Gas prices race back to record highs

The national average for regular gasoline rose to $4,328 a gallon Monday, according to AAA. That’s a fraction of a cent shy of the all-time high of $4,331 on March 11.

Gas prices are up 13 cents in the past week and are well above the recent low of $4.07 a gallon.

Prices at the pump were already high heading into 2022, as supply did not recover from Covid-19 as quickly as demand. The Russian invasion of Ukraine in late February sent them soaring much higher as investors braced for oil supply disruptions caused by the war and embargoes on Russian energy.

The Biden administration responded by releasing a record amount of oil from US emergency oil stocks, a move that helped cool oil and gasoline prices.

But as industry analysts warned at the time, relief from the emergency oil spills was fleeting and relatively small. The national average for regular gas today is about 23% higher than the day before the invasion of Ukraine.

Here comes $4.50 gas?

The recent jump in pump prices cannot be done.

Gasoline futures hit record highs on Friday. Andy Lipow, president of Lipow Oil Associates, told CNN he expects retail prices to rise another 18 to 20 cents in the next 10 to 14 days, reaching a new all-time high of $4.50 a gallon.

While nominal gas prices are near record highs, inflation-adjusted prices are not. According to the US Energy Information Administration, the national average would need to rise above $5.30 per gallon to beat the 2008 inflation-adjusted record.
Nevertheless, high gas prices contribute to the bleak view of the American economy. According to a CNN poll released last week, only 23% of them rate economic conditions as even somewhat good, compared to 54% in April. That’s the lowest level since November 2011. And only 34% of Americans approve of President Joe Biden’s handling of the economy.

Another blow to the inflation outlook is that diesel prices are rising.

The national average for diesel hit another all-time high of $5.54 a gallon on Monday, up 22 cents in a week and 49 cents in a month, according to AAA. Diesel powers the trucks that transport goods across the country, and high transportation costs are likely to be passed on at least in part to consumers.

Europe debates ban on Russian oil

The good news is that the oil market, which sets the pace for petrol and diesel, is taking a breather. US oil fell 2% to $107.54 a barrel during recent trading Monday morning. Brent fell 1.7 percent to $110.42 a barrel.

However, oil prices remain high and the effects of the war in Ukraine continue to cast a shadow over the energy market.

Over the weekend, G7 leaders pledged to phase out or ban Russian oil imports “in a timely and orderly manner, and in a way that gives the world time to secure alternative supplies.”
The European Union also continues to debate a proposal to ban all oil imports from Russia before the end of this year.

Rystad Energy warned Monday that a European embargo on Russian oil will “trigger a seismic shift” in energy markets and push oil prices up in the short to medium term.

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