U.S. gasoline prices are sitting at four-year seasonal highs headed into the November midterm elections, even as President Donald Trump has called repeatedly for OPEC to push prices lower.
While gasoline prices typically drop following peak summer demand season, they have not fallen as fast as expected, said Jeanette Casselano, spokeswoman for the American Automobile Association.
The national price average was at $2.867 a gallon as of Wednesday, its highest seasonally since 2014, according to AAA.
Fuel prices have risen due to a surge in crude oil prices. U.S. crude futures have gained in part because of U.S. sanctions affecting Iran’s petroleum sector, which have already cut into that nation’s exports, according to market participants. That has forced others, including Saudi Arabia and Russia, to make up the difference. The price of global benchmark Brent hit a four-year high of $82.55 a barrel this week, while U.S. crude hit $72.78, the highest since July 11.
The sanctions are expected to take supply off the market when they go into effect in November. The Organization of the Petroleum Exporting Countries ended a meeting on Sunday with no formal recommendation to boost output.
Increased pressure on global supply could cause gasoline prices to remain at current levels or even rise this fall, which would be unusual, said Patrick DeHaan, head of petroleum analysis at tracking firm GasBuddy. That could have an effect on voter psyche with the midterm congressional elections approaching.
“The absence of a decline at the pump in the fall could be notable as voters head to the polls,” DeHaan said.
Yet, prices might not be high enough to sway voter sentiment. Consumers do not usually make “lifestyle changes” until prices rise to $3.25 a gallon or more, Casselano said.
Wholesale prices have risen in the Midwest as the region’s refineries undergo maintenance, DeHaan said.
In the physical market, gasoline cash differentials in Group Three RUV-DIFF-G3, a region that encompasses several Midwestern states, rose to a near three-year high last week, traders said.
U.S. gasoline inventories are at seasonal record highs, which could help temper price increases, said Bob Yawger, director of energy futures at Mizuho.
The wide discount of U.S. crude to Brent WTCLc1-LCOc1 has incentivized refiners to make gasoline with cheaper U.S. crude and put it into storage for later sale, Yawger said.
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