Q&A: Forecasters say gasoline prices likely to remain high

DALLAS — Gasoline prices have smashed a 2008 file and are likely to head even greater, additional fueling inflation and hitting customers and companies which can be nonetheless coming to grips with the pandemic.

The nationwide common topped $4.17 a gallon on Tuesday, in accordance to auto membership AAA, and several other states on every coast might quickly be part of California within the $5-and-up membership.

Prices on the pump have been rising for greater than a yr, and analysts count on additional will increase after President Joe Biden introduced that america will ban imports of Russian oil to punish Russia extra severely for invading Ukraine.

As painful as this week’s prices are, they’re nonetheless not the very best that Individuals have paid when you think about inflation. In at this time’s {dollars}, that 2008 file of $4.10 a gallon could be equal to about $5.24.

A have a look at how we acquired right here, and what it means for American households:

WHEN DID PRICES START RISING?

After averaging $2.69 a gallon in 2019, U.S. gasoline prices collapsed as COVID-19 pressured places of work and companies to shut in early 2020. By late April 2020, a gallon offered for beneath $1.90. Prices have largely risen since then, as demand for power rebounded, international manufacturing failed to hold tempo, and inventories shrank.

WHY ARE PRICES SO HIGH?

It boils down to provide and demand. The world consumes practically 100 million barrels of oil a day on common. Producers reduce spending on exploration and manufacturing through the pandemic, and so they have been gradual to ramp again up. Some producers say they face labor and elements shortages.

The benchmark worth for U.S. oil was round $125 a barrel in afternoon buying and selling Tuesday, whereas the worldwide customary, Brent crude, was above $130. After all, customers did not thoughts when crude was under $20 firstly of the pandemic.

“Oil companies don’t set the market prices; people do, by filling up their tanks,” says Patrick De Haan, petroleum analyst for GasBuddy, which tracks gasoline prices across the U.S.

HOW MUCH IS DUE TO RUSSIA’S WAR?

Analysts say that almost the whole rise of the final week — about 55 cents a gallon nationwide, on common — could be linked to anticipation that ultimately western nations would ban Russian crude, additional shrinking their already tight provides.

“The U.S. doesn’t need Russian oil per se, but the world and particularly Europe are dependent on it,” says Tom Kloza, an analyst for the Oil Worth Info Service.

In accordance to authorities figures, the U.S. imported 245 million barrels of oil from Russia final yr, or 8% of all U.S. oil imports. That’s lower than america imported from Canada or Mexico however greater than it took from Saudi Arabia.

WHEN WILL PRICES EASE?

Usually gasoline prices rise in spring and summer season, as Individuals drive and fly extra. Demand might additionally get a lift as nations proceed to shed their COVID-19 restrictions. These tendencies recommend that pump prices are heading greater, with demand persevering with to outstrip provide.

“It’s not going to be a good summer for motorists,” De Haan says.

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