As reported by Reuters on Monday, winter heating costs for Americans may surge if the season is colder than usual.
Data from the U.S. Energy Information Administration showed that as of August end, stocks of distillates, encompassing heating oil, were about 15 percent less than the average of the past five years. The increased demand from Europe and production cuts by OPEC+ could amplify heating expenses for Americans, particularly in a colder winter.
Reuters added that domestic refiners had not amassed significant reserves of distillate-rich oil types ahead of the expected spike in demand during the colder months. One primary reason for this is the scarcity of medium to heavy-grade crude oil, which is rich in distillates.
“We are navigating on a tightrope, with minimal margin for mistakes,” Phil Flynn, an analyst from the Price Futures Group, commented. A colder winter could cause significant price surges.
The cuts in production by OPEC+ and the fact that the U.S. has been exporting its surplus to European countries, especially in light of sanctions against Russia after they invaded Ukraine in February 2022, highlight the precarious state of the market.
Highlighting the market’s fragility, U.S. diesel futures saw a sudden rise, marking a seven-month peak on Aug. 25. This increase followed an incident at Marathon Petroleum’s refining plant in Garyville, Louisiana, the country’s third-largest facility.
Additionally, upcoming maintenance plans for several significant refineries this fall could slash the U.S.’s production by 2 million bpd out of its 18.1 million bpd total capacity, as informed by Robert Yawger from Mizuho to Reuters.
The White House is applauding the notable decrease in gas prices over the recent seven weeks. However, despite this decrease, the prices are still considerably higher compared to the previous year.
Additionally, the rising demand could potentially decelerate the decline in prices.
As of Wednesday, the national average stood at $4.16. Yet, there’s a notable discrepancy in the prices across states: five states still experience prices over $5 per gallon, while 19 states enjoy prices under $4, based on data from the American Automobile Association (AAA). President Joe Biden, highlighting his administration’s role in reducing gas prices, tweeted in July that their efforts to reduce costs are ongoing.