In certain regions, gasoline prices have already reached $6, despite the fact that summer driving season has not yet begun.

• As summer approaches, gasoline prices may increase, potentially surpassing $5 and $6 per gallon in several regions of the U.S.
• According to AAA, the national average for unleaded gas is currently $4.23 per gallon, which is approximately 10 cents less than the recent record high.
• The global oil market's volatility is evident to drivers who observe gas prices fluctuating at their local stations due to Russia's invasion of Ukraine.

Unleaded gasoline prices are expected to fluctuate and may increase sporadically, with some drivers paying over $6 a gallon during the peak summer driving season.

According to AAA, the national average for unleaded gasoline on Thursday was $4.23 per gallon, which is 5 cents lower than a week ago and 10 cents below the recent record high. However, analysts predict that gasoline prices at the pump will begin to rise, due to the recent increase in oil prices and the rising cost of gasoline in the futures market.

John Kilduff, a partner at Again Capital, stated that if the situation deteriorates, $5 could be attained with ease in California, where he has observed $7 at certain stations.

On average, California drivers pay $5.88 per gallon of unleaded gasoline, which is higher than the national average of $2.87 per gallon, due to factors such as higher taxes and the specific blend of West Coast fuels.

The average cost of gas in Los Angeles County is $6.03 per gallon, while in Nevada it's $5.17 and in Washington state it's $4.72 per gallon.

The lowest prices for gas, excluding Illinois, are in the Midwest and South. In Texas and Iowa, the average price per gallon is $3.88, while Ohio and Georgia also have an average price of $3.99 per gallon, according to AAA.

Some states have reduced or are considering reducing their gas taxes, including Connecticut, which will implement a three-month moratorium on its 25 cents per gallon gas tax starting April 1.

The gasoline tax suspension in Maryland has resulted in an average price of $3.79 per gallon, lower than the $4.31 in neighboring Pennsylvania, where the tax is high. Similarly, Georgia has also suspended its gasoline tax.

The U.S. Senate and House Democrats have proposed legislation to temporarily lift the 18.4 cent per gallon federal gas tax. These proposals have been sent to committees for consideration.

How high can prices go?

Gasoline prices have decreased from a record $4.33 per gallon of unleaded on March 11. Although oil prices have decreased, crude has risen again, and analysts predict that gasoline prices may also increase.

The peak summer driving season, from Memorial Day to the Fourth of July, can make it difficult to predict how high gas prices will rise. Oil prices, which have been volatile due to the global effort to replace Russian oil exports, will determine the final cost at the pump.

Tom Kloza, global head of energy analysis at OPIS, stated, "I have no clue about the honest answer, but on the West Coast, I predict prices could reach $6 a gallon. For the rest of the country, I believe prices will fall between $4.25 and $4.75."

Gaps in refining

According to Kloza, the global refining industry is currently experiencing a gap year, with some capacity lost and new refining operations set to come online.

The refining capacity in North America has decreased by approximately 1.2 million barrels per day since early 2020, according to him.

Refineries in California, North Dakota, Wyoming, and Newfoundland are being repurposed to produce renewable diesel and sustainable aviation fuel, according to Kloza. Additionally, capacity was lost when Shell shut down a refinery in Convent, Louisiana, and Phillips 66 converted its Alliance refinery in Louisiana into a storage facility after it was damaged by Hurricane Ida.

Kloza stated that new refining capacity is expected to be launched in Southeast Asia, the Middle East, and Nigeria.

The refineries were designed to maximize yields of the middle of the refined barrel and will be capable of making large amounts of diesel and jet fuel. However, the rest of 2022 and early portions of 2023 will be dependent on existing global capacity, against the backdrop of the most uncertainty for crude oil supply since the 1970′s.

If the Ukraine conflict ends, crude oil could fall sharply, but the situation is uncertain. Currently, an estimated 2 million to 3 million barrels per day of Russian oil are off the market. Additionally, Russia has exported about 2.5 million barrels a day of refined products, mainly to Europe, and the world is also making up for some of that lost supply.

According to Kloza, a $10 increase in the price of oil per barrel usually leads to a 24-cent rise in gasoline prices per gallon.

Kilduff stated that while U.S. gasoline supplies are slightly below normal, refiners are operating at 91% capacity, which should enable them to meet the demand for gasoline.

If refiners increase their diesel production, it could lead to higher gasoline prices due to the already tight supply in the market.

While the U.S. exports 1 million barrels of gasoline daily, it also imports 268,000 barrels of gasoline daily, according to the U.S. Energy Information Administration.

To avoid any shortfalls in the next few months, Kilduff suggested suspending the U.S. requirement for summer fuels. Refineries usually shut down temporarily during this season to prepare for the transition to fuels that are more suitable for warmer weather.

He stated that waiving the patchwork of environmental regulations for summer gasoline would significantly lower prices at the pump and benefit consumers.

Despite the rapid increase in gasoline prices, gasoline retailers are not seeing a corresponding increase in profits, according to Kloza.

According to Kloza, the current margin for typical retailers in 50 states is 33.4 cents per gallon, which is consistent with where it has been for the past few years.

Fluctuating prices

Gasoline prices vary significantly not only between states but also among stations within the same neighborhood.

Gasoline prices have been fluctuating and moving quickly, making it difficult for Sal Risalvato, executive director of the New Jersey Gasoline, Convenience Store, Automotive Association, and his 1,000 members to keep up with the price changes.

The wholesale prices have been fluctuating daily, with a 20 cent increase followed by a 15 cent decrease, then a 20 cent increase and a 25 cent decrease. It's been an unpredictable journey," he said. "Receiving a gas delivery on a down day feels like hitting the jackpot.

The fluctuating prices at the pump are due to the volatility of oil prices. West Texas Intermediate crude futures were trading lower Thursday, on the possibility of a deal that would allow Iran to export oil in exchange for an agreement on its nuclear project.

On Wednesday, reports emerged that the Caspian Pipeline Consortium terminal on the Black Sea had been damaged by a storm, causing more than 1 million barrels of Kazakh and Russian oil to stop loading daily.

On Thursday, the price of oil was approximately $112.40 per barrel, significantly lower than its recent high of $130.50 per barrel. Over the past week, its value has fluctuated greatly, dropping below $95 per barrel.