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US gasoline hits record high: $4.14 a gallon

US gasoline hits record high: $4.14 a gallon

That beats the previous record of $4.11 per gallon since July 2008.

As Russia continues to invade Ukraine, gas prices are rising faster than they have since Hurricane Katrina hit oil rigs and refineries along the US coast of gulf in 2005.

The record price of $4.14 is at the close of business on the East Coast on Monday. It’s possible the average, which is calculated on a dynamic basis with price information from 140,000 U.S. gas stations, could change slightly before AAA releases its closely watched average price early Tuesday morning. But given the price activity over the past few days, this price would only be rising slightly, not falling. The record is therefore certain.

The $4.14 average means the price is up 52 cents a gallon in the past week alone, and 60 cents, or 17%, since Feb. 24, the day Russian forces invaded the Ukraine.

Gas price spikes aren’t going to stop anytime soon, said Tom Kloza, global head of energy analysis for OPIS. Wholesale gasoline prices rose 1 cent to 12 cents per gallon during Monday’s trading in various markets across the United States. These increases will be passed on to drivers at the pump in a relatively short time.

“I think we’ll hit $4.50 a gallon before it turns around,” Kloza said. “The risk is how bad it gets, how long it lasts. Even $5 a gallon nationwide is possible. I wouldn’t have predicted that before the fighting started.”

Why gas prices are skyrocketing

Russia is one of the world’s leading oil exporters, with most of its production going to Europe and Asia. Russian oil accounted for just 2% of US imports in December, according to Energy Department data. But the price of oil is set in global commodity markets, so the impact is felt everywhere.

Sanctions imposed on the Russian economy following the invasion have so far exempted oil exports. But traders have been reluctant to buy Russian oil due to sanctions imposed on the country’s banking sector. Many also fear finding tankers ready to dock in Russian ports.
The Biden administration has said it is considering a US ban on Russian oil imports. This would likely have limited impact on global or domestic prices since so little is shipped to the United States. But pressure is mounting for a formal ban on Russian oil by European countries and Japan. If that happened, or if Russia itself were to halt oil shipments to retaliate against sanctions imposed on its economy by Western countries, it would have a greater impact on global oil markets.

That’s what investors are betting on contracts for future oil deliveries, driving up the price of crude, Kloza said.

“If it becomes a real ban, not just a de facto ban, the worry is that it’s going to last longer,” he said.

Where gas is the most expensive… and the cheapest

In parts of the United States, gasoline at $4 a gallon remains scarce. A wide swath of central states, from North Dakota to Texas, had averages in Monday’s AAA reading no higher than $3.74 a gallon.

But prices are rising rapidly everywhere. The lowest statewide average in Monday’s AAA reading is in Missouri, where unleaded is $3.63 a gallon. But that’s up 30 cents, or 9%, in the last week alone.

As of Monday morning, there were 21 states, plus Washington, DC, where the price was $4 or more. The entire Northeast and Mid Atlantic, as well as the West Coast, Nevada, Arizona, Illinois, Alaska, Hawaii, Michigan, and Florida had ocean-wide averages. ‘State equal to or greater than $4. And it’s likely other states will cross the $4 per gallon mark when statewide averages are released on Tuesday. Indiana, Virginia and Georgia were all within a penny of that mark when Monday’s reading took place.

The highest prices are in California, where the statewide average was $5.34 per gallon on Monday.

Fight against inflation

Rapidly rising gasoline prices are straining the budgets of many households. It comes at an unfortunate time as headline inflation rose 7.5% in the past 12 months, the biggest year-on-year rise in consumer prices in nearly 40 years. Many gas stations advertise prices that are much more visible to consumers than many other prices.

The average American household uses about 90 gallons of gas per month. So just the 60-cent increase in the average price since the start of the war in Ukraine will cost this typical household about $54 more per month than they were spending on gasoline before this latest spike.

And it’s not like prices were low before this recent spike in gas prices. A year ago, the average price for a gallon of regular fuel was $2.77 a gallon, so drivers are now paying $1.37 a gallon more. That works out to nearly $125 more per month, or nearly $1,500 per year, if prices stay this high for this long.

Still the record high of $4.11 that was set in 2008 would be the equivalent of $5.25 per gallon in today’s dollars after adjusting for inflation. And the vehicles as a group are more fuel efficient today than they were in 2008, with many more electric and plug-in hybrid vehicles, and better overall fuel economy than fleet cars on the road. 14 years ago.