For the second day in a row, the average cost of gas in the United States has surpassed $4 per gallon, with analysts predicting that the all-time high of $4.11 per gallon will be destroyed in a couple of days.
The national average for gasoline was $4.01 on Sunday, the first time it had surpassed $4 since 2008. According to AAA, it had hit $4.07 on Monday, up 46 cents from a week ago and $1.30 more than this time last year.
The substantial price increase has coincided with Russia’s invasion of Ukraine, with the average cost of gas rising 53 cents since the full-scale military assault began on February 24. Experts say growing demand and other factors are pushing it higher and higher even outside of the geopolitical domain.
Here’s all you need to know about gas prices, including how high they could rise, how the Ukraine conflict and other factors are influencing them, and what the Biden administration can do about it.
How high will gas prices go?
On Monday, gas prices averaged over $4.07 per gallon: If you fill up an average 15-gallon petrol tank once a week, you’ll spend around $244 each month. And it’s unlikely that the price won’t rise even further: Gas is now $5.34 per gallon in California, and it’s more than the national average in another 18 states.
Gas prices usually climb in the spring as refineries prepare for the summer driving season, but the current conflict in Ukraine is compounding the problem.
“As Russia’s war on Ukraine progresses, and we enter a season when gas prices typically rise, Americans should expect to pay more for gas than they have in the past,” Patrick DeHaan, head of petroleum analysis at price tracker GasBuddy, said in a statement on Saturday, when prices first surpassed the $4 mark.
How much has the recent increase in gas prices cost you?
Individuals’ reactions to rising gas prices are highly dependent on the sort of vehicle they drive, how much they drive, and how far they travel. Furthermore, as a result of the epidemic, gasoline usage has fluctuated dramatically over the last two years.
But, assuming you fill up your 15-gallon gas tank once a week for a total of 60 gallons per month, here’s how much extra you’ll pay per month and year compared to earlier, cheaper gas rates.
The effect of rising oil prices
The price of crude oil, from which gasoline is processed, has a significant impact on the price of gasoline. Brent crude, the worldwide benchmark, hit a high of $139.13 a barrel on Sunday night before ending at $122.89. It hit $128.76 on Monday.
Brent crude oil, for instance, averaged around $74 per barrel in December 2021.
The US benchmark, West Texas Intermediate crude, reached a high of $130.50 on Sunday evening, the highest since July 2008, before reversing.
As part of its ongoing sanctions against Russia, the US and Europe have contemplated blocking Russian oil. “In the worst-case scenario, with Russian gas and oil completely cut off from the global market,” DTN senior market analyst Troy Vincent told CNET, “crude might go up to $140 a barrel, or possibly more.”
In the current global scenario, Daniel Turner, executive director of the energy advocacy group Power The Future, told Fox Business that oil could “easily” approach $150 a barrel.
Brent crude hit an all-time high of $147.50 in July 2008, fueled by a Brazilian oil worker strike and threats to Nigerian and Iranian supplies. Average US petrol prices peaked at $4.11 per gallon at the time, or roughly $5.21 per gallon in 2022 dollars when adjusted for inflation.
If crude rises to that level now, Vincent believes $6.50 or even $7 per gallon isn’t out of the question.
“However, at that moment, it would cause a global recession,” he warned. “People would begin to pare down their activities to the bare minimum.”
Does the US get oil from Russia?
Russia is one of the world’s largest crude and natural gas producers, supplying roughly 30% of the European Union’s crude oil and nearly 40% of its gasoline.
While the United States is the world’s largest producer of crude oil and natural gas, it is also the world’s largest user, producing 18.6 million barrels per day while using 20.5 million.
Last year, the United States imported over 245 million barrels of crude oil and petroleum from Russia, nearly 25% more than in 2020, making Russia our third largest outside source after Canada and Mexico. Russia supplied about 595,000 barrels per day, or nearly 7%, in November alone.
Only Canada has so far imposed a ban on crude oil from the former Soviet Union. The United States, Europe, and other allies are getting closer to achieving this goal. On Sunday, House Speaker Nancy Pelosi stated her support for a bipartisan bill prohibiting Russian oil imports.
According to a Reuters/Ipsos poll released on March 4, 80% of Americans favor the notion.
To make up the difference, a GOP-supported bill calls for more drilling in the United States, while a separate bill sponsored by Green New Deal backer Sen. Ed Markey promotes renewables.
“Our global addiction to oil keeps us trapped in perilous cycles of conflict and corruption, but we can choose a more peaceful way,” said Markey, a Democrat from Massachusetts.
What’s behind the rise in gas prices?
“The global oil market is uneasy as a result of Russia’s invasion and the US and its allies’ growing sequence of financial penalties,” AAA spokesperson Andrew Gross said in a statement last week. The rise in petrol prices is “a sobering reminder that events on the other side of the world can have an impact on American consumers,” according to Gross.
While the Ukraine situation is having an immediate impact, Vincent believes it is far from the only factor. “We’ve had a supply-and-demand imbalance for a long time — and it’ll continue to exist whether or not this fight ends,” he said.
The pandemic has generated personnel challenges in refineries, as it does in other industries. There have also been outages, including one at a Marathon Petroleum plant in Louisiana that resulted in a fire.
A colder winter in North America has increased demand for heating oil, while pandemic-related online shopping has raised the cost of diesel, which powers all those vehicles.
According to Barron’s, Credit Suisse’s Manav Gupta noted in an analysis that “the underlying fact is that [the] market is well undersupplied in 2022.” “Even if global tensions reduce in the next weeks, high oil prices are here to stay in the short term.”
What can the Biden administration do to bring down gas prices?
In the midst of the Russian incursion, President Joe Biden has announced a strategy to “blunt gas costs.”
The US and other members of the International Energy Agency agreed last week to release 60 million barrels of oil from their strategic reserves, half of which will come from the US. However, many experts feel that 60 million barrels, or around 12 days’ worth of Russian oil exports, will have little impact.
And the reserves that are being released are primarily light oil, whereas the United States imports a heavier grade of crude from Russia. “You can’t always just change out one for another,” CFRA Research oil analyst Stewart Glickman told CNBC.
There have been calls for the US to increase its investments in renewable energy in order to wean the country off foreign oil, but this would be a long-term approach.
To help lower prices, some legislators have proposed a suspension of federal and state gas taxes, dubbed a “gas tax holiday.” However, economists warn that this would have no effect on the supply of oil and would only encourage people to drive more.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in an op-ed in The Hill this week, “It’s a method for politicians to pretend they’re making the situation better, when in fact they’re making it worse.”
How can consumers save at the gas station?
We can’t do much about the price of petrol, but drivers can cut back on unnecessary journeys and search around for the best deal, even crossing state lines if it’s not too bothersome.
Gas Guru is an app that searches for the cheapest gas rates in your area. Others, such as FuelLog, track your car’s gas mileage and can help you figure out if it’s getting good mileage. In addition, several gas station chains offer loyalty programs, and credit cards offer cash-back rewards for gas purchases.
Vincent of DTN cautions against hoarding gas or taking other drastic steps but instead recommends increasing gas budgeting. High energy prices, he noted, have been a key driver to inflation for a long time and aren’t going away anytime soon.
“When the price of crude rises, prices at the pump tend to rise in lockstep,” he remarked. “However, even when oil prices decline, gas prices tend to stay higher for longer.”