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AAA Weekly Fuel Gauge: Crude Oil Price Spike Drags Gas Prices To New 2021 Highs

Illinois $3.51 (+10 cents) and Indiana $3.26 (+15 cents) are among the nation's top 10 largest weekly increases

AURORA, Ill., (October 11, 2021) – Illinois and Indiana drivers are feeling even more pain at the pump this week, as the ripple effects from the pandemic continue to play out in the crude oil market. The price of crude surged last week, on concerns that what was already a tight global fuel market, could get even tighter this winter. And gas prices are being dragged along for the ride

In Illinois Saturday's state average ($3.51) was the highest daily average since October 2014 and in Indiana last Friday's (October 8, 2021) state average ($3.27) was also the highest daily average since October 2014.

"The recent jump at the pump is directly tied to rising futures prices," said Molly Hart, spokesperson for AAA - The Auto Club Group. "The higher crude price raises the cost of producing gasoline. Unfortunately, it's not clear when these prices will come back down."

The price of US crude jumped 5% last week. For context, crude rarely exceeded $75 per barrel this year. However, on Friday, it briefly traded above $80, before ultimately settling at $79.31. That was the highest daily settlement since October 2014.

What's moving the market right now are concerns of what would happen if this winter is colder than normal. The issue is, natural gas prices in Europe and Asia have tripled - to a level that would be the equivalent of oil prices reaching $200 per barrel. This has speculators worried that the countries affected would turn to the oil market for heating and power generation. An oil market that is already extremely tight on supplies. Last year, global production declined, after the pandemic caused fuel demand to collapse. This year, demand has rebounded, but oil producers have not kept pace. Prior to the pandemic, the global market was oversupplied. Now demand outpaces supply.

Fortunately, the US may be shielded from the natural gas crunch, since US supplies are strong and very little of it is typically exported. Unfortunately, the US is not shielded by the tightness in the crude market - which has always been influenced by global factors.



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Oil Market Dynamic

At the close of Friday's formal trading session, WTI increased by $1.05 to settle at $79.35. Alongside the actions of OPEC+ last week, prices increased after the U.S. Department of Energy dispelled speculation that the Biden Administration would ban crude exports or sell crude oil held in the U.S. Strategic Petroleum Reserve. The sale could have put more crude into the domestic market, but it is unlikely to have had a sustained downward impact on oil prices. Prices have increased last week despite EIA's latest report showing that total domestic crude inventories increased by 2.4 million bbl to 420.9 million bbl last week. For this week, crude prices could continue to climb if supply tightens.

Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.