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Gas Prices Pop Up Despite Historic Supplies Of Oil. Blame Spring

Gasoline prices are displayed at a filling station in Philadelphia. Matt Rourke/AP hide caption

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Matt Rourke/AP

Gasoline prices are displayed at a filling station in Philadelphia.

Matt Rourke/AP

If you've stopped for gas lately, you've probably noticed a price jump.

A week ago, the national average for a gallon of regular gas was around $1.70. Now it's about $1.80, according to GasBuddy.com, which tracks prices.

So rising gas prices must reflect shrinking oil supplies, right?

Nope.

The U.S. Energy Information Administration issued its latest "petroleum status" report on Wednesday and said U.S. commercial crude oil inventories are up by 10.4 million barrels from the previous week.

That's a lot — about quadruple what most analysts had predicted in a Platts poll.

"U.S. crude oil inventories are at historically high levels for this time of year," the Energy Information Administration said.

Moreover, gasoline inventories "are well above the upper limit of the average range," the EIA said.

So then what did cause the uptick in gas prices? To a large extent, the rise reflects the change in seasons. Every year at this time, refineries have to stop for maintenance and then switch to more expensive summer blends.

Back in February, consumers were enjoying bargains as wholesalers were cutting prices to clear out winter-blend gasoline. Now companies are shifting to the government-mandated, warm-weather blends that reduce smog during the summer ozone season. These blends use fuel additives that burn cleaner but cost more.

Also, demand for gasoline will be rising soon as Americans start driving more for spring break and summer vacations.

"Swings in gas prices at the regional level are typical for this time of year as many refineries conduct maintenance in advance of the busy summer driving season," AAA, the auto club, said in its weekly analysis.

In addition to the seasonal factors, there's another reason prices are nudging higher: Crude oil prices are showing a bit more strength.

The turnaround for oil began in mid-February, when Saudi Arabia, Qatar, Venezuela and Russia said they would freeze oil output at January levels.

So far, the "freeze" has held, allowing benchmark prices to rise to around $34 a barrel, up from last month's low of about $26. "By announcing a production freeze, the global oil coalition has set a floor under oil prices," ABN Amro said in a report.

And that floor stayed firm Wednesday. Despite the EIA's report of larger than expected U.S. inventories, the price of a barrel of West Texas Intermediate oil closed up a bit at $34.53.

So here's the big picture:

Most experts say gas prices are likely to stay low for a long while, noting that even with the recent uptick, the average gallon is more than 50 cents lower than it was a year ago.

As for summer, the U.S. Energy Department predicts that the national average will peak at $2.08 from June through August. Remember that from 2011 to 2014, the national average on June 1 was $3.60, with many cities seeing prices over $4.

This year's bargains may go on and on thanks to surging oil supplies coming from the Gulf of Mexico. For years, the oil companies have been placing big bets on the Gulf, pouring billions of dollars into the development of deepwater wells.

Now those offshore projects are coming on line and will start pushing oil inventories even higher. The EIA is predicting a record high of 1.8 million barrels of oil per day coming from the Gulf in 2017, up from 1.6 million this year.

In addition, the U.S. Bureau of Ocean Energy Management announced last month that it will lease an additional 45 million acres in the Gulf of Mexico Outer Continental Shelf for oil and gas development.