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Business, Energy, STEM

U.S. Gas Prices Inching Upward

gasoline_pump_business_deskThe last discussion of local and national gasoline price trends was posted to this blog on January 2, 2014. Gasoline prices have been slowly rising here in the U.S. for more than 30 days according to GasBuddy.com. [Ref 1] This post provides an update on price trends and discusses the potential impacts that the current tensions between Russia and the Ukraine are having on pump prices around the world as well as here in the U.S?

First, here’s a price check on gas prices in Arizona and the United States for today, March 11, 2014 [Source: GasBuddy.com]:

                Arizona/U.S. National Avg. ($, dollars)

Today:              3.322 / 3.479

Yesterday:         3.336 / 3.482

One Week Ago: 3.315 / 3.454

One Month Ago:3.226 / 3.304

One Year Ago:  3.732 / 3.678

In the last related post, Tracking Gasoline and Electric Energy Fuel Prices for the New Year, the price of regular gasoline in Arizona and the U.S. average were $3.170 and $3.308, respectively. The above data shows increases of $0.152 and $0.171 for each since the beginning of the year.

Next, let’s take a look at seasonal activity and driving habits that may have an impact on these rising prices.

For example, the State of Arizona requires a winter time blend in metropolitan Phoenix to reduce carbon monoxide (CO) pollution. A 10% ethanol blend is added to all grades of gasoline that are sold between November 1 and March 31st. [Ref 2]  For those locations and regions that struggle to meet EPA’s ozone (O3) standard during the summer, a reformulated blend is sold in these areas, and some refinery equipment has to be reconfigured to create this product.

grass-roots-refineryWe are moving from winter to spring across the U.S. – thank goodness after all of those winter snowstorms – and the outdoor temperatures are finally starting to rise. These rising temperatures signal to refiners that it is time to switch from winter to summer blends in preparation for the summer driving season. U.S. refiners often plan for maintenance in the spring; therefore, any additional outages could lead to a drop in gasoline production, and subsequently, a rise in prices at the pump.

Now, about that conflict between Russia and the Ukraine: It appears that no sooner than the Winter Olympics Games ended, Vladimir Putin, president of Russia, took advantage of a deteriorating situation on the Crimean peninsula of the Ukraine. On February 27, 2014, Putin sent in 2,000 troops to stabilize the political situation in Crimea. Was this an invasion? Putin doesn’t seem to think so. His initial reason for ushering in the troops was to protect the Russian Black Sea Fleet and naval installations, or so he says.

Tell me more Mr. Putin. What he didn’t say and perhaps does not need to say, is that the majority of the citizens of Crimea have ancestry and ties to Russia. The reality is that there are a lot of folks in Crimea who are loyal to Russia. What does the clever Mr. Putin say about the sudden appearance of Russian troops now? “Russia’s involvement in Crimea seeks to protect ethnic Russians in the region against Ukrainian authorities.” [Ref 3]

For all the criticism about what Russia lacks as a country, has not been able to achieve since the fall of the Soviet Union, is isolated and landlocked in this region, etc., it does have something that others want: reserves of oil and gas. Sixty (60) percent of the European natural gas supply comes from Russia, with half of that supply running through pipelines traversing The Ukraine. [Ref 4] The crisis in Ukraine has brought attention not only to the military influence that Vladimir Putin can exert, but also upon the influence that Russian natural gas can wield.

With that said, the possibility of the crisis in Crimea escalating is a double-edged sword for Russia. It relies on its exports of oil and gas as a major source of revenue, therefore escalating conflict or military fighting could strongly result in eastern Europe either being cut-off from its fuel supply, or an embargo against Russian fuel products. However, claiming the Crimean peninsula expands Russia’s presence in the region, and also its oil and gas reserves.

News outlets are reporting today that the citizens of Crimea are preparing to vote to separate from the Ukraine and become an independent state. Although this is unorthodox, and illegal according to some, this is what is happening.

oil-tank-farmEastern Europe and western nations including the U.S. are attempting to reason with Mr. Putin, and caution him against beginning starting a war in this region. If Eastern Europe and the Ukraine have to look elsewhere to purchase energy, this would add further stress to the supply and demand curve.

Prices would definitely rise in the U.S. and everywhere else. However, there may be a silver lining in all of this for the U.S. which has been beaming with increased energy production for the past few years – much attributed to the oil shale boom. According to USAToday, for the first time since 1949, the United States exported more gasoline, heating oil and diesel fuel last year than it imported, the Energy Department reported today. The U.S. has the infrastructure to transport and export crude oil if it desires, however, exporting natural gas would be a greater challenge since the distributions channels are not in place to make that happen very quickly.

To date, most analysts estimate the conflict in the Ukraine has had little to no impact on the cost of gasoline at the pump. Initially the cost of a barrel of crude oil spiked up at the news of the conflict, but has now dropped to less than $101 per barrel as tensions waned. Therefore, rather than continue to dwell in the world of hypotheticals, a future update is warranted on this topic.


1.    National average marches higher…again, by Patrick DeHaan, March 10, 2014, http://blog.gasbuddy.com/posts/National-average-marches-higher-again/1715-566052-2314.aspx#5TGDtKSHeBdQa4QY.99

2.    Air and Fuel Quality, Arizona Department of Weights and Measures, http://www.azdwm.gov/BUSINESS/AirandFuelQuality/tabid/118/Default.aspx, last viewed on March 10, 2014

3.    Black Sea port in Ukraine still key to Russia’s naval interests, by Steven Beardsley, March 3, 2014, Stars and Stripes, last viewed on March 10, 2013

4.    Natural Gas, Ukraine and the U.S., by Daniel Dicker, The Huffington Post, March 10, 2014, http://www.huffingtonpost.com/daniel-dicker/natural-gas-ukraine_b_4936411.html.

5.    U.S. exported more gasoline than imported last year, by Michael Winter, USA Today, February 29, 2012, http://content.usatoday.com/communities/ondeadline/post/2012/02/us-exported-more-gasoline-than-imported-last-year/1#.Ux9c0c5bswE, last viewed on March 11, 2014



About Vi Brown

Vi is principal and CEO of Prophecy Consulting Group, LLC, an Arizona firm that provides business and engineering services to private and public clients. Prior to establishing her consulting practice in 2001, Vi worked with Motorola, Maricopa County Government, Pacific Gas & Electric, CH2M Hill, and Procter & Gamble. As an adjunct faculty member, Vi teaches undergraduate calculus classes and graduate level environmental courses. She is also a professional speaker.


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