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Economy & Business

Deep Freeze In Texas Pushes Up Crude Oil, Gasoline Prices

AILSA CHANG, HOST:

A lot of Americans have been driving less than usual this winter, but gasoline prices have still been going up. This week's winter storm is adding to the crunch, but as NPR's Camila Domonoske reports, that is not the only reason for the price increase.

CAMILA DOMONOSKE, BYLINE: Last year gasoline prices plummeted. The national average dropped to well under $2 a gallon. Now it's back over $2.50.

JEANETTE MCGEE: We are seven cents away from being back to pre-pandemic gas prices.

DOMONOSKE: Jeanette McGee is a spokeswoman for AAA. She says gas prices are likely to go up even more this week thanks to a giant winter storm.

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UNIDENTIFIED METEOROLOGIST: We expect to see that over the northern tier of states and back through the Rockies and the higher elevations but not all the way down into northern Mexico.

DOMONOSKE: Some oil producers and refineries in places like Texas have shut down.

MCGEE: We're going to see crude prices shoot up even more because production's offline.

DOMONOSKE: But the impact of the storm will be temporary. There's a longer trend at play here.

MCGEE: Gas prices have just been increasing consistently week over week since the end of November.

DOMONOSKE: Driving did increase during the summer and fall, but this growth in gasoline prices - it's happening during the winter, not famous for its road tripping weather. So it's not high demand that's driving gas prices up. Instead, it's high crude oil prices. And why have oil prices been rising for months?

PAOLA RODRIGUEZ-MASIU: Everything started with the announcements that we now have the vaccines.

DOMONOSKE: Paola Rodriguez-Masiu is a vice president at Rystad Energy. She describes what's been happening in oil markets as an optimism spiral. The good news about vaccines, a surprise move from Saudi Arabia to boost the oil market - it all created a lot of hope for the future. And it's that hope, not the current demand, that's driving prices.

RODRIGUEZ-MASIU: And the reason is because the market is pretty much forward-looking.

DOMONOSKE: And it's looking forward to a time when people are driving and flying like normal. Oil markets are so excited that there's light at the end of the tunnel that they're setting prices based on the light even though we are still in the tunnel.

RODRIGUEZ-MASIU: We could even say that the market have maybe gotten a little bit ahead of itself.

DOMONOSKE: Premature or not, optimism is powering oil prices right now, and that means gasoline prices will likely keep climbing too.

Camila Domonoske, NPR News.

(SOUNDBITE OF THE BLACK KEYS' "BLACK MUD") Transcript provided by NPR, Copyright NPR.