Energy Economy

Number of States With Gas Price Below $3 Drops to Three

The number of states in which the price of an average gallon of regular gasoline is below $3 has dropped to three. The probable causes are a rise in oil prices and limited refinery capacity for conversion of crude to fuel for cars. The trend shows that prices, which have mostly fallen for months, have started to rise again. An improved economy could accelerate the trend. Ironically, that same improvement may be hurt by the rise in the cost of a gallon of gas.

According to Gas Buddy, Oklahoma, New Mexico and Wyoming have prices below $3. The number is insignificant against the national average, which is $3.279, because the populations of these states are so small.

In states with large populations, gas prices are mostly very high compared to the U.S. average. The average price is California is $3.606, in New York $3.671, in Pennsylvania $3.435, in Illinois $3.413, in Ohio $3.411 and in Michigan $3.407. Theses six states include more than a third of the U.S. population.

After a price drop that has gone on since late August and bottomed at just above $90 in late November, the price of crude has moved back to $100. Much of the rise has been triggered as the U.S. economic picture has improved at an accelerating rate. Violence in South Sudan has caused increased worry that political trouble in the Middle East and northern Africa could push prices higher. China auto sales have also spurred demand for oil. As for the trend in refinery output, according to research firm Platts:

Infrastructure will remain the watchword as US refiners look to further cement their role as world class product exporters in 2014, improving export capacity and rejigging refineries to increase their output of export-friendly diesel, sometimes at the expense of US-favored gasoline.

Even if refinery capacity rates remain strong, gasoline refining shortages will play a role.

Without some new catalysts, the price of gasoline probably will rise, at least in the first part of the year. That will create a drag on the economy, unless the rise is very modest.