Feeling the Burn
This summer’s record-breaking heatwave has turned up the heat, not only on thermometers but also on American drivers, with a significant increase in gasoline prices.
Despite a general cooling in inflation, fuel costs have skyrocketed, with oil prices climbing 22% since mid-June and gasoline prices reaching a nine-month peak this week.
It appears that the extreme temperatures are, quite literally, fuelling this unwelcome spike. However, it’s important to keep in mind there is a lag between heatwaves and their impact on price, so cooling temperatures won’t translate to cooling prices right away.
Hot Refineries, Cold Output
The rising temperatures and rising gasoline prices have a common thread – refineries.
When temperatures skyrocket to around 100 or even 110 degrees Fahrenheit, these facilities struggle to maintain optimal gasoline production. When exposed to this type of extreme heat, most refiners are only able to run at 85% capacity.
To add fuel to the fire, this supply shortage coincides with peak summer driving season, leading to an imbalance with demand that’s reflected in the prices we see at the pump.
Hot and Heavy Impact
While America is a noteworthy victim of this heat-induced problem, the ripple effect is global.
In the Middle East, nations are forced to burn more oil to meet demand for air conditioning amid extreme temperatures. And in regions along the Gulf Coast, like Texas and Louisiana, refineries are slowing down due to unscheduled maintenance.
As a result, we’re also seeing a domino effect on jet fuel and diesel prices, essential fuels that power a significant portion of our transportation sector. While retail prices are increasing, the silver lining is that wholesale prices have started to plateau.
As consumers, we can’t control the weather, but we can mitigate its effects. Being mindful about your commute and considering alternative modes of transportation can be a good start, but the most important thing is to keep your cool.
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