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Business, Energy, STEM

Mid-west Refiners and Geopolitical Impacts of BREXIT Have U.S. Gas Prices Holding Steady for Now

We’re four weeks into the 2016 summer driving season and 10 days out from our next major holiday – Independence Day. Gas prices are holding steady, i.e. they are about the same as they were at the beginning of the Memorial Holiday weekend. We see that in the retail price chart below. (Source: GasBuddy.com)

1-month-retial-average-gas-chart

GasBuddy.com’s gas prices statistics for today, Saturday, June 25, 2016, are also provided and show a reduction of almost 50 ¢ over the same time last year:

Today                   $2.314

Yesterday              2.319

One Week ago      2.347

One Month ago     2.313

One Year ago.       2.788

The above data also supports my last post, Memorial Day Weekend 2016: A Good Time to Take A Road Trip, where the average price for regular gasoline at the start of the summer driving season was $2.317.

From all accounts, it appears that this summer’s driving season is moving along swimmingly! According to AAA, “Pump prices generally peak during the summer months, due to imbalances in supply and demand.  Unlike many recent years, supply appears to be meeting the growing demand and as a result prices have held relatively steady and markedly lower than one year ago.”  To date, refineries have been keeping up with the growing demand.

Previously hard hit refineries in the Midwest are providing a helping hand in today’s gas price update. Beginning last week, some of the refiners in the region began to button up their maintenance activities coupled with boosting fuel production. The State of Ohio showed the largest decline – 19 ¢ a gallon in the last two weeks.

A new wrinkle in this gas price update is a significant geopolitical event – the United Kingdom’s (UK) vote to exit the European Union or the BREXIT referendum. Voters went to the polls on Thursday, June 23, 2016, to cast their votes on whether the UK should stay or go. The outcome: 52% of the voters cast votes to “go” or exit.

Although most pollsters predicted that the stay or go vote would be close, most of them and I assumed that the Brits and others would decide that staying in the EU was the better alternative, at least for now. The outcome of the BREXIT referendum also jolted the global financial markets the next day, Friday, June 24, 2016.  “The “Leave” decision also presents enormous political, economic, and legal questions in Europe, all bad news for commodity markets. The campaign to exit Europe centered largely on immigration, but the fallout will be felt across many sectors of the global economy.” [Ref 1]

The long-term impacts of the divorce between the UK and EU have yet to be seen or written, and are beyond speculation for this blogger. However, immediately after the outcome of the vote at the polls was announced, the prices of West Texas Intermediate (WTI) and Brent oil briefly plunged more than 5 percent in early market trading on Friday, but have regained some lost ground.

In short, the fundamentals of supply and demand for crude oil will not appreciably change due to the BREXIT vote. However, the possibility of other countries making a decision to exit the EU, might.

Until my next post on this topic…..happy motoring.

Sources Cited:

  1. What Are The Long Term Consequences Of The Brexit, by James Stafford for OilPrice.com, June 24, 2016, http://oilprice.com/Energy/Energy-General/What-Are-The-Long-Term-Consequences-Of-The-Brexit.html
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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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