U.S. gas prices average hits $5 as summer of pain sets in
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Gas prices topped $5 a gallon nationwide as of Saturday, according to the latest price data from AAA, and the sharp rise in recent months is not showing signs of slowing.
The national average for a gallon of regular gas is now $5, which is nearly two dollars higher per gallon than a year ago, and 20 states have hit the $5 threshold. Drivers in California are seeing the highest average, $6.43, which is $2.21 higher per gallon than a year ago.
The primary factors driving the rise are inflation, the war in Ukraine and removal of Russian oil from the international market, lack of U.S. refinery capacity, and a rise in demand following two years of pandemic restrictions.
More pain at the pump is expected, particularly among lower income Americans, though this hasn’t deterred most drivers — yet.
“People are still fueling up, despite these high prices,” AAA Spokesperson Andrew Gross stated in a news release this week. “At some point, drivers may change their daily driving habits or lifestyle due to these high prices, but we are not there yet.”
JPMorgan recently asserted that the nationwide average — currently $4.86 per gallon — could surpass $6.20 per gallon by August. Eventually, the high price at the gas pump could lead to demand destruction, in which drivers curtail gas consumption to save money.
“One could argue that demand destruction for gasoline has already started,” Peter McNally, global sector lead for industrials, materials, and energy at Third Bridge, told Yahoo Finance this week.
In any case, researchers at DataTrek are now calling for Brent oil to average $140 a barrel as signaling a “recession indicator since any time since 1970 when oil prices have gone up 2x in a year, a recession has followed in the next 12-18 months, DataTrek researchers stated in a new note.
A similar sentiment came from Goldman Sachs calling for Brent oil to touch $135 a barrel during the second half of the year and first half of the next year — which is up from the previous forecast.
West Texas Intermediate crude oil, the U.S. benchmark, currently sits at $120 per barrel. Crude oil costs comprise about 60% of the pump price, according to the U.S. Energy Information Administration (EIA).