On Saturday, the national average price for a gallon of ordinary gasoline passed the $5 mark, marking a significant new high for the commodity’s cost.
Because of the surge in demand for fuel that occurs around the time of Memorial Day weekend, the price of gasoline virtually always increases throughout the summer. However, this year oil and refined fuel prices have climbed to their highest levels in 14 years. This is mostly attributable to Russia’s invasion of Ukraine and the sanctions that followed, as well as a recovery in energy use as the economy recovers from the coronavirus outbreak.
On Saturday, the national average price of gasoline was $5.00, which represents an increase of 60 cents from one month earlier. According to the AAA motor club, the price of a gallon of petrol was $3.08 one year ago. Since March, when it surpassed its previous record set in July 2008—when oil was selling at more than $133 a barrel—the national average has been at its highest position, and it is expected to remain there for the foreseeable future. That was more than ten dollars over the current amount, and that was before inflation was ever taken into consideration. In those days, the national average price of a gallon of gasoline was $4.11, which is equivalent to around $5.37 in today’s money.
Every state has an average price that is more than $4 per gallon. The cost of a gallon of gas now tops $6 in California, which has been consistently ranked as one of the most expensive states in the US. Some of the states that have seen the most significant rises in the cost of gasoline in recent times include Michigan, Delaware, Maryland, and Colorado.
According to estimates made by professionals in the energy industry, the average daily cost to the United States of America of a one cent rise in the price of gasoline is $4 million.
Because of sanctions placed on Russia, more than a million barrels of oil have been removed from global markets as a direct result of the conflict in Ukraine. This has had the greatest immediate impact on gas prices. Oil prices have also been driven up by traders in the energy sector in expectation of a further decline in production and exports from Russia.
It is unable to produce sufficient quantities of gasoline, diesel, or jet fuel due to a lack of refining capacity. In recent years, oil firms have shut down a number of refineries, particularly in the midst of the pandemic when consumer demand was at an all-time low. The next year will see the opening of a few new refineries as well as the expansion of existing ones.
But for the time being, analysts say that strong demand for gasoline is straining limited supplies and pushing prices higher as drivers hit the road after being kept inside by several waves of new Covid-19 variants. This is because drivers are hitting the road after being kept inside by several waves of new Covid-19 variants. The loosening of China’s strict pandemic lockdowns has also contributed to an increase in the price of oil.
A significant challenge for Vice President Biden is posed by the current state of the economy, namely the growing cost of essential goods and services such as food and housing. Many political analysts are of the opinion that the Democratic Party might suffer losses in the elections that will take place in November because people are furious and dissatisfied over rising levels of inflation. According to a study that was released on Friday, consumer prices resumed their upward trend in May, climbing 8.6 percent from the previous year. This is the quickest pace in more than 40 years.
Last week, as gas prices inched closer to the $5 threshold, officials in the Biden administration announced that the president would travel to Saudi Arabia, one of the world’s largest oil producers, in an apparent attempt to restore diplomatic relations and, more importantly, to seek assistance with bringing down energy prices. This news came as gas prices inched closer to the $5 threshold. In addition to this, he is urging domestic oil producers to expand their output, despite the fact that major oil firms are hesitant to considerably increase their investments and would rather return earnings to investors in the form of dividends and share repurchases.
Mr. Biden does not have much of an impact on the price of gas, which is determined by supply and demand on a worldwide scale. According to the opinions of several experts, even Saudi Arabia is not in a position to rapidly reduce prices since the country does not possess the capacity to totally compensate for the anticipated reduction in production in Russia. Last month, members of the European Union reached an agreement to stop buying most types of oil from Russia by the end of the year.
When Mr. Biden declared in March that the United States would be prohibiting the importation of oil and natural gas from Russia, he issued a warning to the American people, saying that “defending freedom is going to cost.” There is some evidence to suggest that the high costs are starting to have an effect on customer demand. [Case in point:] According to those who specialise in the tourism industry, there is a trend toward individuals opting to take holidays that include driving fewer distances.
It is possible that motorists may eventually be encouraged to convert to electric vehicles because of the high costs at the pump; nevertheless, it is anticipated that sales of such automobiles would decrease demand over the next years, not months.
According to Donald Hertzmark, president of DMP Resources, an energy consultancy business with its headquarters in Washington, “It takes some time for price rises to effect demand.” “Consumers need to think the price rises are genuine and lasting,” as well as “there has to be some time of adjustment to substitution, conservation, and demand destruction.”