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Gas prices rise ahead of Labor Day Weekend and they 'could go a little higher': Analyst

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Patrick De Haan, GasBuddy Head of Petroleum Analysis, talks rising gas prices in the aftermath of Hurricane Ida.

Video Transcript

- --as we've been watching prices here in the recovery from the pandemic, one of the key things that we've watched for inflation has been gas prices. And we're seeing those rise now to new levels, new highs, since the pandemic began. And for more on the outlook here as everyone prepares for a busy travel weekend with Labor Day upon us, I want to bring on an expert in this space for more on where gas prices could go. Patrick De Haan from GasBuddy joins us right now.

And Patrick, I mean, when we're looking at it, obviously, a lot of people are kind of concerned about gas prices moving higher. We've seen a move, what, about $0.05 higher in terms of the national pricing. So where do you see things going here in the short term?

PATRICK DE HAAN: Yeah, as you mentioned, we've already come up a nickel, which is on the low side of the range of expectations. Now, some refineries are indicating that they have some power coming back online. That's certainly good news. But we could go a little bit higher, just depending on, really, the bulk of refining capacity coming back online.

As we look at the numbers here, a lot of outages across New Orleans still. Baton Rouge, the numbers continue to look pretty awful for outages, and all of this really feeding the national average. But the good news is I think we will start to come back down in terms of price in about a week or two.

- Yeah, I guess the mismatch there, too-- it's always a supply and demand story, and Hurricane Ida obviously impacting, I suppose, issues around refineries. We've seen some issues in Texas as well around oxygen use in hospitals there, with a few hubs getting knocked off due to a lack of oxygen. So I mean, how long might that play out when it comes to some of that mismatch? What's the outlook of all that getting squared away?

PATRICK DE HAAN: Well, there's a lot of petrochemical challenges. You mentioned oxygen, some of the refineries in Louisiana having difficulty sourcing nitrogen, just to highlight that really, this area, this sensitive area here, is not only home to oil infrastructure but petrochemical installations as well. And all of it-- a good portion of it, at least, in Louisiana-- knocked offline by the lack of power. It will probably take several weeks, and several refineries are still dealing with the amount of water. Philip 66 refinery may not be back up for weeks yet.

Although some refineries, like I mentioned, are getting power, I think this is going to be a longer game. This is not going to be this weekend we see restoration. Maybe we'll start to see the tip of restoration this weekend. But in the meantime, gas prices are going up because of the immediate hit to refineries in Louisiana. In fact, over 10% of the nation's refining capacity is still down because of the power outages.

- I suppose that there is good news here too, though. It's that after we get over Labor Day, really, travel falls off a cliff just historically. I mean, when you look at the outlook for the rest of the year and demand, what does that look like, given the fact that we're also seeing COVID rise again with the Delta variant?

PATRICK DE HAAN: Yeah, to your point, it looks a little sluggish. As we get back to the grind, so to speak, as summer comes to a close, Americans taking a less road trips, temperatures begin to cool. Demand naturally starts to decline. And then you mentioned, on top of that, COVID resurging. We're seeing a delay in many return-to-work plans that existed.

So even the American commute is not going to come roaring back this fall. There's plenty of challenges amidst lower demand because of the surge in the Delta variant. And that's just in the US.

If this continues globally, we could continue to see pressure on the price of oil. As a backdrop, keep in mind, OPEC increasing oil production every month until 2022. The big question, will they stick to that plan?

- Yeah, and on that point, I mean, I suppose there have been question marks around the falloff in investment back here at home when it comes to oil producers and what we've seen in the shale space, given kind of the uncertainties before and how long it'll take for that to start coming back up. I mean, when you look at kind of the global picture-- US producers playing into that and kind of following what OPEC's been doing-- I mean, how does that all shake out as potential upside for more supply back here in the US could come to fruition?

PATRICK DE HAAN: Well, you know, it's simply a little bit more pressure on the price of crude oil. You know, you talk about shale, how slow it's been to come back. We see a little bit of an increase here and there in EIA data, measured in maybe 100,000 barrels, but then we backslide for a week. The number of oil rigs does continue to go up, but I think certainly shale is beyond its prime in that it's gonna take a long time for this to get back to normal.

- And lastly, Patrick, I mean, when you think about how the travel mix has played out, right, road trips were a big thing earlier on in the pandemic. As you pointed out, potentially with the COVID cases rising again, we could see that, so maybe an unexpectedly stronger post-Labor Day travel season when it comes to road trips. But how has that all played out relative to flights and what the impact is on the price at the pump?

PATRICK DE HAAN: Well, I mean, it's been a brisk summer of travel. Americans have hit the road in pretty strong numbers this summer-- EIA data showing some weeks that we hit all-time highs for gasoline consumption. And you look at the breakdown, you know, whether plane, train, automobile, it's been strong across the board. Now, perhaps the automobile has been the most resilient return. But even some of the nation's airlines saw a blockbuster start to the summer in booking travel that did trail off as the summer progressed and Delta variant really started to see more and more cases.

But it's not been a bad summer. I think we're still a little bit below 2019 numbers, maybe single-digit percentages. But overall, not too disappointing of a summer for gasoline consumption, especially compared to expectations to start the year.

- Well, at the very least, I think a lot of our viewers will be pleased to hear that the price jumps may be topping out here, as you forecast. But appreciate you coming on here to chat with us. Patrick De Haan, GasBuddy Head of Petroleum Analysis. Thanks again for the time. Appreciate it.