Gasoline prices in the tri-state area have shot up recently, and analysts for a leading fuel-tracking service on Thursday predicted that they could climb to $3 per gallon by Memorial Day.
An Iowa State University economist said he doesn’t anticipate such a jump, however.
What’s undisputed is the recent surge in prices in the area. Fuel-tracking service GasBuddy reported as of Thursday night that the average fuel price in the Dubuque metropolitan area had risen by about 20 cents in the previous month and more than 55 cents from two months earlier.
Tanya Duhme, who works at Neighborhood Quick Mart on West Locust Street in Dubuque, has seen gas prices continue to rise in the past few weeks.
“I know it’s been increasing like every two or three days,” she said. “Prices are just nuts.”
Prices bottomed out last April and early May, with the Dubuque-area average dipping to less than $1.50 per gallon, as demand withered during the onset of the COVID-19 pandemic and more people stayed at home.
“(Those prices) ended up being a great benefit for consumers, but it was actually an indication of horrific stress in the economy,” said Dave Swenson, an Iowa State University economist. “Because the prices were so low, oil rigs were shut down.”
But some trends are reversing.
“We’ve had several months of a growing economy, and the pandemic is easing some as people are getting their vaccines,” Swenson said. “Motor vehicle fuel demand is up, but the supply is lagging.”
The key factor in recently higher U.S. gas prices has been the February storms that have taken refineries offline, tightening supply. The national average was $2.74 per gallon on Thursday, up more than 30 cents from the beginning of February.
“The run-up was a function of refinery and distribution disruptions from the southern freeze,” Swenson said. “Even though we get most of our gas from North Dakota and Canada, problems in one petroleum region often affect our prices as well.”
GasBuddy analysts on Thursday predicted that prices would continue to climb, topping $3 per gallon on average nationally by Memorial Day — the highest average price since 2014.
The prediction came after the Organization of the Petroleum Exporting Countries’ recent meeting ended without any decisions to increase oil production.
“The outcome of today’s OPEC meeting lends to a running of the bulls in oil markets, as global oil demand rebounds amidst recovery in the COVID-19 pandemic while OPEC, which controls a third of global production, balks at the recovery and maintains extreme production cuts,” said Patrick De Haan, head of petroleum analysis at GasBuddy, in a press release.
Swenson, however, said he does not foresee prices reaching $3 per gallon. He expected steadily rising prices to incentivize domestic oil producers to increase production and meet the demand, causing prices to level off.
“This is good news for domestic producers because it gives them the kind of prices that support increased production,” he said. “This is way different than the way it was 15 years ago. Now, OPEC making a decision on this has a minor short-term effect. We produce so much (domestically) because of fracking. We are so much less dependent on imports.”
As of last week, gas production was up one-third from April 2020 but remains about 20% below pre-pandemic production levels, according to the U.S. Energy Information Administration.
Dani Ling, energy marketing manager at Three Rivers FS, which owns several local gas stations, said gas and diesel sales at the business’ Dyersville, Iowa, location were up 10% last month compared to the same time last year, and with sales up 25% in Manchester, Iowa.
“Our numbers are starting to come back,” she said.
Swenson, meanwhile, said he expects gas prices to level off at around $2.50 per gallon in the U.S.
“What’s going on is simply the adjustment to the pandemic,” he said. “The people that sell and produce oil want nothing more than to sell that oil, but they can’t do it until the demand is up. Supply is going to lag demand for quite a while.”