By Naveen Athrappully
Gas prices have hit a record high amid the crude oil price rally in international markets during the past few days, according to latest data from AAA.
The national average price for regular unleaded gas on May 17 was $4.52 per gallon, which is an all-time record according to AAA. This is 3.4 percent higher than the price of $4.37 per gallon one week prior; 10.9 percent higher than the price of $4.08 per gallon one month prior; and 48.5 percent higher than the price of $3.05 per gallon one year prior in 2021.
Gas prices were above $4 per gallon in all 50 states, with six states seeing prices exceeding $5 per gallon.
The state with the highest gas price was California at $6.02 per gallon, followed by Hawaii at $5.34 and Nevada at $5.20. Kansas and Oklahoma had the lowest gas prices at $4.01 per gallon, followed by slightly higher prices in Georgia at $4.06.
“The high cost of oil, the key ingredient in gasoline, is driving these high pump prices for consumers,” said Andrew Gross, AAA spokesperson, in a May 16 statement.
“Even the annual seasonal demand dip for gasoline during the lull between spring break and Memorial Day, which would normally help lower prices, is having no effect this year,” Gross said.
At present, the summer blend of gasoline is being switched in, with the switchover expected to be completed by early June. That process is adding 7 to 10 cents per gallon to gas prices.
Brent crude oil futures had peaked at about $138 per barrel on March 7, 2022, following Russia’s invasion of Ukraine. Though prices have come down, it has still continued to trade above $100 per barrel.
In the past four days, crude oil futures have surged about $12 per barrel and were trading at $113.93 per barrel as of 16:19 UTC (12:19 p.m. Eastern time) on May 17.
Oil prices make up roughly half of the final price of gas. A lack of refining capacity, which continues to remain below pre-pandemic levels, is also contributing to the surge in prices.
In the past two years, about 5.5 percent of refinery capacity in the United States has been lost, according to the U.S. Energy Information Administration.
At a May 13 online forum co-hosted by the Federal Reserve Banks of Dallas and Minneapolis, Vicki Hollub, President and CEO of Occidental Petroleum, warned that she expects things to get worse for consumers at the gas pump, as supply chain issues continue to hamper oil production.
“We will see incremental production from the U.S. this year, but it’s going to be insufficient to meet the demands,” Hollub said.
Europe is pushing toward banning the import of Russian oil by the end of 2022, something which could have a massive effect on oil prices.
“We’ve only seen the beginning of this oil supply shock,” said economist Lutz Kilian of the Federal Reserve Bank of Dallas at the event.
“This particular oil shock, if it were to happen, could be more severe than other oil supply shocks that have happened in the past,” Kilian said. “There is every reason to worry about the inflationary impact of the invasion of Ukraine in the medium to long term.”