Here’s What’s Going on With Gas Prices

Hint: It has a lot to do with the cost of crude oil.

November 22, 2021

Gas Prices

By Sara Counihan

ALEXANDRIA, Va.—Gas prices are always a hot topic, and it’s never been more so than right now. California is facing record prices a few days in a row. The national average is as high as it’s been this time of year in late November. The holiday travel season kicks off this week with Thanksgiving, and prices historically rise. What’s going on with gas prices? This week’s episode of the Convenience Matters podcast has the answers.

“Gas is increasing at a time when it usually decreases. Part of that could be related to demand, but it’s really more related to oil prices and how they’ve continued to ramp up and refining margins being fairly robust,” said Jeff Lenard, NACS vice president of strategic industry initiatives, and this week’s Convenience Matters podcast host.

According to Tom Kloza, global head of energy analysis, OPIS, currently, there are high crude oil prices by OPEC+ and wide refining margins, plus high ethanol prices, which is 10% of the blends. However, demand has not returned from pre-pandemic levels.

“You’ll hear a lot of people talk about demand is back to where it was before the pandemic, but not quite there yet. I’m not sure it will get there,” said Kloza.

Kloza says that affecting the price of gas is the amount of crude oil OPEC controls, and right now, it has a lot of crude oil “in its pockets.”

“They’re wearing kind of like those big sort of cargo shorts that you see. And there’s a lot of crude there. There’s also a lot of crude in North America’s pockets,” he said. “We’ve had two boom and bust cycles. You know, the most recent of course was the one where we went down to a negative price for oil, and the people that control the capital don’t want to necessarily exploit the oil right now.”

The world is also seeing the biggest rebound in gasoline demand worldwide that we’ve ever seen. (Gas volumes in the U.S. during the pandemic were as low as they were during the Kennedy Administration.) Kloza said it’s a perfect storm to send prices higher for world crude.

Looking to the Thanksgiving holiday, Kloza says it’ll be “much more brisk than last year. But still, we don’t think it will be up to 2019 levels.”

Kloza says that the problem comes after Thanksgiving and into the colder months. The price of crude has been “pumped up” because there are talks of the U.S. getting another polar vortex, like the one in 2014.

“When it’s 10 below zero or there’s snow all over the ground, that’s when the prices tend to go down, so it would be very unusual if in the next hundred days, we don’t see prices drop or ease a little bit. Right now, it’s been lingering for longer, essentially in the last couple of months or so, and there’s a lot of reasons for that, but most of those should go away in the real dead of winter months.”

Be sure to listen to this week’s episode of Convenience Matters podcast to learn more about exactly what’s going on with gas prices, how California is an “island” when it comes to gas prices and why Kloza has a beef with George Clooney.

Each week a new Convenience Matters episode is released. With more than 300 episodes to choose from, the podcast can be heard on Apple Podcasts, Spotify, Google Play and other podcast apps and YouTube and at www.conveniencematters.com. Episodes have been downloaded more than a quarter million times by listeners around the world.

Sara Counihan is contributing editor of NACS Daily and NACS Magazine. Contact her at scounihan@convenience.org.

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