Two reports show another rise in inflation with the cost of groceries, gasoline and rents on the rise. Gasoline costs were up just slightly month-to-month at 1.8% but parts of the country - especially California - are seeing the price at the pump go higher than that as season adjustments based on demand kick in.
Patrick De Haan is a oil and gasoline analyst that can be found on X (formerly Twitter) @gasbuddy and he spoke to WCCO's Chad Hartman this week on what he's seeing for trends, the threat of tariffs and what that might mean for energy prices, and how the Midwest stacks up for producing gas for cars.
The state of gas prices in America is?
We're getting closer to the switchover to summer gasoline, which does start in just a couple of weeks. Oil prices have come down, but there have been a couple of low-level refinery snags. Those are mainly on the West Coast. For now, gas prices in the Twin Cities, they're teetering up just a little bit in the last week, up about 2-cents. Boy, I'm glad I'm not in California. San Francisco's average up 48-cents a gallon in the last week, that's because of refinery issues, and they are the first state to start making the transition to summer gasoline. But that may be a taste of what could be coming over the next several weeks as we get closer to warmer weather here in the Twin Cities.
When that transition happens, how much of a jump are we looking at in the state?
This is usually right about the time that we start to see the changeover happening. So between now and we'll say eith weeks from now, mid-April, which is usually about the time prices peak, average prices will likely go up anywhere from 20 to 65-cents a gallon. They could go up a little bit more or less than that, just depending on how refinery maintenance season proceeds. That's usually something that also starts here as temperatures start to break. So refineries will do maintenance, the transition to summer gasoline starts, demand will start going up, and that's usually it starts the domino effect of rising gas prices here as we get towards the end of February and all of March and into early April.
So when this goes up, if Democrats want to say, 'hey, Donald Trump, you told me this,' there may be other factors. But this has to be baked in every single year and people should remember that?
Exactly right. It's like going to a stadium wherever he's got one of those foam hands, everyone's gonna be pointing fingers. A lot of words are gonna fly. Very few of them are going to be accurate because to your point, this does happen every year.
The exception, of course, was COVID when millions of Americans were losing jobs and when we were losing loved ones. So, that's the exception. When there's economic duress, that may not happen, but almost every other year, gas prices go up in the spring. Not only that, but they go down in the fall. And it's not an election conspiracy, it's just supply and demand.
We're incredibly early into the Trump administration, and you've counseled me over and over again how presidents can play a part, but so much is really out of the president's control. When you look at the frenzy of activity that Trump offers up by the second, has that played any part in what's happened to gas prices so far?
Well, I can't completely eliminate that there's zero impact, but it's almost as close to zero. There's been a lot of noise, there's been a lot of drama to keep track of, but none of it's come to fruition yet. The threat of tariffs has not been implemented, at least on energy from Canada and Mexico. That would be the one that would be very significant, as we've talked about before. But so far, everything for as much as there is to dissect about what's happening, none of it's having a significant material impact. Like I said, the seasonality is going to be what has a significant impact.
If the tariffs do come into play in roughly three weeks, because they are technically on pause, if the tariffs do come into play, they're likely going to play a secondary role, not a primary role, in influencing gas prices. Because the seasonal forces are just so strong that it would still be the seasonal forces that are primarily leading gas prices up. At that point, it could be that the tariffs add a little bit on the top, but it's still going to be the seasonal forces that are dominating the trend.
If the tariffs happen, how quickly would that play the secondary role you you just talked about?
Probably within a few days of when everything was finalized. And I'm gonna say that because, you know, there's been a lot of talk, we've been what, a day away from them being implemented? But they haven't been implemented. So once the tariffs are signed, they're official, give it probably 72 hours from then, and then we'll start to see an impact depending on when they're signed.
I mean, if they're signed on a Friday afternoon for whatever reason, well, energy markets aren't open over the weekend, so it would take a few extra days for them to assess exactly what happens. But it should be fairly quick.
I was looking at your tweets the last couple of days, including about what's going on in California with these crazy prices and you talked about the number of refineries California had years ago compared to now. So let's go to the Midwest. How are we doing with refineries in our area and what's the likelihood we will get more refineries to match the population, the demand, and try to play a stronger part in what's taking place to slow this down when the prices are going up?
Well, I'll say, probably on the radar of many folks in the Twin Cities was what, back in 2018 or 2019 when that Superior Refinery caught fire, the Husky Refinery in Wisconsin. I wouldn't say lucky that that's been rebuilt, but that is certainly an asset now that the refinery was rebuilt. Another one in 2019 burned down in Philadelphia. That one was permanently dismantled and it's still having an impact. The lack of that refinery is having an impact.
So, refineries aren't impactful until they are. I hate to say it that way, but you'll remember what, three years ago, was it September of 2023? When prices in the Twin Cities virtually skyrocketed overnight because refineries suddenly became an issue, there was a little bit too little summer gasoline left to make it through the rest of the year, and then you'll remember, prices I think went up like 50-cents to $1 a gallon in almost two weeks.
Refineries are out of sight, out of mind. The Midwest has ample refining capacity. It's good that they be rebuilt that refinery in Superior, Wisconsin. Thankfully, I think there's a bit more breathing room in areas of the Midwest. Even after that severe weather that rode through Chicago last summer, it didn't cause much of a blip, and that is because there's a little bit of breathing room. Not a ton. We're probably not going to see any new refineries built either because it's a huge risk. If the next administration doesn't see eye to eye on environmental regulations like Trump did, they're going to reverse them. A lot of politics have become about this back and forth, it's nauseating. It's a risk to a business to build in an environment where you're very uncertain. The refinery, if you build one today, it's not going to be done for five years.
So that's the complicating factor, you're having to make future predictions. And by the way, the EV transition is not exactly giving oil companies or oil refiners a lot of certainty. You don't really want to build a refinery when certain politicians and maybe the way the country is going, is going to change significantly in the next couple of years. And that's why we're probably not going to see any new refineries, at least significant refineries, built anytime soon in the U.S.