Analyst: US could see $5 gas by Memorial Day, $6 per gallon on the table

As price surges from states across the Midwest began pouring in, GasBuddy’s Patrick De Haan couldn’t believe what he was seeing. The jumps, nearly $1 per gallon overnight, were leading his automated systems to conclude it was a “fat-fingered” or some other type of input error.

“We’ve seen a fast and furious surge in wholesale gasoline, diesel, and jet fuel prices,” De Haan, the site’s head of petroleum analysis, told Sherwood News on Wednesday evening. De Haan sounded the alarm earlier in the day about a rapid spike in prices stemming from the states of Michigan, Wisconsin, Illinois, Indiana, and Ohio. De Haan attributed today’s price increases to a refinery in northwest Indiana going offline, but said the warning signs were apparent going back to Sunday night.

If the Strait of Hormuz off the coast of Iran is not reopened, De Haan said the price of gas could surge past his earlier estimate of $4.50 in the next two weeks to over $5 per gallon, or more, by Memorial Day. After prices soared on Monday and Tuesday, De Haan explained, gas station owners were essentially hit with a $0.70 increase in between restocks, which usually occur every two days.

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“Yeah, I mean, nothing’s impossible at this point. Absolutely,” De Haan said when asked if the price of gas could reach $5.50 or even $6 per gallon by later in the summer. “It’s definitely possible that we could see new all-time records set for gasoline prices, whether or not in the weeks ahead or beyond that.”

The destruction of infrastructure in the refining of crude oil has played a role during the war so far, De Haan noted, but he emphasized that much of the upward price pressure heading into the crucial summer travel window hinges on the Strait of Hormuz.

“At this point, it looks like the blockade is going to be extended, that there’s no real plan in place,” he said. “And the worry is that as we get closer to Memorial Day, if the strait is still closed, I think we a have very good shot of hitting new all-time records for both gasoline and diesel.”

With most gas station retailers restocking every two days or so, De Haan said these hikes will be sticky as these buyers try to take back some of their margins once wholesale prices begin to fall. “What a lot of motorists don’t realize is that stations are a couple days behind on raising prices, and that’s why prices take more time to go down, because stations need to reabsorb the margin that they hemorrhage when prices were actively spiking.”

For someone who’s seen almost everything in the fuel market, even De Haan was taken aback by how the current market dynamics have been giving his systems everything they can handle — until they can’t.

“We build validation tools that are built for normal times,” De Haan says. “And whenever you put in a price that’s a dollar a gallon higher than it was 24 hours ago, our systems have a hard time keeping up on what’s real and what might be a fat-fingered or inaccurate price post. It’s extraordinarily rare that you see prices going up a dollar a gallon in a retail market compared to where they were just six hours ago.”

Earlier in the day, De Haan recalled misspeaking about the national average for gasoline being $3.30 a gallon instead of $4.30, an example of “how volatile the market is and how much prices have surged when you’re conflating and mixing up data.” So, in turn, he gives the algorithms some grace for not being able to keep up, either.

And if someone like him is having a hard time keeping up, it can’t be any easier for gas station owners hoping to make sense of the market.

“It’s just a lot of uncertainty,” De Haan said. “I mean, station owners and those that market fuel are finding it really difficult to stay ahead of the game and stay ahead of the volatility. I mean, it’s virtually impossible.”