Gas prices spike behind Texas deep freeze, expected to keep rising in New Mexico
Analyst: Price increases will slow but continue
- Gas prices have been rising since December because of an expectation of increased demand.
- A recent surge in prices has been attributed to an Arctic front that moved through Texas, reducing refining and production capacity.
- New Mexico drivers continue to enjoy some of the lowest gas prices in the region.
FARMINGTON — It seems as if the months-long era of inexpensive gasoline brought on by the COVID-19 pandemic is over.
After enjoying falling gas prices for several months as demand plummeted, drivers across the country and New Mexico have seen those prices surge over the last two-plus months.
That situation began with expectations of increased consumer demand before morphing into a response to the severe winter storms in Texas that impacted production and production cuts by the Organization of Petroleum Exporting Countries (OPEC).
Those elements have driven up prices everywhere, including in the Farmington metropolitan statistical area. On Dec. 14, 2020, motorists were paying an average of $2.04 for a gallon of regular unleaded here, according to the weekly New Mexico Weekend Gas Watch produced by AAA Texas/New Mexico. By Jan. 14, that average price had increased to $2.28 a gallon, and by Feb. 18, it had climbed to $2.47 a gallon.
Shortly after the most recent report was released last week, prices surged again, with many gas stations in the Farmington area now charging $2.67 a gallon — an increase of 63 cents a gallon, or 24%, since the middle of December.
Daniel Armbruster, a spokesman for AAA New Mexico, said the biggest reason behind the sharp increase of late was the Arctic front that blew through Texas, leaving several refineries frozen and forcing them to shut down.
"Crude oil prices were rising prior to that," he said. "We were expecting oil prices to rise slowly but steadily through spring."
But no one foresaw the jolt to the system caused by the record-breaking cold in south Texas. Armbruster said up to 40% of the refineries in Texas were impacted by the frigid conditions, and that led directly to a steep drop in gasoline production, as well as the price at the pump.
According to AAA, 2 million barrels a day of refining capacity were taken offline during the cold blast, and approximately 1 million barrels a day of crude oil production were shuttered in the region.
That production already has started coming back, Armbruster said, meaning the worst is likely over for consumers. But they shouldn't expect prices to fall anytime soon.
"For the most part, the (price) spikes will be over, but we expect prices to increase in the weeks and months ahead, even though demand is lower than it was this time last year," he said.
Market watchers have been forecasting an increase in demand for gas for the past few months, and they say that speculation is what drove the increase that began in December. Their optimism is based on the availability of the COVID-19 vaccine and the expectation that American society soon will return to a more normal level of activity, including increased driving.
That increased demand hasn't shown up yet, with AAA spokesman Joshua Zuber noting in the Feb. 18 press release that demand was 1 million barrels a day less on that date this year than it was a year earlier. Still, many analysts remain convinced that increased demand will develop as the weather turns warmer and more Americans get vaccinated.
Armbruster cautioned that gas prices are likely to remain volatile until those Texas refineries regain their normal production capacity. But he said the price spikes of the last week are likely to be short lived and consumers can expect increased stability soon.
According to AAA, the average price of a gallon of unleaded fuel in New Mexico on Feb. 18 was $2.43. That was an increase of 4 cents over the previous week and 8 cents more than what motorists were paying on the same date in 2020.
The Farmington MSA average price of $2.47 a gallon was the second highest among the state's four MSA's, according to AAA. Albuquerque ($2.48) was the highest, while Santa Fe and Las Cruces ($2.44) tied for the least expensive.
Nationally, AAA reported that American motorists were paying $2.57 a gallon on Feb. 18 — 8 cents more than a week earlier and 13 cents more than the same date a year earlier.
New Mexico continued to have one of the lowest average gas prices in the region at $2.43. Texas was lower at $2.24, but Colorado ($2.47), Arizona ($2.63) and Nevada ($2.84) were all higher.
Mike Easterling can be reached at 505-564-4610 or firstname.lastname@example.org. Support local journalism with a digital subscription.