutdowns in Texas triggered by the coldest weather in the southwest region in more than a century.
Rising demand, however, has also added upward pressure to both gas and crude prices, with Gasbuddy reporting the first rise in three weeks. The ongoing global COIVD recovery, which has lifted benchmark oil prices from their April 2020 nadir of -$37.63 per barrel to just under $65, is also driving prices for crude and its components in markets around the world.
Additional supply cuts unveiled by Saudi Arabia earlier this year, as well as OPEC's ongoing commitment to re-balancing global markets with output curbs, are also keeping prices at multi-month highs.
It's not just tighter supply which has been a catalyst for the move higher, growing hopes of a global recovery have been bullish as well, as we see Covid-19 cases falling once again and the rolling out of vaccines," said ING's head of commodity strategy, Warren Patterson. "This does mean that we are a step closer towards returning to some form of normality, which should be supportive for oil demand."
"We are still of the view that the demand recovery is going to be a long and slow process, and it is only when we get into the second half of this year that we should see a more robust recovery," he added.
That could mean that U.S. gasoline prices test the $3 per gallon mark sometime in September, when current trends suggest some 70% if the U.S. population will have received at least one dose of the two available vaccines.
Gasbuddy's head of petroleum analysis, Patrick De Haan, thinks we could get there even sooner.
"This situation will last as long as OPEC continues to restrain their oil production, creating the situation we’re in where demand is recovering faster than supply," he said. "(And) just wait until spring; it’s likely the national average will rise another 10 to as much as 50 cents per gallon if oil production doesn’t respond to the continued recovery in demand."