Gas prices hit their highest levels since 2008 Thursday and at some stations in New Jersey, the dreaded price of $4 a gallon for regular has already been reached.
Thankfully, that is not the average price, but experts said $4 per gallon isn’t far away due to factors ranging from the war in Ukraine to the seasonal switch from winter grade gasoline.
“You’re going to hit it,” said said Tom Kloza, Oil Price Information Service global petroleum analyst. “There’s a good chance we might hit it this month.”
On Thursday, New Jersey gas prices averaged $3.74 for a gallon of regular, slightly above the U.S. average gas price of $3.72, according to GasBuddy.com. By Friday, the average price increased to $3.83 a gallon.
That website reported the lowest prices in the state range from $3.21 to $3.39 a gallon for regular, primarily at unbranded gas stations and discount retailers such as Costco. The highest prices ranged from a $4.17 to a mind-numbing $4.99 per gallon for regular, all of these are at “name brand” stations.
That practice is called “zone pricing” where stations in affluent areas, and some poor towns and off interstate highways, have higher prices than the state average, said Robert Sinclair, AAA Northeast spokesman.
For the rest of us, prices are being driven by higher crude oil prices on commodities markets, which reached $110 a barrel Thursday, according to NASDAQ.
Even without likely price increases due to Russia’s invasion of Ukraine, gas prices would go up anyway because of the seasonal switch from winter blend to summer gas, Kloza said. That could increase pump prices between 10 to 20 cents per gallon by mid-April, Sinclair said.
Another factor is since 2019, one million barrels a day in gas refining capacity has been lost in the Gulf Coast, Kloza said.
“We lost a refinery to Hurricane Ida, we lost another Louisiana refinery because Shell said it’s not profitable,” he said.
Some gasoline refineries on the west coast were lost due to COVID-19 -- they were reconfigured to make renewable diesel and sustainable aviation fuel and other carbon friendly products, he said.
“Even without Ukraine, I thought we were going to hit $4 nationally and that includes New Jersey,” he said.
The war in Ukraine has oil markets on edge, where looming sanctions and unofficial sanctions by oil companies and shippers could mean the loss 10 million barrels of Russian oil a day.
“There is noise on the markets that there might be a deal with Iran this week,” Kloza said. “We’re going higher, it’s just a matter of how quickly we get there.”
Local sanctions include formal boycotts of the Russian owned Lukoil gas stations, including Newark City council’s vote to suspend the licenses of two Lukoil stations on Wednesday.
The impact on the price of diesel fuel, which is used by trucks, ships and trains, will be worse, and could reach $4.50 a gallon, increasing shipping costs, Kloza said. Homeowners also could be in for sticker shock if they need to top off their tank with diesel’s cousin, heating oil, before spring, he said.
“You will see so many fuel surcharges work their way through the economy for freight, it will make your head spin,” he said. “I’m hoping we can get Iranian crude in the market, otherwise we’ll be in this cycle of high prices for a long time.”
President Joe Biden, a Democrat, announced in his State of the Union address this week that another 30 million barrels of oil from the Strategic Petroleum Reserve will be released to ease gas prices. But, as happened with past releases of oil, experts don’t expect that to have much impact on prices at the pump.
Meanwhile, a bill to ban Russian gas and oil imports was introduced Thursday by a bipartisan group of legislators including U.S. Rep Josh Gottheimer, D5th Dist., to sanction Russia for its invasion of the Ukraine.
While the U.S. Energy Information Administration predicted national crude oil production to return to 2019 levels of 12 million barrels a day by April, officials at the American Petroleum Institute said American oil production could be increased further, if the Biden administration removed some regulatory barriers.
“The polices the administration put in place (are) restricting oil and gas access, canceling pipeline projects, proposing tax increases on oil and natural gas (and) continue to have a dampening effect on domestic oil and natural gas,” said Dustin Meyer, API natural gas markets vice president.
Delays on permits for oil infrastructure and hold-ups executing leases of federal lands for oil exploration were specific issues cited by API.
Some experts disagreed with some of that assessment.
“The Keystone XL pipeline would have been a supplementary pipeline that might have been pumping crude from Canada in 2025 or 2026,” Kloza said. “We are importing 4 million barrels a day from Canada, thanks to expanding other pipelines.”
While Kloza said there is much land to explore for oil without federal lands, he said the Biden administration should try some diplomacy with exploration and production companies, since they have an “adversarial relationship.”
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Larry Higgs may be reached at lhiggs@njadvancemedia.com.
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