HOUSTON – Gasoline prices reached a grim milestone on Saturday, when the national average for regular gasoline reached $ 5 per gallon.
Summer gasoline is always more expensive because the demand for fuel takes over Memorial Day weekend. But this year, oil and refined fuel prices rose to their highest level in 14 years, largely due to the Russian invasion of Ukraine and the consequent sanctions and rebound in fuel consumption as the economy recovered from the coronavirus epidemic.
The national average price of gasoline on Saturday was $ 5.00, up from 60 cents a month ago. According to AAA Motor Club, a year ago, the gas sold for $ 3.08. The national average is the highest since March, surpassing its previous record when oil traded at more than $ 133 a barrel in July 2008. That was more than ten dollars above current levels, regardless of inflation. At the time, the national average gasoline price was $ 4.11, or about $ 5.37 a gallon in today’s dollars.
The average price in all states is over $ 4 a gallon. In California, one of the most expensive states in the country for fuel, the price exceeds $ 6 a gallon. States with recent increases in gasoline prices, including Michigan, Delaware, Maryland and Colorado.
Energy experts estimate that each penny increase in gasoline prices will cost Americans an additional $ 4 million a day.
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“Strap on for a sizzling summer ride,” said Tom Cloza, global head of energy analysis at the oil price information service. “The average consumer will pay $ 450 a month for their fuel needs, and that will be less than $ 100 in 2020 at the time of the epidemic.”
The war in Ukraine has had a more direct impact on gas prices, as sanctions on Russia have pulled more than a million barrels of oil from global markets. Fuel traders have bid for oil prices in the hopes that Russian production and exports will fall further.
But many other factors have contributed to the rise in prices.
Oil is insufficient to process gasoline, diesel and jet fuel. Oil companies shut down a handful of refineries in recent years, especially when demand fell during the epidemic. Some new refineries will open or expand over the next year, which may help.
But now, analysts say the strong demand for gasoline is driving down supply, and drivers are hitting the road after several waves of new Kovid-19 variants keep them close to home. Easing stricter epidemic lockdowns in China has increased oil prices.
High gas prices – along with rising costs for other necessities such as food and shelter – are a big problem for President Biden. Many political experts believe that Democrats may lose in the November elections because voters are angry and frustrated over high inflation. A report on Friday showed consumer prices rebounded in May, up 8.6 percent from a year earlier, the fastest in 40 years.
Last week, as gas prices approached the $ 5 threshold, Biden administration officials said the president would travel to Saudi Arabia, one of the world’s largest oil producers, to restore diplomatic relations and, most importantly, to seek help. Reducing energy prices. Although large oil companies are hesitant to increase investments and prefer to return profits to investors through dividends and stock buybacks, they are encouraging domestic producers to pump more oil.
In the past, when oil companies produced more oil in response to higher prices, they became gluttonous, reducing their profits.
Mr Biden has little influence on gas prices driven by global supply and demand. Experts say Saudi Arabia is not in a position to bring down prices so quickly as it does not have the ability to completely offset the expected decline in Russian production. The European Union agreed to ban more Russian oil by the end of the year.
What is inflation? Inflation is a loss of purchasing power over time, which means your dollar will not go tomorrow. It is typically expressed as an annual change in the prices of everyday goods and services, such as food, furniture, clothing, transportation and toys.
In March, when Mr Biden announced that the United States was banning Russian oil and natural gas, he warned Americans that “it would be costly to protect independence.” There is some evidence that higher prices are beginning to impact demand. Travel experts say that some people choose to drive short distances during their holidays.
Ultimately, higher prices at the pump may encourage motorists to switch to electric cars, but such car purchases will reduce demand in coming years, not months.
“The price hike will take some time to affect demand,” said Donald Hertzmark, president of DMP Resources, a Washington-based energy consulting firm. “Consumers must believe that price increases are real and permanent and there must be some adjustment period for alternatives, conservation and demand destruction.”
Clifford Cross Reported by Houston and Mary Solis Reported from New York.