Houston – Gasoline prices hit a grim milestone on Saturday as the average for regular gasoline in the country reached $ 5 a gallon.
Summer gasoline is almost always more expensive because demand for fuel grows around Remembrance Day weekend. But this year, oil and refined fuel prices have risen to their 14-year highs, largely due to Russia’s invasion of Ukraine and the ensuing sanctions, as well as the recovery of energy use as the economy recovers. from the coronavirus pandemic.
The average national price of gasoline on Saturday was $ 5.00, up 60 cents from a month ago. A year ago, gas sold for $ 3.08, according to the AAA Motor Club. The national average is at its highest point since March, when it surpassed its previous record set in July 2008, when oil traded at more than $ 133 a barrel. That was more than ten dollars above the current level, not even taking into account inflation. Back then, the average national price of gasoline was $ 4.11, or about $ 5.37 a gallon in today’s dollars.
The average price is over $ 4 per gallon in all states. In California, for a long time one of the most expensive states in the country for fuel, the price exceeds 6 dollars per gallon. The countries with the largest recent increases in gasoline prices include Michigan, Delaware, Maryland and Colorado.
Energy experts estimate that each increase in the price of gasoline costs Americans an additional $ 4 million a day.
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“Contact us for a churning summer ride,” said Tom Klose, global head of energy analysis at the Oil Price Information Service. “The average consumer will pay $ 450 a month for their fuel needs, which compares to just over $ 100 in 2020 during the pandemic.
The war in Ukraine had the most direct effect on gas prices, as sanctions against Russia pulled more than a million barrels of oil from world markets. Energy traders have also raised oil prices in anticipation that Russian production and exports will decline further.
But many other factors have contributed to rising prices.
There is not enough capacity to refine oil in petrol, diesel and jet fuel. Oil companies have closed several refineries in recent years, especially during the pandemic, when demand fell. Several new refineries will open or expand next year, which may help.
But for now, analysts say strong demand for gasoline has strained limited supplies and raised prices as drivers set off after several waves of new Covid-19 variants kept them close to home. Easing severe pandemic blockades in China has also raised oil prices.
High gas prices – along with rising costs for other needs such as food and shelter – are a major problem for President Biden. Many political experts believe Democrats may suffer losses in the November elections because voters are angry and frustrated by high inflation. A report on Friday showed that consumer prices accelerated again in May, up 8.6% from a year earlier, the fastest pace in more than 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, apparently in a bid to restore diplomatic relations and, most importantly, seek help to lower energy prices. It also encourages local producers to pump more oil, although large oil companies are reluctant to significantly increase investment, preferring to return profits to investors through dividends and share repurchases.
In the past, when oil companies produced more oil in response to high prices, they oversaturated, undermining their profits.
Mr Biden has little influence on gas prices, which are driven by global supply and demand. Experts say even Saudi Arabia is unable to cut prices quickly because it does not have the ability to fully compensate for the expected decline in Russian production. The European Union last month agreed to ban most Russian oil by the end of the year.
In March, when Mr. Biden announced that the United States was banning Russian oil and natural gas, he warned Americans that “protecting freedom will cost money.” There is some evidence that high prices are beginning to affect demand. Travel experts say some people choose to drive shorter distances during their vacations.
Ultimately, high pump prices are likely to encourage motorists to switch to electric cars, but purchases of such cars are expected to reduce demand in the coming years, not months.
“It takes some time for rising prices to affect demand,” said Donald Herzmark, president of DMP Resources, a Washington-based energy consulting firm. “Consumers need to believe that price increases are real and constant and there needs to be some period of adjustment to replace, protect and destroy demand.
Clifford Kraus reports from Houston and Marie Solis from New York.
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