Oil

Gas prices are up 31% from last Memorial Day. Here's why

5/26/18
from CNN Money,
5/25/18:

Prices at the pump haven't been this high heading into the biggest driving holiday of the year since 2014, when crude was sitting in triple-digit territory. AAA says that fifteen states, including New York, New Jersey and Illinois, are already facing $3 average gas prices or higher. Gas in California and Hawaii, traditionally two of the priciest states, is north of $3.70 a gallon.

Here's why gasoline prices are getting uncomfortably high: People are driving more: The United States is consuming more gasoline, thanks to the strong economy and upbeat consumer confidence. That trend could continue into this weekend. AAA estimates that 36.6 million Americans will travel by auto this weekend. That's almost 5% more than last year. Overall, AAA estimates that 41.5 million Americans will travel by car, planes, trains, buses and cruise ships over Memorial Day weekend, the highest since 2005. "Demand is red-hot," said DeHaan. Crude awakening: But demand isn't strong enough to justify the spike in prices. That's where crude oil comes into play. Brent crude, the global benchmark that tends to influence US gas prices, recently topped $80 a barrel. It's up about 50% over the past year. The oil rally has been driven by a range of factors, including robust demand around the world amid stronger economic growth. Thanks OPEC and Russia: The rebound in oil prices from the crash of 2015-2016 was engineered in large part by OPEC. The oil cartel teamed up with Russia to slash production beginning in early 2017 in a bid to fix a supply glut. That strategy eventually worked and global oil stockpiles, especially in the United States, have declined steadily. In fact, OPEC and Russia's moves have been strong enough to offset soaring production from the shale revolution in the United States. Trump exits Iran deal: US oil prices topped $70 a barrel earlier this month just as President Trump announced the United States is withdrawing from the Iran nuclear deal. The decision sparked fears that renewed sanctions on Iran, the world's fifth-biggest oil producer, will sideline up to 1 million barrels per day of supply. It remains unclear exactly how much Iranian oil will get knocked offline, but it's safe to say the Iran decision has supported oil and gas prices.

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