Gasoline and diesel prices this summer could be the highest since 2014, and the industry is blaming political uncertainty for prices at the pump.
“The ultimate price U.S. consumers pay for gasoline and diesel this summer will depend on the course of global oil supply and demand in the coming months, which are very uncertain,” the U.S. Energy Information Administration (EIA) stated in its summer fuels outlook released Tuesday.
The price of retail gasoline will average $3.84 per gallon this summer, from April to September — up from $3.06/gal during summer 2021 — the highest price, adjusted for inflation, since summer 2014, according to EIA. Retail diesel prices will average $4.57/gal.
EIA predicts that gasoline consumption will increase as COVID-19 pandemic restrictions ease, but remain below the pre-pandemic summer of 2019. The agency estimates that the average U.S. household will spend approximately $2,495 on gasoline this summer, which in real terms is 18% more than in 2021.
The effect of global uncertainty
The outlook is riddled with uncertainty due to global events. The war in Ukraine has disrupted crude oil supply and Russian crude has stopped flowing to the U.S. following sanctions. The International Energy Agency’s (EIA) recent announcement that it will release 240 million barrels of oil will also impact prices during the summer, according to the Agency.
In addition, the Biden administration said March 31 that it will release 180 million barrels of crude oil from the Strategic Petroleum Reserve over the course of six months.
On Tuesday, the administration also announced that the Environmental Protection Agency (EPA) is issuing an emergency waiver to allow sales of 15% ethanol-gasoline blends (E15) across the U.S. this summer in order to increase fuel supply. Under the Clean Air Act, the sale of E15 is usually prohibited between June 1 to September 15 as higher ethanol blends can increase smog in warmer weather, according to EPA.
The potential for new COVID-19 variants and spikes in the number of cases could limit travel and demand for transportation fuels, EIA said.
US policy receives criticism
Policy uncertainty from Washington has added to price increases, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute.
“While we can’t predict the future, it’s clear that Washington can do more to bring additional supply into the market through clear and consistent policies that support U.S. production and ultimately bring relief to American consumers,” Macchiarola told Energy Policy News in an email.
The American Fuel & Petrochemical Manufacturers (AFPM) agrees with EIA’s prediction of higher gas prices, according to a spokesperson. AFPM has previously argued that the U.S. should improve oil and gas infrastructure and shore up U.S. refining capacity instead of relying on the Strategic Petroleum Reserve.
Executives from major oil companies made similar arguments last week during a House committee hearing. Republican lawmakers also slammed Biden for making it harder to build pipelines, pointing to the cancellation of Keystone XL.
EIA will publish a separate summer outlook for electricity markets in the May update of the Short-Term Energy Outlook.
