Why Gasoline Prices Are Rising

During the first two weeks of February, refinery utilization in the U.S. was at 83%. Then the winter storm negatively impacted about a dozen refineries in Texas. By the last week of February, refinery utilization had plunged to 56%. Once again, it’s hard to pin that on Biden.

There are only a couple of mechanisms by which a President could have a short-term impact on gasoline prices. If they signed legislation changing the gasoline tax, which currently accounts for about 21% of the cost of gasoline, then that would quickly impact gasoline prices. Or, if a President announced a major release of oil from the Strategic Petroleum Reserve, that could cause oil prices to temporarily dip and might impact gasoline prices short-term.

Longer-term, there are certain things Biden can do to impact gasoline prices. Some of the moves he is making now may eventually impact prices. Cancellation of the Keystone XL Pipeline, for example, could eventually impact gasoline prices.

But those are long-term impacts. Other than the two mechanisms I mentioned above (or, I suppose he could also escalate military action in the Middle East), a President just doesn’t have a mechanism for sharply moving gasoline prices.

Factor 3: Transition to Summer Gasoline

Where are prices headed from here? Undoubtedly higher. One final fact that impacts gasoline prices is whether the U.S. is in winter or summer gasoline season. Winter gasoline blends are cheaper to produce, and demand is lower.

By summer, gasoline blends cost more to produce and demand is higher. Hence, the price of gasoline typically rises between January and May. Last year was a notable exception caused by the pandemic, but higher gasoline prices headed into summer is the norm.

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