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How success against coronavirus could affect gas prices
Gas
Motorists pump gas Thursday at the RaceTrac at McEver and Browns Bridge Roads. Gas prices are expected to rise in the coming months. - photo by By Scott Rogers

One year ago, gas prices in area were averaging $1.85 per gallon, according to AAA’s gas price index. 


Supply vs. demand amid pandemic

Montrae Waiters, regional spokesperson for AAA, said the effects of the pandemic — which included stay-at-home orders and a shift from in-person to at-home working schedules — played a major impact on gas demand.

“The pandemic caused a shift for a lot of commuters,” Waiters said. “COVID-19 caused state closures around the nation, businesses to close, more folks working from home, which impacted work commute and fewer motorists on Georgia roadways.”

From the beginning of April last year, Energy Information Administration data shows gas demand decreased significantly, from 8.8 million barrels to 6.7 million barrels.

According to EIA, demand has not been that low since 1993. 

And even as gas prices slowly broke the $2-per-gallon average during the holiday season, according to AAA officials, it was the lowest per-gallon rate in five years as 34 million fewer motorists traveled.

But fast-forward to April 2021 and the area’s gas prices have increased, with regular rates in the neighborhood of $2.69 per gallon, which is in line with the state’s per-gallon average of $2.71.

How much motorists could be paying at the pump in the coming months, gas market experts say, depends on a number of factors. The normal summer price increase will also be affected by the success of COVID-19 mitigation efforts.

“It’s directly tied to each other,” Patrick De Haan, head of petroleum analysis at Gas Buddy, told The Gainesville Times. “If there is a downward trend in COVID-19 cases, people are getting vaccines, all 50 states are successful in curbing COVID-19, gas prices will rise.”

Waiters said gas prices traditionally rise going into summer anyway, when there is a switch from low to high Reid vapor pressure fuel used in hotter months and as driving increases.

“High-drive seasons such as Memorial Day, July 4 and Thanksgiving are also times when prices can significantly fluctuate,” Waiters said. “Additionally, regional gas prices fluctuate depending on local taxes, local supply, and demand.”

That demand could be higher as more states open up, restrictions are lifted, and many people who’ve been isolated at home for a year indulge their urge to go somewhere.

“The belief is that a blend of Americans will feel better about getting out and driving more as vaccinations rise and … COVID cases trend downward,” De Haan said. “Also consider how much overseas travel could be limited for Americans. There could be more (road) travel happening.”

De Haan told The Times that while it’s “impossible to predict” what prices could look like this summer, gas prices could also surge due to optimism from oil producers that there will be higher demand. 

More demand could cause a spike in the price of crude oil, which accounts for half the price of gas. The Organization of the Petroleum Exporting Countries and other top oil producers have announced they will increase production by about 350,000 barrels a day starting next month.


Politics at the pump

De Haan said the rising prices have little to do with who is president.

Gasoline prices are rising “because the economy is coming back strong after the lockdown,” De Haan said. “It’s economic fundamentals, not politics.”

Only 544 drilling rigs are currently in operation in the United States and Canada compared to 996 a year ago, De Haan pointed out. North American oil producers, still shaken by the unprecedented 60% drop in gasoline demand over two weeks last spring, are being cautious about restarting idled drilling rigs, which is allowing renewed demand to outstrip supply and keeping prices high.

Some Republicans point to executive orders that Biden issued during his first days in office as part of his goal, outlined during his campaign, to combat climate change by eliminating carbon emissions by 2050. They say that while those executive orders might not be immediately affecting oil and gas supplies, Biden’s policies as a whole could be influencing producers and traders to anticipate rising prices and take actions now that reinforce those expectations and keep prices climbing.

One of Biden’s orders, issued on Inauguration Day, halted construction of the 1,200-mile Keystone XL pipeline between Alberta, Canada, and Steele City, Nebraska. When complete, the pipeline was projected to move 830,000 barrels a day from the Canadian oil sands to refineries along the Gulf Coast of the United States.

Another order barred new sales of oil and gas drilling leases on federally owned land, primarily in the western U.S.

Biden also ordered the United States to rejoin the Paris Climate Agreement, reversing predecessor Donald Trump’s withdrawal from the treaty, which was intended to reduce global greenhouse gas emissions and stop CO2 gases from affecting global weather by midcentury.

The Keystone decision, according to contractor TC Energy, immediately killed more than 1,000 jobs and scuttled plans by contractors to hire thousands more.

Dan Kish, senior vice president of policy at the American Energy Alliance, an offshoot of the Institute for Energy Research Institute, said in an interview, “I have no idea” whether Biden is causing gas prices to rise.

But he added, “The fact is that the administration has made it clear he wants to get off of fossil fuels. One of the most effective ways to do that is to make it more difficult to produce so prices go up. Then people will shift to types of energy he supports. How much of that is kicking in now, eh, you can ask 10 different people and get 10 different answers.

“But if you anticipate that it’s going to be harder, effects of that psychology on business decisions begins to work its way into the system.”

De Haan said there will come a day in the not-too-distant future when oil and gas production return to peak levels and producers will be constrained by Biden’s policies from leasing new drilling sites and opening new pipelines. At that point, he said, it will be accurate to blame Biden for rising prices.

Before that happens, he said, the industry will have to return to pre-pandemic production levels by reviving idled drilling rigs and ramping production back up from the current 10.4 million barrels a day to 13.3 million barrels a day — all of which can be done without new drilling sites and without the Keystone Pipeline XL.

“There will be a time when it will be about politics,” he said. “That time is not now. It’s on the horizon.”


Looking toward the summer

While there have been reports that motorists in some states could be paying as much as $4 per gallon this summer, AAA officials said that’s not expected in Georgia. With a glut of supply, prices could even go down temporarily.

“There appears to be no indication that Georgians will experience $4 per gallon gas prices at the pump this summer,” Waiters said. “Actually, growing stock levels and cheaper crude oil prices are putting downward pressure on pump prices for the majority of motorists.” 

Garrett Townsend, Georgia public affairs director for AAA, concurred.

“In the weeks ahead Georgians may see slight fluctuation at the pumps,” Townsend said. “However, large jumps are not likely to occur.”

Ahmad Brown, a long-hauler for Pepsi who does deliveries throughout North Georgia and metro Atlanta, said he noticed prices lower than $2 per gallon when the pandemic was in full force in March 2020. 

When asked about a possible rise in gas prices in the months to come, he was skeptical.

“This pandemic isn’t over, and while there are more people on the roads, I also don’t see quite as many people at the local pumps that I’m at,” he said. “For me, my expenses are covered by [Pepsi], but I know that a difference of a dollar at the pumps can hurt folks.”

De Haan added that while gas prices have rebounded in recent months, the oil industry is still reeling from the pandemic that led to a massive elimination of jobs in that sector.

“The pandemic has a major impact on the gas market, and the next few months will be critical for the industry,” he said.

This article includes reporting from the Sun-Sentinel, available to The Times via Tribune Content Agency.