Lifted by oils recovery and growing consumer demand, gasoline prices at pumps in the U.S. hit an average of $2.88 a gallon over the past week, according to the AAA. That marks a 30% increase over this time last year, when the pandemics lockdowns slammed fuel usage.
Rising prices are an early season gift for fuel makers including Valero Energy Corp. and Phillips 66 after a bruising year, helping to make energy shares the top-performing sector this year in the S&P 500. A proxy for profit margins at refiners, calculated from the gap between gasoline and crude-oil futures, recently neared its highest level in three years at more than $24 a barrel.
Some analysts see further gains ahead. Prices tend to climb closer to summer, when millions of Americans drive to vacation spots and petroleum refiners blend costlier fuel that wont evaporate in the heat.
Booming gas prices join a recent rally in other commodities such as copper, as well as improving data on jobs and spending, as signals that the economy is gathering momentum. At the same time, elevated fuel prices are biting some consumers and businesses while adding to worries about rising inflation.
A man checks gas prices at a BP gas station in Libertyville, Ill., Saturday, Feb. 6, 2021. (AP Photo/Nam Y. Huh)
In Colorado, where gas prices have climbed by nearly 40 cents a gallon over the past month, landscaper and tree surgeon Allan Trujillo is feeling the pinch. Mr. Trujillo drives a 1996 Ford Econoline to work from his home in Arvada and runs fuel-consuming machinery including chain saws and power trimmers. He said he is spending about $100 a week on gas right now, up from around $60 normally at this time of year.
This just seems a little bit too early in the year for gasoline prices to rise said Mr. Trujillo, 45 years old. When we do want to drive out to the locations that are further out its definitely going to cost us a little bit more.
Supporting gasolines climb is a rebound in crude-oil prices and a big drop in the amount in storage. The price of West Texas Intermediate crude has advanced by more than 60% since the end of October to $57.76 a barrel Tuesday, even after a recent tumble. Crude accounts for 56 cents of every dollar consumers spend on gasoline, according to the Energy Information Administration.
Refiners throttled back output last year in response to lower prices and weak demand. The winter freeze that struck Texas in February then knocked some of the nations biggest out of action. The combination dragged stocks of motor gasoline below normal levels for March.
Now, many observers expect a nascent recovery in fuel consumption to accelerate as restrictions on movement ease. Climbing prices could then encourage refiners to churn out more fuel to meet the surge, analysts said.
The market is telling me I need to turn my refinery on and run it as hard as I can, said Michael Tran, managing director for global energy strategy at RBC Capital Markets. Can we push north of $3? Absolutely, Mr. Tran said.
The prospect of a sustained rise concerns Lauren and Peter Long, whose family raises cattle and horses just north of Jackson Hole, Wyo. Come summer, the couple will drive the 35 miles from home to the ranch most days before swapping their Jeep Cherokee and Chevrolet Equinox for beaten-up vehicles to get around their 400-acre plot.
Its going to be quite costly, said Ms. Long, 34.
Another worry is that the expense of driving into the mountains might deter potential customers from hiring the ranch as a venue for weddings or business events in future seasons. A Long family trip to Yellowstone National Park might be off if prices keep heading higher, Ms. Long said.
Diesel prices also have climbed. That is an unwelcome development for Jerry Boyce, owner of Nampa, Idaho-based Hallmark Construction Inc. Mr. Boyce drives trucks up to 250 miles to building sites and said his monthly fuel bill is now about $4,000, up from $3,000 in the fall.
That little dollar adds up really fast, said Mr. Boyce, 44. Hallmark has taken the hit from higher diesel prices so far but will charge customers more if they remain elevated, he added.
Analysts are gauging whether consumers will respond to higher gasoline prices by cutting down their driving. In a 2019 survey, 44% of respondents said they would change their habits if prices rose to $3 a gallon, according to Jeanette Casselano McGee, a spokeswoman for the AAA.
Many observers expect drivers will be less sensitive to prices this year as pandemic restrictions lift.
People are fatigued by lockdowns and theyre desperate to get out, said Regina Mayor, global head of energy at KPMG. Still, she thinks March could see the highest prices of the year because refiners are set to kick into action to replenish supplies.
Another factor that could keep a lid on gasoline prices: Many Americans are either working from home or unemployed, crimping gasoline demand from commuters.
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