Local gas prices are rising ahead of Memorial Day weekend, potentially deterring some summer travel.
Prices at the pump in Odessa and Midland averaged $2.98 per gallon as of Sunday, according to a survey of 156 gas outlets in the area by gas price tracker GasBuddy. That reflected an increase of 7.4 cents per gallon over the past week. And it exceeded the national average by 6 cents and the state average by 28 cents.
GasBuddy predicted summer travel would “plunge as a result of high gas prices,” citing an annual survey. Local gas prices at this time of year have not been higher since 2014.
“High gas prices are starting to eat away at the travel plans of many, and the number will likely rise as gasoline prices appear poised to continue moving higher in the weeks ahead,” said Patrick DeHaan, head of petroleum analysis for GasBuddy.
Despite the high gas prices, AAA Texas predicted about 2.9 million Texans to hit the road during the holiday weekend, up about 4.7 percent from last year. In contrast to GasBuddy, AAA Texas expected that rising gas prices will not discourage Memorial Day travel in Texas.
“A strong economy and growing consumer confidence are motivating Texans to kick off what we expect to be a busy summer travel season,” said Kent Livesay, general manager of AAA Texas.
Locally, high gas prices might come as counterintuitive for a region where crude production is surging.
“It has nothing to do supply — Nothing, not in West Texas,” said Odessa oilman Kirk Edwards, president of Latigo Petroleum, about the high gas prices. “If anything we are oversupplied which you can see from our discount that our crude gets to the rest of the state and world.”
The majority local gasoline supply comes from the Alon USA refinery in Big Spring, along with other regional refiners and alternatives piping in gasoline from Houston.
As recent years demonstrated, local gas prices often failed to correspond with how much local refiners save producing it because of the surging Permian Basin production. Local refiners of crude can see a discount of more than $10 compared to what refiners pay at the Gulf Coast. The discount results from constraints on infrastructure needed to move the oil from the region.
Refiners base their prices on what the market will bear relative to what competitors are doing, and local refiners are incentivized to price as high as they can while competing with other gasoline wholesalers pumping fuel to the region at a greater cost.
“The closer you are to a refinery the cheaper the gasoline should be, but that’s not the case here,” Edwards said.