Gas Prices Reach Record Highs Due to Crude Oil Costs

Geopolitical factors increase headaches for consumers and retailers
convenience store forecourt
Photograph: Shutterstock

WASHINGTON — The national average for a gallon of gasoline is now $4.59. The increase is primarily due to the high cost of crude oil, which is hovering over $110 a barrel. The national average is $1.55 higher than a year ago and nearly 50 cents higher than a month ago. This is the highest recorded average price of regular unleaded gasoline in the United States ever, according to data from AAA.

Only three states—Georgia, Kansas and Oklahoma—are still holdouts for crossing the $4 per gallon mark.

“The high cost of oil, the key ingredient in gasoline, is driving these high pump prices for consumers,” said Andrew Gross, AAA spokesperson. “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.”

According to new data from the Energy Information Administration (EIA), total domestic gasoline stocks decreased by 3.6 million barrels to 225 million barrels last week. Gasoline demand also decreased slightly from 8.86 million barrels per day (bpd) to 8.7 million bpd.

Typically, lower demand would put downward pressure on pump prices; however, crude prices remain volatile, and as they surge, pump prices follow suit. Pump prices will likely face upward pressure as oil prices stay above $105 per barrel, said AAA.

Meanwhile, the switch to the more expensive summer blend of gasoline, which usually adds seven to 10 cents per gallon depending on the market, is happening now. This switchover should be complete nationwide by early June. This summer blend switch is an annual event. It is unrelated to the Biden Administration’s announcement a few weeks ago to allow the higher E15 ethanol gasoline blend to remain on sale throughout the summer until September, AAA said.

At the beginning of last week, the price of crude oil decreased due to global market concern that crude demand will suffer as COVID-19 lockdowns in China remain in place; however, crude prices reversed course at the end of the week over growing market worries that actions by Ukraine and the European Union against Russian oil and natural gas companies could spark retaliation by Russia, which would lead to more market disruption and uncertainty.

Crude prices could fall if demand concerns continue to weigh the market down, according to AAA. Additionally, EIA reported that domestic crude supply increased by 8.5 million barrels to 424.2 million barrels.

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