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How extreme weather causes your gas prices to rise

The unprecedented warmth this summer has increased gas prices across the United States.

Gasoline prices have increased to levels not seen in nine months, despite overall economic inflation trending lower. The uncomfortable increase in prices can be partly blamed on the recent heat wave.

As with humans, refineries can’t function properly in constant heat.

Extreme heat, such as when temperatures hit 100 or 110 degrees Fahrenheit, makes it impossible for these sophisticated plants to produce enough gasoline to meet demand. Not only is demand rising, but supplies are dwindling at the same time.

When temperatures soar, refineries often malfunction. Oil Price Information Service CEO Tom Kloza compared it to constantly operating a car’s engine at high temperatures.

Gas prices have risen due to the shutdown of several refineries. Regular petrol prices have increased by 30 cents in the past month, bringing the national average to $3.83 per gallon, as reported by AAA.

Even the oil and gas industry, which scientists hold partially responsible for global warming, is not safe from the effects of the crisis, as all of this evidence demonstrates. Rising gas prices are hitting consumers hard and could reverse some of the progress made in taming inflation elsewhere in the economy.

Russian and Saudi Arabian restrictions on supply

The rising cost of gasoline is due to more than just the recent heat wave. Retail gasoline costs continue to be mostly influenced by oil prices.

As recession worries have subsided and Saudi Arabia and Russia have pledged to limit supply, oil prices in the United States have risen by 22 percent since mid-June.

On Thursday, Saudi Arabia promised to do much more this fall and announced intentions to extend a voluntary supply cut of 1 million barrels per day for another month. Additionally, Russia has stated that beginning in September, it will reduce oil exports by 300,000 barrels per day.

High temperatures are undoubtedly putting upward pressure on petrol costs.

Due to the high demand for electricity and cooling systems, some Middle Eastern countries are resorting to burning oil to power their utilities.

Some refineries along the Gulf Coast, including those in Texas, Louisiana, and elsewhere, have had to reduce output because of unplanned maintenance.

Why temperature matters

Andy Lipow, head of consulting firm Lipow Oil Associates, claims that refineries heat crude oil to temperatures of 900 or 1,000 degrees Fahrenheit to break down the molecules in order to produce gasoline, jet fuel, and diesel.

The final product cannot be obtained until the oil has been cooled after being heated. That’s how things usually go, but as the thermometer keeps climbing into the triple digits, the rules become rewritten.

The difficulty of cooling down increases as the temperature outside rises, according to Lipow.

Refinery maintenance can be slowed down by the high temperature.

Refineries have every economic reason to max their production at the moment. High profit margins make it worthwhile to increase output of fuels like gasoline, jet fuel, and diesel.

“If refineries can keep their operations running, they are doing extremely well. There’s a lot of money to be made, so you might as well go as fast as you can,” remarked Kloza.

Increasing diesel costs

When it’s 100 degrees outside, though, most refineries can only operate at 85% of capacity, according to Kloza.

Since refinery capacity has declined in recent years, this is a particularly pressing concern.

Lipow stated, “The system is truly at capacity.”

The cost of aviation gasoline and diesel has risen as a result of this circumstance. Diesel is an essential fuel for the economy because it is used to run ships, boats, and trains. Consumers will be charged more for their transportation expenditures.

According to AAA, retail fuel prices have increased by 31 cents a gallon in the last month. Diesel futures suggest further price increases.

When gas costs go up, everyone gets a little crazy. But, as Kloza pointed out, “the effect of such fuels on inflation is even more subtle.”

The good news is that there appear to be decreasing indications that the high heat has had on gas prices.

While retail prices are going up, the price of wholesale gasoline has remained relatively stable.

“I think we’re hitting a plateau,” Kloza remarked.

Fuel use normally decreases in September as summer winds down, so drivers may rest easy for a few weeks.

According to Kloza, the summer high for petrol prices could be just a few cents away.

The only caveat? If a strong hurricane hits the Gulf Coast, where many refineries are located, it could be exacerbated by the extremely warm water.

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