1. Crude oil prices are surging

Industry oil barrels or chemical drums stacked up.container of  barrels of hydrocarbons.hazardous waste of black and blue tank oil.Stack Of Oil barrels in plant.
RachenStocker / Shutterstock

As with gasoline, the cost of crude oil tanked last spring as COVID-19 wrecked economies and stopped people from traveling. To prop up oil prices, the OPEC cartel and its allies slashed oil production.

But lately, crude prices have been soaring — because OPEC has been slow to boost output again. Oil this month hit $60 a barrel for the first time in over a year, and Goldman Sachs expects prices to hit $72 by summer, according to multiple media reports.

"Crude, not demand, has been the main factor driving gas price increases this year," says Jeanette Casselano McGee, a spokeswoman for AAA. The average price in most states is now higher than a year ago, according to AAA data.

Though gas prices are going up, mortgage rates remain historically low — meaning if you're a homeowner, one way to offset the rising cost of fuel is by refinancing your home loan. You could save thousands of dollars a year.

2. Harsh winter has been tough on refineries

Texas is still suffering from the unexpected huge amount of snow. People without heat, without food, without access to internet. It’s a real life threatening situation. Dallas, 02.17. 2021.
Marouanesitti / Shutterstock

The recent brutal winter weather in Texas has seriously impacted the state’s oil production, forcing refineries to close in America’s top crude-producing state.

Eleven refineries in Texas were shut down at least partially due to the extreme winter temperatures, taking as much as 20% of the country’s total refining capacity offline, says the price-tracking website GasBuddy.

“Oil prices have continued to rally as global oil demand recovers from the worst of the COVID-19 pandemic, and now the extreme cold weather shutting refineries down, U.S. motorists just can’t seem to catch a break,” says GasBuddy analyst Patrick De Haan.

De Haan says gas prices could ease in the near term but then fly high again as summer approaches. That's a good reason to look for a better deal on car insurance, to help hold down your driving costs.

3. The pandemic also knocked out refineries

Oil Refinery and Smoke Stacks with Clear, Blue Sky - Los Angeles, California.
Paul W Thompson / Shutterstock

Long before the storms, the oil and gas industry was reeling from plummeting fuel sales caused by COVID. By late 2020 there were more than a dozen refinery closures that reduced U.S. production by more than 1 billion barrels per day.

"It's possible some capacity could come back online in the 2022-2023 timeframe, but by and large, we think these closure announcements will mostly prove permanent," wrote Raymond James analyst Justin Jenkins about the refinery shutdowns in a December report.

U.S. oil and gas producers lost tens of thousands of jobs last year, and laid-off workers were left scrambling to make ends meet.

Many struggling Americans have been leaning on credit cards more than usual, to get by during the pandemic. If that's you, a lower-interest debt consolidation loan can cut the amount you pay each month — and help you afford the higher prices at the pump.

4. Vaccinations are expected to boost travel

Woman with face mask getting vaccinated, coronavirus, covid-19 and vaccination concept.
Halfpoint / Shutterstock

As more Americans are vaccinated and life begins to return to something closer to normal, people are likely to drive and fly more. And that trend will contribute to rising fuel costs.

“At the foundation of the rise [in oil prices] is the fact that the coronavirus situation continues to improve, pushing global oil demand higher as production continues to lag, pushing U.S. gas prices higher,” GasBuddy's De Haan says.

You can fight back by shopping around for lower gas prices, because they can vary by up to $1 a gallon in metro areas, according to GasBuddy. Also, you might want to consider replacing your vehicle with a more efficient model.

This tax season, you could turn your tax refund into a new set of wheels.

5. Stimulus checks will drive up spending — and prices

Extreme close-up of Federal coronavirus stimulus check provided to all Americans from the United States Treasury in 2020, showing the statue of liberty.
William Sawalich / Shutterstock

Congress is working on giving Americans another $1.9 trillion in COVID relief, including a third round of stimulus checks. The aid is expected to help lift gas prices as consumer spending gets a shot in the arm.

Goldman Sachs estimated last month that $2 trillion in economic stimulus spending over 2021 and 2022 could pump up U.S. oil demand by roughly 200,000 barrels a day. If supplies don't keep up, that higher demand will mean higher fuel prices.

As gasoline gets more expensive, another way for you to balance out those higher costs is by spending less on other purchases.

You can download a free browser add-on that will point you in the direction of lower prices and other savings every time you shop online.

6. Summer will bring pricier gasoline blends

Couple driving convertible car enjoying a summer day at sunset
Stokkete / Shutterstock

American drivers could find themselves spending close to $3 a gallon for gasoline, on average, by Memorial Day, according to both AAA and GasBuddy.

Those forecasts factor in the switch to pricier summertime blends of gasoline, expected to begin rolling out in March. Higher-grade gasoline is used in summer months to reduce emissions that cause smog; those blends can cost up to 15 cents more per gallon, according to the service station trade group NACS.

GasBuddy says the U.S. may ultimately be spared from $3-a-gallon gas this year: "The market could get doused in cold water, however, should OPEC, which controls a third of global oil production, raise production in the weeks or months ahead."

But looking for ways to save on the cost of driving is a smart strategy, no matter what you're paying for gasoline. For example, regular comparison shopping for car insurance can save you as much as $1,100 a year, studies have found.

About the Author

Justin Anderson

Justin Anderson

Reporter

Justin Anderson is a reporter at MoneyWise. He has a degree in Journalism from Ryerson University and his career has seen him cover everything from business and finance to the entertainment industry to politics, with plenty in between.

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