West Texas Intermediate crude oil ticked up $1.06 to $62.34 per barrel on Thursday as OPEC leaders and their allies reviewed supply cuts.
The recent rally in oil markets has pushed crude prices to their highest levels since near the start of the coronavirus pandemic, fueled by recovering demand and production cuts.
“The reason gasoline is coming back up is we’ve been in a shutdown period for many of the refineries and so that puts a squeeze on what’s available in terms of final product,” Hofmeister told host Maria Bartiromo.
Gas prices have been increasing at the pump for the past few weeks, reaching a national average of $2.75 a gallon as of Thursday, which is 33 cents higher than the same time in 2020, according to AAA.
AAA forecasts the national gas price average will hit at least $2.80 this month, according to a news release, which explained that that means drivers can expect continued increases of at least 5 to 10 cents in local markets until refinery operations are stable.
The latest price increases are “a direct result of February’s winter storm that took 26 U.S. refineries offline and pushed refinery utilization from an average of about 83% down to an atypical low of 68%,” AAA noted, citing the Energy Information Administration (EIA).
Frigid temperatures knocked out electricity across Texas last month and resulted in one of the largest U.S. oil production disruptions ever.
Shut-ins related to the winter storm have removed about 3 million barrels of daily oil production, or 27% of U.S. output, much of which comes from the oil-rich Permian Basin located in West Texas and Eastern New Mexico. Refining capabilities in Houston were also knocked offline.
“Barring hurricane season, March may bring the most expensive pump prices of 2021,” Jeanette Casselano McGee, a AAA spokesperson, said. “While the month is roaring in like a lion, by the end of it we could see some relief at the pump as refineries resume normal operations, especially if crude oil prices show signs of stability.”
On Thursday, Hofmeister also pointed out something “more subtle” that is affecting gas prices.
“The producers are practicing serious capital discipline and they’re not roaring back to produce more oil,” he said.
He added that producers are also “getting squeezed by the administration.”
He warned that “the prohibition on new leases from the Biden administration” will “create a psychology in the industry of there’s going to be less available and the psychology drives the pricing as well.”
“As long as we see this hostile administration, we’re going to have a problem with prices,” Hofmeister continued.
In January, President Biden signed an executive order that put drilling and fracking on federal lands and waters on hold for 60 days in an attempt to combat climate change. Biden on the campaign trail called for the U.S. to phase out its dependence on fossil fuels.
FOX Business’ Jonathan Garber contributed to this report.