Record gas prices are rearing their ugly head yet again, and at a particularly bad time for commuters and travelers.
Just weeks before Memorial Day weekend, the launch of the summer travel season, the national average for a gallon of gas popped Tuesday to $4.37, according to AAA.
That tops a record set in early March when the average price reached $4.33.
State prices are even steeper, reaching $5.84 for California drivers on Tuesday.
The previous record was $4.11/gallon in July 2008. Adjusting for inflation, that’s $5.37 in March 2022 dollars, according to the Bureau of Labor Statistics.
The latest spike is powered by last week’s news that European Union leaders were calling for a ban on imported Russian oil as the country’s Ukraine invasion continues, a AAA spokesman said.
March’s record occurred as markets began weighing the invasion’s effects on already-rising prices.
It’s the same story of more pain at the pump in a time of hot inflation — but this latest record comes as state and federal officials are trying to temper consumer gas costs through efforts like a massive release from the nation’s Strategic Petroleum Reserve and pauses on several state-level gas taxes.
Cash-strapped commuters fared no better with a separate tally on prices from GasBuddy. National gas price averages came to a record $4.36 on Tuesday and also beat a $4.35 record set in March, according to the site aggregating real-time gas prices.
“‘There’s little, if any, good news about fuel prices heading into summer, and the problem could become worse should we see an above average hurricane season.’”
— Patrick De Haan, head of petroleum analysis at GasBuddy
“There’s little, if any, good news about fuel prices heading into summer, and the problem could become worse should we see an above average hurricane season, which could knock out refinery capacity at a time we badly need it as refined product inventories continue to plummet,” said Patrick De Haan, head of petroleum analysis.
During March, the cost of crude oil accounted for 59% of the price in a gallon of gas, according to the U.S. Energy Information Administration (EIA).
When EU officials announced the proposed ban last week, “that just sent shockwaves through the market,” because it opened up questions where Europe could find alternative supplies and how quickly it could get them, said AAA spokesman Devin Gladden. European countries receive approximately half of Russia’s crude and petroleum exports, according to Reuters. (The U.S. already banned imported Russian oil; only 7% of its imported oil came from the country last year.)
Looking forward, there may be a slight lull in prices before even more price records are set, said Gladden. But the travel demands from Memorial Day onwards could ratchet up those gas prices once again, he added.
More than half of people (57%) in a recent Gallup poll — highlighting the inflation’s vice-like pinch on consumer budgets — said gas prices increases were painful, but temporary.
Other surveys and anecdotes suggest some people are holding off on travel as rising prices change behavior. For example, almost half (45%) of people said they were driving less and nearly one-third (31%) said they were taking fewer trips to the store, according to a recent survey from Numerator, a consumer market and analytics firm.
But other data points indicate high prices still aren’t squelching demand. Monday’s demand for gas was up 4.7% from last Monday and it’s more than 5% above the demand averages over the last four Mondays, De Haan noted on Twitter.
“‘Liquid fuels have turned into liquid gold, with prices for gasoline and diesel spiraling out of control with little power to harness them.’”
“Liquid fuels have turned into liquid gold, with prices for gasoline and diesel spiraling out of control with little power to harness them as the imbalance between supply and demand globally continues to widen with each passing day,” he said Tuesday. “Russia’s oil increasingly remains out of the market, crimping supply while demand rebounds ahead of the summer driving season.”
Federal energy officials sounded a similar note Tuesday. Even with the uncertainty in the global markets, EIA Administrator Joe DeCarolis said the agency has “consistently forecast that elevated crude oil prices would help drive record-level annual U.S. oil production levels in 2023. Low global oil inventories coupled with continued high demand for gasoline, diesel, and other petroleum products means that increased production likely won’t have much impact on prices in the short term.”
Several states are pausing the gas taxes they include in the pump price. (Taxes contribute to 12% of a gallon’s cost, according to the Energy Information Administration.)
Those states include Georgia and Connecticut, while Maryland’s pause ended and New York’s pause starts in June and goes through the end of 2022.
Last month, the Biden administration announced it awarded contracts for all of the initial batch of oil coming out of the country’s Strategic Petroleum Reserve. The administration is prepared to release 180 million barrels through early fall and the initial contracts apply to 30 million barrels slated for delivery in May and June, the White House said.
When Biden announced the release in late March, he said the move could ultimately cut gas prices by 10 to 35 cents per gallon. Though at the time, he noted the difficulties of making precise predictions.
Given the price of gas, it may sound like lawmaker efforts amounted to a big lemon. But Andrew Kleit, a Pennsylvania State University professor of energy and environmental economics, noted policies can only do so much in a massive global market for oil with Russia increasingly sidelined. “It’s very hard to fight such a severe decline in production,” he said.
“As long as this war goes on, I think prices will be high,” Kleit noted.