Gas prices have been shooting higher in New Jersey: What’s next?
The average price for a gallon of unleaded regular gas in New Jersey is now $4.54, up more than 20 cents a gallon from one week ago, and more than 40 cents a month ago.
According to industry analysts, there are multiple reasons why gas prices keep climbing.
When the pandemic started in March of 2020 demand for oil tanked and production was slashed.
Demand has returned, but Tom Kloza, the global head of energy analysis for the Oil Price Information Service, said gas prices have been spurting higher because ramping up oil production takes time.
Not enough refining capacity
"The latest jumps really are on a lack of refining capacity, in addition to some of the closures you’ve had in the United States in the last few years,” Kloza said.
Some companies are also reluctant to ramp up oil production efforts because there has been growing support for expanding green energy efforts, solar and wind, in particular, moving forward.
He said refining output in Europe has also been cut back and now many nations are vowing to no longer use Russian oil so prices have been rising.
Kloza said demand continues to be lower than it’s been for years but another reason why prices have been shooting higher is an automated market system.
“The markets are broken, the people that are normally the circuit breakers in the market, that keep prices from running away to the upside are not in there,” he said.
As a result, “you’ve got a lot of artificial intelligence and black box and momentum trading and so forth, it’s becoming disconnected.”
So what happens next?
Kloza expects prices to stabilize, at least for the next few weeks.
“Most of the increases that you’ve seen recently are related to the fact that it’s now summer gasoline that’s being traded everywhere,” he said.
“I do expect that the U.S. government is going to have a tax holiday on the federal tax, so that will be an 18-cent drop when that happens.”
Wholesale gas prices traditionally peak in early to mid May and after that they could drop a bit.
“I think you’ll see prices flatten out, then the summer is anybody’s guess. If we get some hurricanes at the Gulf coast we could see $100 a barrel crude but $200 per barrel gasoline, and that’s one of the things we worry about,” said Kloza.