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Gasoline has been shooting higher, with the national average at $3.83 a gallon -- a nine-month high. This week, market participants told Power Corridor they are expecting tight fuel inventories, refinery outages and a potentially active hurricane season to keep prices elevated.
One of the main reasons for the rising cost of fuel: Outrageous summer heat that's broken multiple records and made it virtually impossible for the nation's fuel refineries to keep up with summer driving season demand.
"The whole summer has been defined by refinery problems," said one director at a bank in New York who oversees energy hedge funds and investor flows. With the nation's refineries running full-tilt at more than 90 percent of capacity in the blistering heat "things are breaking, especially in Texas," which leads the nation in both crude oil production and refining.
"I think we're going to continue to see tight gasoline inventories going into autumn," he said. "We came into the summer with these low inventories and they're still tight due to the refinery outages."
Energy companies have been recalibrating their production, as refineries aren't able to run in temperatures above 95 degrees. Nearly 40 percent of U.S. petroleum refineries reside in Texas and Louisiana, where temperatures this summer have, at times, breached 100 degrees.
Another factor keeping gas prices propped up is that energy hedge funds are betting on an active hurricane season this autumn, with the earth's oceans hitting the hottest temperatures in modern history. Some of the warmest temperatures have been measured in the North Atlantic.
According to weekly data from the U.S. Commodity Futures Trading Commission, money managers' bullish gasoline bets have reached the highest level since the Russian invasion of Ukraine. Gas prices could go higher if the Atlantic Ocean's heat pulls a hurricane into the Gulf of Mexico and damages refineries. Already, retail gasoline prices are at the highest level since November, although below the nation's peak average of $5.02, notched in June 2022, according to AAA.
The Atlantic hurricane season runs every year from June 1 to November 30, with 97 percent of all tropical storms and hurricanes in the Atlantic falling within this period, according to the U.S. National Hurricane Center.
Still, a hurricane doesn't always mean higher prices.
"The thing about hurricanes is that there is often a reactionary move up, but they can also drive prices down and be a demand-killer," the bank director said. "If there's a hurricane, people will stop driving, they will stay inside. When the hurricane hits, it may damage refineries, but gas is not being used."
