Patrick De Haan interview

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Gas and diesel prices have jumped quickly across the nation and across the state.

And the big question for drivers is how much higher can they possibly go?

We're talking with Patrick Dahan.

He is the head of petroleum analysis at GasBuddy about what's driving the increase, whether we've seen the peak and what could bring prices back down.

So thank you so much for joining us today, Patrick.

Well, thanks for having me.

So let's just jump right in.

I think the big question that people want to know, how much higher could gas and diesel prices actually go?

Have we seen the peak yet or should drivers expect prices to just keep climbing?

I'll think here in the very short term, covering days to maybe a week or two, prices should moderate.

A lot of the reason why prices have spiked so significantly the last few weeks while escalations geopolitically, but also refinery outside Chicago affecting Great Lakes gas prices, sending gasoline and diesel prices up significantly.

While the good news that refinery did get its issues sorted back out.

And so now gasoline and diesel prices may seal a bit of a drop here over the next week or two.

We're already seeing that in some areas of the country.

But how long lived that may last?

Well, that's tough to know.

A lot of this still boils down to geopolitical tensions overseas.

And if there are escalations, these decreases could revert right back to increases, both for gasoline and diesel.

And of course, there's been some headlines over the course of the last few weeks that some states are suspending or reducing their gas taxes to give drivers some relief.

Wisconsin is not one of those states right now.

And of course, gas tax revenue helps pay for transportation.

How much difference in your expertise does suspending something like the tax actually make for consumers and what are some of those trade-offs?

Well, you know, as an analyst, there's a lot of things.

First of all, my wallet loves it as a motorist, but the trade-off, the state taking in less revenue, generally, that would tell us that the state's going to have to find replacement revenue somewhere else.

So we're trading one problem for another.

In some states, instances, though, they may have a surplus.

Some states that are doing gas tax holidays do have surpluses, and so the cost is going to be coming out of the surplus.

Other states, well, it is a trade-off.

You may be robbing Peter to pay Paul.

so to speak, but it can offer some relief.

As you mentioned, states doing this, they vary in how much relief this is going to bring.

Some states are only doing gasoline.

Some are doing both.

And all of those add up.

In addition, as an analyst, it worries me that

Essentially, we are potentially stimulating demand by lowering price at the exact time that the market is telling you, well, there's a supply problem.

That's why prices go up.

So I don't think now that we're in fall that you're going to stimulate much demand, but arguably you're stimulating some level of demand at a time that supply is a little bit harder to come by.

If Wisconsin were to suspend their gas tax say tomorrow, would drivers actually see the full savings at the pump or could some of that relief get swallowed up by changes in the market?

Well, it depends on how it's coded.

There's a lot of different ways to code this relief into laws.

Sometimes it's at the wholesale level, meaning that stations that are buying thousands of gallons, well, if you stop the collection of tax on thousands of gallons today, the stations that bought yesterday still have thousands of gallons that were taxed.

So if it's at the retail level, it's a simply removing a line item from a point of sale system.

So you may see a little bit faster relief if it's at the retail level.

Some states are doing it at the wholesale level.

Some are

the retail level.

So it delays the potential onset of relief, depending on what level

you suspend taxes, but most of it gets passed along.

And a lot of that is simply because stations will use any competitive advantage they can to lower their price.

If you suddenly cut the tax stations are paying, they're going to undermine and undercut their competitors, which then forces the competitor to undercut right back.

So eventually much of these tax suspensions end up in the wallet of motorists, but sometimes there can be extenuating circumstances.

If the price of oil goes up,

$20 a barrel today, the tax relief that could be implemented today would be completely offset by a huge jump in the price of oil.

So a lot of Americans think that, well, hey, if there's a gas tax holiday, I'm going to visibly see that at the pump.

But what you see at the pump is a function of all the lovers moving in real time, not just one of them.

So it may not necessarily translate into a tangible and visible decline in gas and diesel prices at the pump.

Patrick Dahan is joining us right now.

We are discussing the rise in gas and diesel prices.

He's the head of petroleum analysis at GasBuddy.

Check out gasbuddy.com.

Patrick, historically, when was the last time in some sort of equivalent world where we saw gas and diesel prices rise this quickly?

And how does what we're seeing now compare to that?

There's a lot of different contexts to look at the current rise, the rise over the last couple of weeks, the rise over the last seven months.

I will say that the pace of increases this year has been very close to what we saw in 2022.

When the US economy was reopening after COVID and Russia invaded Ukraine, there was a big surge in prices as well.

This surge in prices, well, seven months into this, that's what's different this time around.

The surge in 2022 started to improve by June after prices surged from March through June.

Prices then spent much of the rest of the year, June through December, declining.

This time around, it's a much more prolonged, elevated period of prices, and there's not any

of relief just yet.

So all of these are hard to compare, but it certainly has been one of the most expensive.

It likely will be one of the most expensive, if not the most expensive year for gasoline ever.

2022 again was a shorter window of pain.

This seems like it's being an extended window, both gasoline and diesel.

Diesel prices this time around have reached new all-time records.

Gasoline in 2022 though, that's what holds the all-time record for gasoline prices.

Let's talk about diesel for just a moment because those prices don't just affect truckers and farmers.

They eventually can show up in the cost of food and other goods.

So how much of a ripple effect could these diesel prices have on consumers?

Well, yeah, as you mentioned, truckers aren't just out for a joyride, right?

They're not the only one that are paying to fill that tank up.

All of the goods that truckers haul generally will end up in the market.

And the cost has to be reflective of the cost of diesel.

That's just one of the considerations.

Aside from the trucker's time and his pay, the other major factor in hauling goods is the cost of diesel.

And as you mentioned, everything in this economy moves

with diesel whether it's the farmer harvesting crops right now with diesel whether it's the semi that brings those crops to be processed and then distribution and then the grocery store diesel is really the fuel that powers us supply chains and also it powers things like trucks and trains so much of the us economy is driven on diesel and with diesel prices in record territory in 47 states

That's a cost that eventually trickles down to every aisle, the grocery store, the next time you go out to eat, the next time you have something delivered, all of that is going to be impacted by the rise in the price of diesel.

And finally, for people who are paying attention to this, for people who are at the pump, which ultimately affects all of us at some point, what should we be watching over the next few weeks and what would have to happen for prices to start coming back down?

Well, what I'm watching, just kind of a factor of everything.

The two main geopolitical tensions that have created this, those being the U.S.

attacks on Iran.

So any issue between the U.S.

and Iran can further undermine or drive prices up.

And also increasingly Ukraine and Russia.

Ukraine has been attacking Russian oil refineries.

That's problematic because Russia produces a lot of diesel, but they're not exporting any of it because a lot of that diesel production has been knocked offline by these attacks.

So anything that touches both of these geopolitical tensions could impact prices in the weeks ahead.

Unfortunately, I have no crystal ball for what that's going to look like, but any new escalations could aggravate and send gas prices and diesel higher.

Whereas if there's any de-escalation, that could push prices lower.

And if we get a major de-escalation in both of these, the relief could start very quickly and it could last several weeks, if not several months.

Patrick DeHaan, thank you so much for joining us today.

He is the head of petroleum analysis at GasBuddy.

Check out gasbuddy.com.

With prices changing quickly, as Patrick alluded to, we are going to be watching what happens at the pump and how it affects people all across the state.

Remember, for more stories and issues affecting Wisconsin, visit civicmedia.us.