National Average Gasoline Price Climbs Towards $5 A Gallon, And There’s No Immediate End In Sight
That pain at the gas pump might just hurt a little more soon.
The price of fuel is expected to rise further from already record territory, due to the ongoing conflict in Ukraine and the start of hurricane season in the United States, analysts said.
In his latest note to clients, veteran oil markets expert Andy Lipow said he expects the average U.S. gasoline price to top $5.00 a gallon this month, as oil trades higher in anticipation of upcoming storms. The weather, he said, is likely to impact production and refining supplies along the U.S. Gulf Coast. According to AAA, the average price is now around $4.86, though it’s much higher in some West Coast and Midwestern states.
“The only question is when will it hit $5,” Lipow wrote.
The main driver of gasoline prices is the price of oil. Currently, many Western countries have suspended their purchases of Russian oil in response to the country’s invasion of Ukraine. Since Russian troops entered Ukraine on Feb. 24, the price per barrel of Brent crude oil has fallen from around $87 to around $120 at Monday’s market close.
During that period, national average gasoline prices soared from the $3.54 per gallon to $4.86 per gallon drivers saw on Monday.
“This war in Ukraine doesn’t look like it’s going anytime soon – it’s entered a difficult phase,” said Andrew Gross, national director of public relations for the AAA. “So the sanctions are not going away. Our retaliation is not going away.”
Demand is also on the rise, especially in China, where a post-Covid lockdown reopening is underway.
“Their economic engine is going to start running again,” Gross said.
Although the Biden administration released significant amounts of oil from the U.S. Strategic Petroleum Reserve, global market forces dampened the impact of that move, Lipow said. Meanwhile, even as U.S. oil production tends to increase, shortfalls in domestic refining capacity have limited its ability to affect global oil markets.
Another concern is diesel prices. As fewer U.S. drivers use diesel for their personal vehicles, they can expect to see higher prices for goods — which means continued inflation — as the cost of industrial fuels is passed on to consumers.
“The price of diesel in the Los Angeles/Long Beach area is of particular concern at $6.90 and is expected to head toward $7,” Lipow wrote. “This is important because 31% of all containerized international maritime trade passes through these ports. These goods are then delivered to the consumer by truck and rail. Higher freight costs mean higher costs for consumer goods .”
Bottom line, Lipow said: There is no immediate end in sight to rising gasoline prices.
“The consumer should expect high gasoline and diesel prices to be with us for a long time,” Lipow said in a follow-up interview. “And while fall and winter gas prices may come down a bit, a return to 3 gallons of gas is quite unlikely.”