Lower oil supply pushes gas prices up

  • Regular unleaded gas cost $3.27 per gallon Friday at the Shell gas station in Hilo. Gas prices are up 40 cents compared with last year.

    HOLLYN JOHNSON/Tribune-Herald

Gas prices in Hilo are up 40 cents compared with last year, and they’re predicted to continue to increase into 2018.

A gallon of regular unleaded gas in Hilo averaged $3.24 Thursday, up from $2.78 a year ago and $3.16 a month ago, according to the AAA Fuel Gauge Report.

Statewide, the average was $3.25 Thursday for a gallon of regular unleaded fuel, up from $2.85 a year ago and $3.15 a month ago.

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AAA doesn’t track Kailua-Kona prices, but several West Hawaii stations posted prices between $3.36 and $3.44 Thursday, according to the gas price tracking site GasBuddy.

Patrick DeHaan, senior petroleum analyst at GasBuddy, said that spike is a result of rising oil prices, which are currently at “multiyear highs.” A barrel of crude oil sold for $57.40 Thursday, down from $59 earlier this week, which DeHaan said is the highest it’s been since June 2015.

Higher oil prices are a result of lower supply. OPEC’s decision in January to cut production caused inventories to decline, DeHaan said. Total inventory is down about 100 million barrels from last year.

Demand also was higher this fall, DeHaan said, partly a result of the improved economy.

“It’s supply and demand driven,” he said. “It’s been 11 months since OPEC has reined in oil production, and that’s why inventory is falling steadily throughout this year. They haven’t been providing as much oil. They did that for the sole intent (so) oil prices would recover, and they have.”

Current prices are predicted to stick around for awhile. OPEC announced Thursday it plans to extend production cuts through 2018, DeHaan said, so oil inventories likely will “continue to tighten” and create “upward pressure at the pump.”

“I certainly don’t expect the year’s lowest prices to emerge at the end of the year,” DeHaan said. “It will be what we’ve seen the last few weeks, if not prices higher.

“We will probably see 2018 with a higher average price than what we saw last year, but I wouldn’t say we’ll see record highs,” he added. “That’s very unlikely.”

Prices also are inching up slightly because of a higher fuel tax. Hawaii County adopted a plan this year to gradually boost its fuel tax from 8.8 cents to 23 cents by the 2019-20 fiscal year.

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Nationally, drivers were paying an average of $2.50 for gas Thursday, up from $2.15 a year ago.

Email Kirsten Johnson at kjohnson@hawaiitribune-herald.com.