Gasoline prices near record highs

The national average for regular gasoline rose to $4,328 a gallon on Monday, according to AAA. That’s a fraction of a penny short of the all-time high of $4,331 set on March 11.

Gasoline prices have risen 13 cents over the past week and are well above the recent low of $4.07 a gallon.

Pump prices were already high heading into 2022 as supply did not recover from Covid-19 as quickly as demand. The Russian invasion of Ukraine in late February sent them much higher as investors braced for oil supply disruptions caused by the war and embargoes on Russian energy.

The Biden administration responded by releasing a record amount of oil from US emergency oil reserves, a step that helped cool oil and gasoline prices.

But as industry analysts warned at the time, the relief from emergency oil releases was fleeting and relatively minor. The national average for regular gasoline today is about 23% higher than the day before the invasion of Ukraine.

Here comes gasoline at $4.50?

The recent jump in pump prices cannot be done.

Gasoline futures closed at record highs on Friday. Andy Lipow, president of Lipow Oil Associates, told CNN that he expects retail prices to rise another 18 to 20 cents over the next 10 to 14 days, hitting a new record high of $4.50 a gallon.

Although nominal gasoline prices are near record highs, inflation-adjusted prices are not. The national average would have to exceed $5.30 a gallon to break the inflation-adjusted record set in 2008, according to the US Energy Information Administration.
Still, high gasoline prices are contributing to Americans’ dismal views of the economy. Only 23% of them rate economic conditions as somewhat good, down from 54% last April, according to a CNN poll released last week. It’s the lowest level since November 2011. And just 34% of Americans approve of President Joe Biden’s handling of the economy.

In another blow to the inflation outlook, diesel prices are soaring.

The national diesel average hit another record of $5.54 a gallon on Monday, up 22 cents in a week and 49 cents in a month, according to AAA. Diesel powers the trucks that haul goods across the country, and the high transportation costs are likely to be passed on, at least in part, to consumers.

Europe debates banning Russian oil

The good news is that the oil market, which sets the pace for gasoline and diesel, is taking a breather. Oil prices fell sharply on Monday in their steepest one-day drop since late March, as stock market turmoil spread to the energy complex.

US crude fell 6.1% to $103.09 a barrel. Brent, the world benchmark, also fell about 6%.

Experts blamed a variety of factors for the steep losses, including strong selling on Wall Street, concerns about China’s Covid-19 lockdowns hurting demand, and a lack of progress in Europe’s efforts to phase out imports. of Russian oil.

“Oil prices are being dragged down by the rapid and sharp sell-off in risk assets,” said Matt Smith, principal oil analyst for the Americas at Kpler.

Robert Yawger, vice president of energy futures at Mizuho Securities, agreed that the “general flight to safety” is having an impact on the oil market.

“It’s just a general massacre in risk assets,” Yawger said, adding that energy traders see the stock market as a barometer of general market conditions.

Fears about high inflation, and the Federal Reserve’s plan to lower it again, have driven US stocks lower recently.

However, oil prices remain high and the fallout from the war in Ukraine continues to cast a shadow over the energy market.

Over the weekend, G7 leaders pledged to phase out or ban imports of Russian oil “in a timely and orderly manner, and so that the world has time to secure alternative supplies.”
The European Union also continues to debate a proposed ban on all oil imports from Russia by the end of this year.

Rystad Energy warned on Monday that a European embargo on Russian oil “will trigger a seismic shift” in energy markets and push oil prices higher in the short to medium term.

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