With gasoline prices suddenly spiking to their highest levels nationally in seven years, experts warn prices could get up to $5 a gallon and Connecticut officials are urging the president to take action.
Gas prices have risen sharply over the past few weeks. The average price in Connecticut reached $3.54 per gallon Tuesday — up by 25 cents in the past month and by $1.41 over the same day last year, according to the latest AAA statistics.
But Michael J. Fox, executive director of the association that represents 375 Connecticut gasoline retailers, said he fears that the situation will get worse before it gets better.
Supply and demand
“We may — and I hate to say this — get into the $4, $4.50, and that nasty $5 per gallon range,” Fox said in a telephone interview. “We are dependent on foreign crude oil. It’s more expensive to bring it in by barge. We’ve gone from total energy independence — producing more crude oil here in the United States than we were using. We had cheap product, and the result was cheap gas.”
Fox and others pointed to the shutdown of the Keystone XL pipeline that came when President Joe Biden signed an executive order revoking the permit. Plans for the continued construction of the pipeline were soon dropped.
“I’m not Republican or Democrat,” Fox said. “The Keystone XL pipeline being shut down — that would have provided crude oil from Canada directly to the refineries in Texas — is the dumbest thing I’ve ever seen a president do, and there’s a lot of dumb things done.”
Christian Herb, who represents gasoline distributors who own and deliver to 1,000 stations in Connecticut, does not see any immediate reason for optimism.
“It’s always hard to predict future prices, but there is no relief in sight in the short term,” Herb said in an interview. “People who are going to be driving for Thanksgiving are not going to see drops in prices. They just didn’t think the country could rebound from COVID this fast, and it did. The demand for gasoline is surging at a faster rate than suppliers can meet that demand.”
When prices were low, few consumers were talking about the Organization of Petroleum Exporting Countries, which is now 60 years old and had huge power decades ago.
“We are relying on OPEC plus Russia,” Herb said. “OPEC is unwilling to open up the spigot because they are making a lot of money on the backs of people in Connecticut [and other states]. … This is an extremely profitable time for them.”
Senators call for action
U.S. Sen. Richard Blumenthal and 10 other Democratic senators who are supporters of Biden sent the president a letter this week that called for action.
Blumenthal and his colleagues are even talking about considering releasing oil from the nation’s strategic petroleum reserve — a move that has been done only rarely by both Republican and Democratic presidents.
“We’ve urged it before,” Blumenthal said in an interview. “It should be used carefully and sparingly, but we should be preventing an emergency before it occurs.”
While rare, the release from the strategic reserve is usually done after major events like a hurricane or international incident.
During the first Gulf War in 1991, President George H. W. Bush released 17 million barrels. His son, President George W. Bush, took action in 2005 after the devastation of Hurricane Katrina by releasing 11 million barrels.
Bush’s successor, Barack Obama, responded to supply problems from oil-rich Libya in 2011 by releasing 30 million barrels.
The oil is eventually restored to the reserves after the immediate crisis subsides.
“We need to take action to reduce gas prices,” Blumenthal said Tuesday. “What we’re facing now is hopefully a temporary, inflationary blip, but there’s the danger it could be longer and bigger, and that’s what we need to try to prevent.”
But both Fox and Herb are opposed to using the strategic reserve at this point.
“The strategic reserve should be reserved for emergencies,” Herb said. “It should not be used as a price tool. It’s a one-time. It’s like taking money out of your savings account. What happens in a real emergency when you have supply issues?”
An economic threat?
The problem, Blumenthal said, is that gasoline prices have a direct impact on the economy, affecting drivers of all ages and income levels.
“Everybody pays it,” Blumenthal said. “It affects everyone, regardless of their income. It has a very regressive effect. It impacts moderate and lower-income people more than higher income because it’s a bigger portion of their daily expense and daily income.”
The Democratic senators agree with Biden on many political issues and have been strong supporters of his presidency.
“We agree with your recent comments at the United Nations Climate Change Conference that as the United States works to boost the development of clean and renewable energy over the long term, we must ensure that Americans are able to afford to fill up their cars at the pump in the meantime,” the senators wrote in their letter.
“We share the administration’s concerns that the decision by the Organization of the Petroleum Exporting Countries and others to purposefully manipulate gas prices by constraining supply, as well as the choice of domestic leaseholders and producers to continue to export U.S. petroleum, threaten to send already record prices even higher,” the senators wrote. “Continued U.S. exports and overseas supply collusion could be devastating to many in our states, contributing to higher bills for American families and businesses.”
Tracy E. Noble, a spokeswoman for AAA, said that predictions can be difficult with the volatility of the energy markets. But she was not optimistic in the short term.
“It’s hard to say where things are going to be a month from now,” Noble said. “One of the things is this is typically the time of year when fuel prices decline because there is less demand as we come off the summer driving season. However, we didn’t see that decline happen post-Labor Day this year. The Thanksgiving holiday is a drive holiday.”
Connecticut prices, she said, are 13 cents higher than the national average, but below the highest levels of $4.62 per gallon in California and $4.34 per gallon in Hawaii. At the low end, the average prices Tuesday were $3.07 per gallon in Texas and $3.03 per gallon in Oklahoma.
“The biggest driver right now is the price of crude oil at over $80 per barrel,” Noble said. “That compares to last year when we were seeing crude oil prices at $37 per barrel at this time of year.”
Christopher Keating can be reached at ckeating@courant.com.
