Minnesotans are driving more, and the price of light crude is up.
Minnesota’s less-painful gasoline prices have evaporated.
Motorists had been paying less than $3 per gallon at the pump through much of December, including a 2013 state-record average low of $2.92 a few days before Christmas.
But it didn’t last. The statewide average price of regular gasoline rose 24 cents to $3.16 per gallon over the past 12 days, according to AAA data.
“That is a very dramatic price hike, and it is not something that drivers in Minnesota see very often,” said Michael Green of AAA’s Daily Fuel Gauge Report, which tracks gasoline prices based on credit-card swipes.
Green said prices have stabilized in the past couple of days. A holiday-season price jump also happened last year — only to be followed by significantly lower prices in January.
It’s been a year of seesaw gas prices. Minnesota is one of two states where gas prices in 2013 at one point exceeded $4 per gallon — back in May — while dripping below $3 at other points, said Tom Kloza, chief oil analyst with GasBuddy.com.
Several factors may explain the latest uptick, analysts said.
People are driving more, boosting gasoline demand. The price of light crude oil also is up this month to $99 per barrel. Some Midwest refineries are not operating at peak, and the St. Paul Park refinery, the smaller of two refineries in Minnesota, could face a strike Tuesday if negotiations with the union representing nearly 200 operators reach an impasse.
Even with the latest increase, Minnesotans still paid less than motorists in 32 states, with Connecticut drivers paying $3.70 per gallon, the highest average price in the Lower 48 states, AAA data showed. Montana had the lowest average price on Monday, $3.01 per gallon.
What’s going up?
Driving and fuel demand are up. AAA, which also tracks holiday travel, projected that 85.8 million Americans — or one in four — are taking road trips between Dec. 21 and Jan. 1. It is the fifth consecutive annual increase, and the highest travel volume ever projected by the membership travel service.
U.S. fuel consumption increased in November to the highest level for that month in six years, with gasoline up 5.4 percent, the American Petroleum Institute reported last week.
“The numbers have been pretty spectacular,” Kloza of GasBuddy.com said of the late-year spike in demand.
But he added that “gasoline demand is very, very lumpy” and it could fall off in January as low temperatures and winter weather keep drivers at home. That tends to bring prices down, as happened last January when Minnesotans were paying less than $3 per gallon.
Looking ahead, Kloza said, many commodity futures traders seem to be betting on higher petroleum prices.
“We are going to end 2013 with the greatest amount of financial money invested in the long side of crude,” he said. “There is lot of money that has pumped up the price.”
Alex Breitinger, a commodities futures broker with Paragon Investments in Valparaiso, Ind., said refinery shutdowns in the Northeast and international factors are affecting the world oil market.
The market had anticipated a significant flow of oil from Iran amid optimism that an accord over its nuclear weapons program would ease trade sanctions, he said. “That didn’t happen,” Breitinger said, so traders stopped betting on a peace discount.