Summer Vacation Season Sees Continued Gasoline Supply Crisis and Price Surge in the U.S.

[Mexico City = Shim Young-jae, Correspondent] Gasoline prices in the United States are nearing $4 per gallon again, raising concerns about inflation. The prolonged military conflict between the U.S. and Iran has led to a contraction in global energy supply, compounded by damage to Russian refining facilities and changes in the production structure of U.S. refineries, resulting in tight gasoline supply. The rise in gasoline prices is expected to increase the cost of living for American consumers and pose a political burden for President Donald Trump and the Republican Party.

Gasoline Prices Surge 20 Cents in 10 Days

According to Bloomberg on the 17th (local time), the average retail price of gasoline in the U.S. was recorded at $3.98 per gallon on the 16th, according to the American Automobile Association (AAA). This marks an increase of about 20 cents in just 10 days.

Gasoline prices in the U.S. fell below $4 per gallon in June but have returned to an upward trend in July. Bloomberg reported that in some areas, including Michigan, Maine, and Pennsylvania, the average price has already surpassed $4 again.

This price increase coincides with the summer vacation season in the U.S., further increasing the burden on consumers.

July is typically the month with the highest vehicle movement in the U.S., with millions of barrels of gasoline consumed daily.

Iran War and Damage to Russian Refineries Compound Issues

Bloomberg analyzed that the war between the U.S. and Iran has disrupted global energy transportation, continuously pressuring gasoline supply.

Additionally, the drone attacks in Ukraine have significantly reduced the fuel production capacity of Russian refineries, further exacerbating the global gasoline supply shortage.

The production strategies of U.S. refineries are also contributing to the price increase.

According to Bloomberg, U.S. refiners are allocating more resources to the production of jet fuel and diesel than to gasoline. As a result, gasoline supply has become even tighter, and price pressures are ongoing.

Thomas Weinandy, chief economist at the cashback application Upside, told Bloomberg, "July is generally the time when the most driving occurs, and the rise in gasoline prices adds to the burden on consumers as they start their travels."

He explained, "With gasoline prices rising and volatility increasing, households are finding it difficult to budget. Consumers are left wondering whether to fill up today or wait until tomorrow."

Inflation and Political Burdens Resurface

The rise in gasoline prices is expected to exert pressure on inflation again. According to Bloomberg, the decline in energy prices played a significant role in the slowdown of U.S. inflation last month.

However, with gasoline prices rising again, concerns about a potential resurgence in inflation are growing. This could also pose a burden for President Trump and the Republican Party ahead of the midterm elections this fall.

Bloomberg reported that the Democratic Party is focusing on high gasoline prices and the burden of living costs as key election issues in their bid to regain control of both the House and Senate.

However, consumer burdens are somewhat alleviated compared to May, when the average gasoline price in the U.S. exceeded $4.50 per gallon.

Patrick De Haan, head of petroleum market analysis at GasBuddy, told Bloomberg, "People express dissatisfaction with gasoline prices, but they don’t significantly change their summer vacation plans."

He noted, "It’s rare for gasoline prices to drop below $4 and then rise above it again in the same summer, but since it has only been a month since consumers last experienced prices at $4, it’s not a completely new shock for them."

Refining Margins at All-Time High... Potential for Further Increases

The market suggests that gasoline prices could rise further. According to Bloomberg, if the military conflict between the U.S. and Iran continues, international oil prices may rise further, which could push gasoline prices up again.

The profitability of the refining industry supports this.

The so-called 'Crack Spread,' which measures the difference between the price of crude oil and gasoline, is currently at an all-time high. Bloomberg explains that this indicates a strong market demand for increased gasoline supply.

U.S. refiners are already operating at maximum capacity to meet both domestic consumption and export demand.

However, if unexpected shutdowns occur at refining facilities at low inventory levels, there is a risk of a sharp increase in gasoline prices in a short period.

The market views the situation in the Middle East, international oil prices, and the operational status of U.S. refineries as key variables that will influence U.S. prices and consumer sentiment this summer.