Here’s why gas prices are rising again

Gas prices have been climbing for a month, but that's after prices plummeted over the previous six months, bottoming out around $2.00 a gallon in late January.

After months of decline, the seemingly inevitable is here: Gas prices are back on the upswing.

That may seem odd given the plunging prices most Americans have seen over the past half year, but analysts say an uptick in gas prices is normal for this time of year. Refineries undergo routine maintenance in preparation for warmer days ahead, and many refineries across the country are in the middle of an ongoing workers strike. What’s more, crude oil prices – which heavily influence gas prices – are also on the rebound.

“We’re seeing a typical trend in prices right now,” says Michael Green, a spokesman for automotive group AAA, in a telephone interview Monday. “Pretty much every year gas prices rise in the spring and peak by May.”

US average gasoline prices were at $2.30 a gallon Monday, according to AAA. That price is low compared to previous years (Last February’s average was a dollar higher than gas is today), but it's still higher than the last few months of falling gas prices.

As recently as January, gas dipped to $2 a gallon for the first time in years, a drop fueled primarily by cheap crude oil and resilient refineries. But US average gas prices have risen for 28 days straight now, the longest streak of rising prices since last spring, according to AAA.

Refinery slowdowns – from seasonal maintenance, a refinery explosion, and strike-related uncertainty – are largely to blame for the rising price at the pump, analysts say. Refineries tend to tune up equipment in the winter, when fewer motorists are hitting the road and demand for gasoline is lower. And although the refinery walk-out has had a limited impact on production so far, it could have a bigger impact down the road: It’s the largest strike in three decades, and it’s now getting larger.

 

“This is the most volatile time of the year because of maintenance, and additional uncertainty leads to higher prices,” Mr. Green says.

Oil prices play a role, too. After collapsing 60 percent since June to a low of $48 per barrel earlier this month, global crude prices have climbed back up to near $60.   

Even if oil prices begin falling again, gas prices will still likely rise as part of their seasonal cycle, dipping slightly in late spring before climbing during the summer driving season. Even as gas prices rise, Americans can expect to save an average of $750 in gasoline costs this year compared with last year, according to the US Energy Information Administration.

EIA predicts crude prices will slowly rise in 2015, EIA Administrator Adam Sieminski said in early February. That uptick will nudge the price of gas up to an average of $2.13 a gallon for this quarter, and up to an average of $2.33 a gallon across the year.

In contrast, the average gas price last year was $3.36 a gallon, according to EIA data.

In early February there was concern that a strike of thousands of refinery workers across Texas, California, and the Midwest could have an impact on the price of gas.

Workers in the United Steelworkers union began striking Feb. 1 after talks with the industry collapsed over workers’ insistence on addressing safety concerns and staffing levels. The largest refinery in the country – the Motiva Enterprises facility in Port Arthur, Tex. – joined the strike midnight Friday, adding 1,350 workers to the walk-out.

“We are in solidarity with the more than 5,200 oil refinery workers who are currently on the picket lines demanding safe working environments and an end to dangerous and abusive industry practices,” Richard Trumka, president of the AFL-CIO, the largest US union, said in a statement in early February. “No one should go to work each day wondering if it will be their last. No one should be asked by a supervisor to labor at unsafe staffing levels.”

But the current strike hasn’t had a huge impact on gasoline prices, analysts say – at least not yet. "The longer it goes on, then the more likely it is going to influence gas prices," Amy Myers Jaffe, an energy economist at the University of California, Davis, told CBS Sunday.

Refineries today are more automated than ever before, meaning a walkout won’t necessarily halt production.

"We can continue on running with the staffing levels that we have ... for a very long period of time," Geoff Goff, CEO of Tesoro – which owns several striking refineries – told investors earlier in February, according to AP.

Refineries are relying on temporary workers until the union dispute is settled.