Elevated Refining Costs Fueling Persistent Gas Price Increases

A surge in gas prices has left consumers facing elevated costs at the pump. According to Nicholas Sly, vice president and Denver Branch executive for the Federal Reserve Bank of Kansas City, refining activities are contributing to higher gasoline prices. With refineries operating at maximum capacity, refining margins have increased, leading to a growing price difference between crude oil and refined products.

Sly noted that inventory has dwindled and capacity has lessened following the COVID-19 pandemic, Russia-Ukraine conflict, and ongoing conflict in Iran. As a result, the destruction of refining facilities has made global refining capacity 'much more limited.' He stated that the crack spreads are 'likely to remain elevated' due to the time it takes to build new refineries.

The state average for regular gasoline on Wednesday stood at $4.47, up 41 cents from a month ago and nearly $2 from a year ago, according to AAA New Mexico. Diesel prices have also reached their highest recorded average price this month at $6.36 per gallon. Sly emphasized the need for businesses and consumers to plan ahead due to persistent upward pressure on gas prices.