Record-breaking gas prices could be here to stay—here's what a gallon might cost you this summer
The average gas price in the U.S. surged to over $4 per gallon this week, as the invasion of Ukraine led to a new all-time high for the cost of gas. These prices are expected to remain elevated, possibly all summer — or at least until the supply of oil catches up with demand.
Western countries have been avoiding Russian oil purchases due to the conflict in Eastern Europe, which, along with growing post-pandemic demand, has choked the global supply of crude oil.
Regular-grade gas prices reached $4.173 on Tuesday — a 55.4 cent increase from a week ago, according to the American Automobile Association. This increase is in addition to the 40% year-over-year increase in gas prices as of the end of January. The cost of gas jumped by more than $1 per gallon in 2021, on average.
However, it's worth noting that while gas prices are steadily climbing, these figures do not account for inflation. In terms of actual cost to the consumer, current prices are similar to what they were in the 2010s, when retail gas prices last reached $4 per gallon. Over the years, fuel-efficiency for passenger vehicles has also increased by a few miles per gallon, so that might also mitigate some of the cost, too.
How Russia affects crude oil prices
The U.S. imports 8% of its oil from Russia, according to Reuters. Compared to the European Union (EU), which imports 27% of its crude oil from Russia, according to 2019 E.U. data, the U.S. is much less dependent on Russian oil.
However, even with less direct exposure to Russian oil exports, Americans are still feeling the pinch.
"The problem is that oil has been and remains a global market," says Patrick De Haan, head of petroleum analysis for Gas Buddy. "When oil is getting choked off — a kink in the hose, so to speak — that impacts everyone that consumes oil, as well as the price."
And gas prices tend to be more volatile than other commodities, as they're particularly sensitive to fluctuations in supply and demand.
The price gains in 2021 are no exception to this price sensitivity: Oil production briefly shut down early in the pandemic, and has yet to catch up with growing demand. Supply chain issues have been another factor, as well as seasonality. Gas prices tend to go up during the summer, when people typically travel more.
Should we expect $6 or $7 per gallon gas prices?
In over 10 states, average retail gas prices are currently over $4.346, including California, which is averaging $5.444 at the pump. Because of that, many consumers are likely wondering whether these elevated prices will last.
"For now, 98 or 99% of Americans don't have to worry about $6 or $7 [per gallon], or some of those apocalyptic numbers," says De Haan, who argues that such an increase would require unforeseen events to further limit the global supply of oil, like oil rigs in the Gulf of Mexico being damaged by hurricanes, for example.
He expects the rate of price increases to level off, while remaining elevated for the rest of 2022, barring a big event or change in the crude oil market.
"We're now predicting a yearly national average of $3.99. I think that's pretty likely to stick," says De Haan. He says that prices at the pump reflect the current prices of about $115 for a barrel of oil. But if oil prices jump up by $20 per barrel — something not seen since 2008 — then the pace of retail gas price increases will accelerate again.
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