Elevated Crack Spreads & Crude Oil Prices Contribute to Higher Prices at the Pump

Gas prices are running higher this year, and the reason has more to do with refining than with crude oil itself. Refiners make money on the gap between what crude costs and what they can sell gasoline and diesel for, called the crack spread. That gap has averaged about $1 a gallon more than last year since May, mainly because global gasoline supplies are tight after refinery disruptions in Russia, China, and the Middle East. Those same disruptions have hit diesel and jet fuel even harder, so refiners have been shifting production toward those fuels, which leaves less room to boost gasoline output.

The tight global supply has also cut into gasoline imports, which matters most for the East and West Coasts, since both regions rely on shipments from elsewhere to cover local demand. Since March, U.S. gasoline imports have run 32% below the five-year average, and some of that gap has been made up by shipments from the Gulf Coast under special waivers to shipping rules.

The upshot for your wallet depends heavily on where you live. As of the Monday before Labor Day, the national average for regular gasoline was $4.07 a gallon. The West Coast was running much higher at $5.21, and the Rocky Mountain region was at $4.27. The Gulf Coast, Midwest, and East Coast were all below the national average, at $3.62, $3.85, and $3.94 respectively. Local taxes and fuel rules also factor into these regional differences.