Why Are Gas Prices Rising in February?

Gasoline prices have risen versus last week in every section of the U.S. besides the Midwest. Nationally, the price of a gallon of gas has climbed 1% in the past week and 13% in the past month, outpacing the 3% drop in the price of WTI crude and the 2% rise in Brent crude.

Source: U.S. EIA.

Seasonally, we're seeing the highest price of gasoline in the fourth week of February in the past five years.

Regionally, gas prices vary quite a bit, with California having the highest prices.

And so the obvious question is: Why is gas so high now?

There are three big reasons.

1. Refinery outages. Many refineries do necessary maintenance in the winter months, as demand is the lowest. However, there are a few unplanned refinery outages, and Hess (HES 1.15%) is closing its 70,000 bbl/d Port Reading refinery, which has lost money the past three years.

2. Prior low crack spreads. Earlier in the winter, crack spreads for Brent crude fell below 0, meaning refiners were losing money for every gallon of gasoline they produced.

This situation has now reversed itself.

3. Global demand for petroleum products. While demand for gasoline in the U.S. has been flat, around the world demand is growing. For structural reasons, the price of oil in the U.S. (WTI) is almost $20 cheaper than the international price. While Enterprise Product Partners (EPD -0.17%) and Enbridge are busy reversing the Seaway Pipeline and TransCanada (TRP -0.54%) is halfway done with its pipeline from Cushing, Okla., to the Gulf Coast, Marathon Petroleum, Valero Energy, and Phillips 66 have all been taking advantage of the price disparity by exporting gasoline and other forms of processed crude oil. Exports for gasoline were at their highest levels in U.S. history in December. We'll have to wait till March 7 for the January numbers, but I expect those to be even higher.