U.S. gas prices are rising at a record pace as Western sanctions on Russia’s financial and shipping industries cut off oil supplies from global markets and refineries struggle to keep up with surging demand.
It’s the largest short-term price spike AAA’s data have ever recorded, spokesman Devin Gladden said. Its price-tracking records date to 2000.
More price hikes could be in store. Some analysts predict that oil could reach $130 per barrel. RBOB gas, a benchmark for pretax refined gasoline, traded close to $3.50 per gallon Friday up from $3.30 on Thursday. Crude oil Friday afternoon traded for more than $112 a barrel, its highest mark since 2008.
The added expenses could have sweeping impacts for U.S. consumers, experts say. Recent wage growth has insulated some consumers from climbing prices, but gasoline alone contributed to a quarter of the 6.1 percent increase in inflation over the past 12 months.
And rising oil prices have rippling effects. As diesel prices increase, so does the cost of shipping goods through the country’s already-rattled supply chains.
“I think people are going to have sticker shock,” Gladden said. “Even if they can purchase more because wages have increased, you also have to think about how the pandemic for a lot of families has made them more fragile than they ever have been. There’s a lot of social challenges at the moment that are compounded by higher prices.”
The U.S. fuel market was already tight before Russia began its invasion of Ukraine on Feb. 24, experts say, as pandemic restrictions in many states expired and consumers exercised pent-up buying power.
But harsh economic sanctions from the White House, European Union and Japan have thrust Russia’s financial system into chaos and severely curtailed businesses from conducting international trade. Russia’s main banks have been isolated from eight of the world’s 10 largest economies. Nearly half of the world’s container ships are barred from landing at Russian ports. Russian planes are banned from the skies above western Europe, and most of North America.
Though the E.U., which is heavily dependent on Russian natural gas and other fossil fuels, has not enacted energy sanctions, some international oil companies have announced plans to pull out of Russian energy investments.
“The bulk of Russia’s exports are already severely impacted by Russia’s sanctions,” Patrick De Haan, head of petroleum analysis at tracking service GasBuddy, said in a briefing with reporters. “Russia’s oil supply has already essentially been made very difficult to obtain.”
House Speaker Nancy Pelosi (D-Calif.) on Thursday said she supported banning Russia energy imports to the U.S., a proposal that’s gained bipartisan momentum in both chambers of Congress.
White House press secretary Jen Psaki on Friday said the Biden administration was “considering a range of options” including energy sanctions as Russia escalates its invasion of Ukraine, but the administration remained concerned about global energy supplies.
“What we know is that, you know, from the U.S. economy, we don’t import a lot of Russian oil, but we are looking at options that we can take right now if we were to cut the U.S. consumption of Russian energy,” Psaki said. “But what’s really most important is that we maintain a steady supply of global energy.”
She later added that “certainly the rising price of oil and the impact on gas prices is one we are focused on.”
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The White House also announced Tuesday that the U.S. and other world powers would tap 60 million barrels of oil from their strategic reserves to tamp down oil prices. But the release is a stopgap measure that international authorities say is only enough to stabilize the energy market for 30 days.
The dynamics come at a difficult moment on the American energy calendar. Domestic refiners are beginning to transition production from higher-emission winter-blend gasoline to cleaner summer blends, which are more expensive to produce.
In a normal year, retail gas prices increase 50 cents per gallon from the end of February through their peak in midsummer, said Jeff Lenard, a spokesman for the National Association of Convenience Stores, a trade group whose members sell close to 80 percent of the U.S.'s retail gasoline. That’s because of combination of rising consumer demand and the increased costs associated with summer blends, he said.
But 2022 is far from a normal year, and consumers have shown enthusiasm to travel and spend money after two years of taking pandemic precautions, De Haan said.
“Americans still have pent-up demand for getting out,” he said. “Things are widen open now. The economy is open. People feel safer flying. And with the reduction in mask mandates, that may embolden more people to travel and feel free. Until the national average [for a gallon of gas] reaches $4.50 or $5, I don’t know that people will really slow down consumption.”