Soaring summer temperatures continue to cool the demand for gas, but it is also complicating things for refinery production, according to AAA.
The national average cost for a gallon of gas increased by 13 cents from last week to $3.71, in response to production constraints, according to the latest report from AAA.
The extreme heat that has many parts of the U.S. suffering sweltering temperatures has also sidelined oil refineries. Oil prices have increased by nearly $4 to settle near $80 per barrel, AAA said. Gas prices typically rise in tandem with oil.
“Gas demand, meaning people fueling up, remains tepid,” AAA spokesperson Andrew Gross said. “It’s lower now than at this time last year and in 2021. But while the heat may be keeping some folks home, it also suppresses refinery production, according to experts.
“Constrained supplies and a higher cost of oil are tipping the balance toward rising pump prices for now,” Gross said.
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Fueling up at state borders could add to costs
Drivers hitting the road this summer could be paying as much as an extra $1 a gallon if they are filling up at stations near certain state lines, according to a GasBuddy report.
Gas prices between states vary because of state taxes, proximity to oil refineries and resulting transportation costs, according to GasBuddy. The top five most expensive bordering states to fill up are Arizona/California, Idaho/Washington, Idaho/Oregon, Nevada/California, and Oklahoma/Colorado borders.
“Crossing state lines is often an exciting time for summer road trippers, signaling progress and new experiences,” Patrick De Haan, GasBuddy head of petroleum analysis, said. “However, these milestones should also serve as a red flag to drivers. The difference in gas prices among two bordering states can add up to over $10 on a single tank of gas, potentially costing American travelers hundreds on long road trips in some parts of the country.”
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Consumers could see used car prices drop
If you are buying a car, you’ve likely noticed how high prices and interest rates for financing are at the moment. The Federal Reserve has raised rates 11 times since last year, leaving the federal funds rate at 5.25-5.5% – the highest level in 22 years.
However, consumers could soon see relief as affordability returns to the used car market, Cox Automotive Chief Economist Jonathan Smoke said in a statement.
Retail used prices have already declined about 3% from their peak in April and are expected to continue to drop over the next quarter, according to Smoke. Also on the decline are rates for used car loans which have dropped to 13.6% so far in July.
“The dramatic increase in rates over the last 16 months, along with vehicle price inflation, has effectively priced out 5-10% of consumers,” Smoke said. “We have seen the most impact on the used auto, where sales have declined for more than a year. However, this spring likely represented the bottom for the weak used-vehicle sales trends, as affordability should improve from here, enabling incremental demand to grow.”
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