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Gas prices rise as travelers make Memorial Day plans

May 14, 2018--8:02 a.m.

NEWS RELEASE

Gas prices rocketed higher last week in most markets, due to reductions in domestic supply and the oil market's response to the President's decision to leave the Iran Nuclear Deal.

Sunday's national average of $2.87 is 53 cents more than this time last year.

Prices at the pump jumped 6 cents last week.

Gas prices have not been this expensive in nearly four years (November 2014)

On average, Americans are spending $6 more to fill their vehicle than a year ago.

Georgia gas prices held relatively steady during the past week. The average price in Georgia now sits at $2.72 - the highest since September 2017. 

Gas prices are 52 cents more than this time last year. It now costs the average motorist $41 for a full tank of gas, an increase of $8 from a year ago.

The most expensive gas price averages in Georgia are in Brunswick ($2.80), Savannah ($2.74), Atlanta ($2.73)

The least expensive gas price averages in Georgia are in Augusta-Aiken ($2.63), Warner Robins ($2.63), Catoosa-Dade-Walker ($2.64)

"Gas prices are their highest in years, yet that doesn't seem to be slowing motorists down," said Mark Jenkins, spokesman, AAA - The Auto Club Group. "The latest round of figures from the EIA shows that gasoline demand is significantly higher than this time last year. A strong economy is helping to fuel motorists along, as we approach the most traveled Memorial Day in more than a dozen years. Those people affected by the higher prices at the pump are likely cutting back on other expenses like shopping and dining out."

Why are gas prices rising?

Strong domestic gasoline demand caused reduced supply levels

Gas stations are shifting to summer-blend gasoline

Oil prices are at 4-year highs - raising the price of producing gasoline

Global demand is strong

Global oil supply is tightening

U.S. sanctions against Iran could further tighten the oil market, depending on what restrictions are put on Iranian oil exports.

The oil market jumped last week following President Trump's decision to withdraw from the Iran Nuclear Deal, and reimpose economic sanctions. Any oil sanctions would not actually kick in for six months, yet oil prices hit new multi-year highs at the mere idea of one of OPEC's largest oil exporters having to reduce the amount of fuel it brings to market. Iran pumps about 4 percent of the world's oil and is capable of exporting 2.2 - 2.7 million barrels per day. The previous round of sanctions cut Iran's output in half. It is unclear how much will be cut this time.

The global oil picture has dramatically changed in the past year. When gas prices were below $2 a gallon, oil was in high supply. In fact, there was too much oil, which caused the market to crash in 2014. Unfortunately for motorists, that glut has been drained by a combination of strong global demand and production cuts from Venezuela, and a collection of OPEC and non-OPEC oil producers. The mere talk of forcing Iran to reduce the amount of oil they bring to the table, pushed oil prices above $70 per barrel for the first time since 2014. On Friday, WTI closed at $70.70 per barrel, after rising $2 during the week. An increase of that magnitude normally signals a 5 cent increase at the pump.

In addition to the Iran situation, the latest EIA figures painted a picture of lower fuel supply in the United States, which heaped additional upward pressure on prices at the pump. The weekly report showed a 0.3 percent dip in domestic crude inventories, and a near 1-percent decline in gasoline supplies. Production rates are strong, but so too are U.S. demand and fuel exports. Gas stations are also in a process of transitioning from winter to summer blend gasoline, which is federally mandated to happen by June 1.