This will fuel inflation and hit consumers and businesses still grappling with the pandemic.
According to auto club AAA on Tuesday, the national average was $4.17 per gallon. Several states along each coast could soon join California’s $5-and-up club.
The pump prices have been increasing for over a year and analysts are expecting further increases after President Joe Biden announced that the United States would ban imports of Russian Oil to punish Russia for its invasion of Ukraine.
Although this week’s price hikes are painful, they are not the most expensive that Americans have ever paid. Inflation is also a factor. Today’s dollar equivalent to the 2008 record of $4.10 per gallon is $5.24.
We look back at how we got to this point and what that means for American households.
WHEN DID PRICES START RISING?
In 2019, gasoline prices in the United States averaged $2.69 per gallon. COVID-19 caused offices and businesses to close down in 2020. A gallon of gasoline was selling for less than $1.90 by late April 2020. Since then, prices have risen as the demand for energy has rebounded. However, global production has slowed and inventories have shrunk.
WHY ARE THE PRICES SO HIGH
It all boils down to supply-demand. On average, the world consumes close to 100 million barrels per day of oil. During the pandemic, producers cut back on exploration and production and have been slow in resuming production. Some producers claim they are facing labor and parts shortages.
In afternoon trading on Tuesday, the benchmark price for U.S. crude oil was $125 per barrel, while Brent crude was higher at $130. Consumers didn’t mind that crude oil was below $20 at the beginning of the pandemic.
Patrick De Haan, Petroleum Analyst at GasBuddy, says that oil companies don’t set market prices. People do. They fill up their cars and set them.
WHAT IS RUSSIA’S WAR RISING?
Analysts believe that almost all the rise in gasoline prices over the past week (at 55 cents per gallon across the country, on an average) can be attributed to the anticipation that western countries will ban Russian crude oil, further reducing their already limited supplies.
“The U.S. does not need Russian oil per se,” states Tom Kloza, an analyst at the Oil Price Information Service.
According to official figures, the U.S. The United States imported 245 million barrels from Russia last year. This represents 8% of all U.S. oil exports. This is less than what the United States imported from Canada and Mexico, but it was more than it took from Saudi Arabia.
WHEN WILL PRICES EASE?
Spring and summer are when fuel prices tend to rise because Americans drive more and fly more. As countries loosen COVID-19 restrictions, demand could see a rise. These trends indicate that pump prices will rise as demand continues to outstrip supply.
De Haan states, “It’s going to not be a great summer for motorists.”
