Why are gas prices rising again in February 2024?

It’s a long weekend for many Americans as the country celebrates Washington’s Birthday on Monday. If you’re driving to a little out-of-town getaway, be prepared to shell out a little more when you gas up.

According to AAA, average prices have gone up by 11 cents in the past week to $3.28 per gallon. An increase is not a surprise this time of year, because higher demand as winter winds down leads to higher rates at the gas pump.

However, there are factors other than seasonal demand at play. For one, unexpected refinery shutdowns in the Midwest have affected the supply of gas.

Conflict in oil-rich countries could force gas prices up

Also, the threat of war spreading across the world’s largest producers of oil is a serious danger to oil prices, inevitably having a knock-on effect for American consumers at the pump.

At this stage the increase in price is slight and prices are still around half a dollar less compared to summer. Gas prices have largely recovered from the oil shocks of 2022, when the Russian invasion of Ukraine disrupted global oil prices, surging prices to over $5 per gallon in June of that year. Prices are still lower now, even with the average at $3.28 per gallon. Prices are down from a year ago, but the upwards trend over the last month has experts worried.

“Heightened tensions in the Middle East have the market pricing in a higher probability of a supply disruption,” Andy Lipow, president of Lipow Oil Associates, told Yahoo Finance earlier this month.

How escalation in the Middle East will put pressure on prices

The Israeli war on Gaza would have been expected to influence global oil prices due to where in the world they are. However, global oil prices have actually decreased since the invasion. It is the escalation in the wider Middle East over the last two months that will really put the squeeze on oil.

The Yemeni blockade of the Red Sea, without needing a naval fleet of any kind, has been astounding. The US bombing, claimed to be self-defense, has not stopped the Yemeni raids. Now the Red Sea, including the crucial Suez Canal, is off-limits for much of global shipping, which is now taking the longer, more time consuming, and more expensive route around the Cape of Good Hope, South Africa.

An interesting way to measure this is the price of global shipping containers. Before the Yemeni blockade the price of a 40ft container was around $1,300. Now, it is $3,842, nearly three times as much. This time and money spent on transport can only be offset onto consumers.

“Although no oil production has been shut in, tankers avoiding transiting through the Red Sea and Suez Canal have added to logistics cost, and the consumer is seeing that in higher gasoline prices,” Lipow continued.

The US has begun attacking Iran-linked military targets in Syria and Iraq, and President Joe Biden has said the country’s response will continue at the time and place of their choosing. The objective is to deter through force but Stephen Collinson, CNN senior reporter, says “the Biden administration’s effort to prevent an escalation is not working.”

With fighting in Yemen, Palestine, Iraq, Syria, and Pakistan, it is likely that an even wider conflict will impact fuel prices.