Summer driving, tight supply gasses fuel prices at the pump

Jul 15, 2021, 6:30 AM | Updated: 8:01 am

The economic recovery is pumping up gas prices.

Drivers are facing pricier fill-ups as more people hit the road for work, travel and other activities that the virus pandemic halted. Higher demand for gasoline is running up against lagging supply as the energy industry slowly ramps up after more than a year of production and staff cuts.

The prices are especially painful for drivers who just a year ago saw gas fall to its lowest point since 2016, but who couldn’t take advantage because the virus pandemic limited travel.

The supply and demand disconnect is exacerbated by a busier summer travel season as COVID-19 cases fall, vaccination rates rise and the tourism industry recovers. The Energy Information Administration estimated that gas demand for the week ending July 2, which included only one day of the Independence Day holiday weekend, was the highest in 30 years.

“The reason we’re here is because of imbalances created by COVID-19,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Less driving during the pandemic caused demand for gas to plunge and that forced the fuel industry’s hand to cut production and lay off employees.”

The national gas price average has increased 40% since the start of the year, according to AAA, and drivers can expect the price to keep rising. The auto club expects the national average to rise above $3.25 this summer.

The actual cost of gas isn’t near a historic high, De Haan said, but the quick rise in prices not long after last year’s sharp dip is making it feel more painful.

“Obviously the $3 threshold is what makes it fell particularly worse,” De Haan said.

A large part of the production imbalance stems from the OPEC cartel’s resistance to increasing production to meet rising demand. Talks among OPEC members and allied oil producing countries broke off earlier this month in a standoff with the United Arab Emirates over production levels.

Currently, OPEC and allied countries are producing some 37 million barrels a day, compared to around 43 million barrels per day in April of last year, at the start of the pandemic. The low supply, high demand situation has pushed crude oil prices up more than 50% in 2021 to levels not seen since late in 2018.

“Lots of energy companies paused development as bond holders demanded discipline and you’re not seeing a supply reaction,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

Analysts have said high oil and gas prices will probably remain this year as the economic recovery levels off and energy companies find their footing again with production and staffing levels.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Lead water pipes pulled from underneath the street are seen in Newark, N.J., Oct. 21, 2021. (AP Pho...

Associated Press

Biden to require cities to replace harmful lead pipes within 10 years

The Biden administration has previously said it wants all of the nation's roughly 9 million lead pipes to be removed, and rapidly.

3 days ago

Facebook's Meta logo sign is seen at the company headquarters in Menlo Park, Calif., on, Oct. 28, 2...

Associated Press

Meta shuts down thousands of fake Facebook accounts that were primed to polarize voters ahead of 2024

Meta said it removed 4789 Facebook accounts in China that targeted the United States before next year’s election.

3 days ago

A demonstrator in Tel Aviv holds a sign calling for a cease-fire in the Hamas-Israel war on Nov. 21...

Associated Press

Hamas releases a third group of hostages as part of truce, and says it will seek to extend the deal

The fragile cease-fire between Israel and Hamas was back on track Sunday as the first American was released under a four-day truce.

8 days ago

Men look over the site of a deadly explosion at Al-Ahli Hospital in Gaza City, Wednesday, Oct. 18, ...

Associated Press

New AP analysis of last month’s deadly Gaza hospital explosion rules out widely cited video

The Associated Press is publishing an updated visual analysis of the deadly Oct. 17 explosion at Gaza's Al-Ahli Hospital.

11 days ago

Peggy Simpson holds a photograph of law enforcement carrying Lee Harvey Oswald's gun through a hall...

Associated Press

JFK assassination remembered 60 years later by surviving witnesses to history, including AP reporter

Peggy Simpson is among the last surviving witnesses who are sharing their stories as the nation marks the 60th anniversary.

11 days ago

Israeli Prime Minister Benjamin Netanyahu, chairs the weekly cabinet meeting in Jerusalem, Sunday, ...

Associated Press

Israeli Cabinet approves cease-fire with Hamas; deal includes release of 50 hostages

Israel’s Cabinet on Wednesday approved a cease-fire deal with the Hamas militant group that would bring a temporary halt to a devastating war.

12 days ago

Sponsored Articles

(KTAR News Graphic)...

KTAR launches online holiday auction benefitting Boys & Girls Clubs of the Valley

KTAR is teaming up with The Boys & Girls Clubs of the Valley for a holiday auction benefitting thousands of Valley kids.


Dierdre Woodruff

Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?

Interest rates are the highest they’ve been in decades, and it looks like the Fed has paused hikes. This may be the best time to lock in rates for long-term, low-risk financial products like fixed annuities.



Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.

Summer driving, tight supply gasses fuel prices at the pump