The oil market may spike to as high as $100 per barrel if Saudi Arabia fails to quickly resume oil supply lost after attacks over the weekend, traders and analysts said.
Meanwhile, the attack on an oil facility in Saudi Arabia that sent futures prices soaring Monday will likely begin filtering through to gas stations later this week, according to price tracker GasBuddy.
The average U.S. retail gasoline has risen just one cent a gallon since Sunday, even as futures on the New York Mercantile Exchange jumped as much as 20 cents on the back of drone strikes on Saudi oil production.
The impact at the pump should start to become more pronounced late Tuesday or Wednesday, according to Patrick DeHaan, senior petroleum analyst at GasBuddy. That’s after gasoline distributors adjust prices to match gains in futures and regional spot markets.
He said an increase of at least 10 cents per gallon to the U.S. average is likely if Aramco can return to normal operations in one to two weeks. If the repairs take longer, an increase of at least 25 cents per gallon is likely in the U.S., DeHaan said.
The national average price of regular gasoline was currently $2.57 per gallon, according to AAA.
Higher pump prices represent a political risk for President Donald Trump, who authorized the release of oil from the nation’s strategic reserve, to keep the market well-supplied.
A prolonged price increase could lead low and middle income voters, especially in red states, to stay home from the polls come election time, said Kevin Book, managing director of ClearView Energy Partners in Washington.
“No voter has ever been happy about a price increase,” Book said in a phone interview. “They might not vote for the other party, but they might not get off the couch if they are pissed off.”
The rise comes during a time of year when prices typically fall during the transition to winter-grade gasoline that is cheaper to make. Auto club AAA earlier had predicted $2 gasoline in the U.S. South this fall; the cheapest states for gasoline, Mississippi and Louisiana, were around $2.20 per gallon Monday, AAA said.
“Right now you are seeing the stations rushing to get those tanks full. And those who are not able to fill up will be confronted with having to pay extra later,” DeHaan said.
However, California motorists, some 8,000 miles (13,000 km) away from Saudi Arabia, could be hit the hardest. Refineries in that state rely heavily on imports for supplies due to its isolated location and lack of pipelines to connect it with oil-rich states such as Texas.
Saudi Arabia exports more than 7 million barrels of crude oil every day, much of that to Asia, but about 47% of what it sends to the United States goes to the West Coast.
For the 12 months ended in June, the U.S. West Coast imported an average of 11.40 million barrels every month of Saudi crude, much of it going to a number of refineries based in California, according to the U.S. Energy Information Administration.
"I absolutely think it's likely that the West Coast will see more of a pricing impact than other regions since they're more tied to Saudi imports," said Patrick DeHaan, head of petroleum analysis at tracking firm GasBuddy.
Saudi Arabia accounted for about 37 percent of California's total foreign oil imports in 2018, according to the California Energy Commission.
"Saudi Arabia has always sought to portray itself as a reliable supplier of crude to the market and for this reason we think they will opt to supply the export market for crude first then products," said Robert Campbell, head of oil products research at Energy Aspects.
The state currently has the second-highest average gasoline prices in the United States at $3.63 per regular gallon of gas, trailing only Hawaii. Fuel prices in California are typically higher due to tight regulations and differing gasoline specifications.
Among the biggest buyers of Saudi Arabian crude are Chevron Corp.'s 245,000-barrel-per-day (bpd) refinery in Richmond, California, and the 269,000-bpd El Segundo refinery in California. The West Coast, known as oil region PADD 5, includes Washington State, which has also taken in barrels from Saudi Arabia in the last year.
A Chevron spokesman told Reuters the company sources crude from "multiple global suppliers," and it will "take the necessary actions to continue to meet the needs of the marketplace."
The United States has more than 640 million barrels of oil in reserve that could offset tighter supply as a result of the Saudi attacks. U.S. President Donald Trump said on Sunday he authorized the release of oil from the U.S. Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined.
"I don't yet think any area will see 'spikes' because of the attacks, but it certainly could become that if Saudi Arabia production doesn't return to 90% of normal very quickly," DeHaan said.
Meanwhile, the market could see a return to $100 per barrel if the issue cannot be resolved in the short term, according to Greg Newman, co-CEO of Onyx Commodities.
Other experts also warned of oil prices surging to triple digits.
"If 5 million BPD of oil production stays offline for very long, that's a prescription for a quick return to $100/bbl oil," Robert Rapier, a chemical engineer, wrote on Forbes.com.
Material from Bloomberg and Reuters has been used in this report.