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Gas Prices Will Continue to Rise Until U.S. Builds More Refineries: GasBuddy Analyst

Bernice Napach
Daily Ticker

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After falling steadily in May and June, gasoline prices have risen 25 cents per gallon in the past month, putting renewed pressure on consumers' budgets. Prices nationwide are now averaging $3.68 a gallon and have topped $4 in California and Illinois.

Patrick DeHaan, senior petroleum analyst at GasBuddy, an online site for gasoline consumers, says unexpected shutdowns at two U.S. refineries are largely responsible for the recent jump in gasoline prices.

But those shutdowns aren't the only reasons gasoline prices are spiking.

The price of crude oil, from which gasoline is made, is rising following production outages in South Sudan and the North Sea. Declining output from Iran as a result of an oil embargo by many Western nations has also caused a jump in prices at the pump. And the price of ethanol, a required additive for gasoline sold throughout the U.S., has spiked because of the drought in the Midwest--the worst in more than 50 years. That drought has hammered the corn crop used in ethanol production, pushing up corn prices almost 60 percent in the past two months.

"Ethanol prices may continue rising for at least another month or two and that will continue to put upward pressure on gas prices" says DeHaan.

While not much can be done about the drought, something can be done about U.S. refineries. "We should look at the oversight of these facilities," says DeHaan. "They constantly seem to be breaking down."

He also favors less red tape so companies can more easily expand existing refineries or build new ones.

DeHaan expects gasoline prices will start to fall after Labor Day and bottom out between Thanksgiving and Christmas. Beyond then, he expects prices will rise again.

"The refining situation leads to massive increases in prices virtually every spring…that will continue until we tackle this refining issue," he notes.