The average price of a gallon of regular fuel was $3.54 nationwide on Thursday, according to figures collected by AAA from US gas stations. But wholesale gasoline prices climbed 14 cents a gallon, or 5%, on Thursday, pushing oil futures above $100 a barrel for benchmark Brent crude for the first time since 2014.
Higher wholesale gas prices will likely be passed on to consumers at the pump within days, said Tom Kloza, global head of energy analytics for the Oil Price Information Service, the company that tracks gas data for AAA.
“Every distributor and retailer will be looking to fill today,” he said Thursday morning. “They’ll pay $3 for gas wholesale, but they’re worried about paying $4 a gallon next time.”
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Kloza thinks the national average will likely hit $4 a gallon by mid-March. It would be the first time gas has reached such a high since the summer of 2008, when prices hit a record average of $4.11 a gallon. Kloza expects that record to fall between mid-April and Memorial Day.
Some areas are already paying at or near $4 a gallon. On Thursday, Oregon joined California and Hawaii with a statewide average at that mark. Nevada was at $4 on Friday, and Washington State reached it in Saturday’s reading. California leads the nation with an average of $4.81 per gallon on Saturday.
It’s not that Russian oil or gasoline make up a significant portion of US supplies, Kloza said. “Brent is a world market price. It’s going to be the most important number for a while,” he said.
The latest data from November showed that Russia contributed less than 4% of US demand, but Europe uses a lot of Russian oil and gasoline.
Although the sanctions have yet to take effect, Russian crude was trading below world prices on Wednesday – but found no buyers, Kloza said. “Multinationals are realizing that Russia is on the way to becoming a commercial pariah in its own right,” he added.
The war in Ukraine is just one reason gas prices in the United States are heading to record highs. The strong demand for gas, which was increasing alongside the decline in Omicron’s push in Covid cases, is outstripping supply for a number of reasons.
Several major refineries are offline after recent damage, including a Texas facility that was damaged by fire just before Christmas, and two Louisiana refineries that are still not operational after being hit by Hurricane Ida last August. . On the West Coast, gas prices were already near or above $4 as a number of refineries closed or converted to process renewable fuels in recent years, reducing the region’s refining capacity by more than 20% from pre-pandemic levels.
So even without the current crisis, the national average gasoline price would likely reach $4 a gallon given current levels, according to RBC.
“Prices typically increase by about 45 cents per gallon between mid-February and early June, on a seasonal basis,” the investment bank said in a note to clients. “Given the current fundamental framework, few investors view $4 a gallon as an aggressive scenario.”
Some parts of the country where current gas prices are relatively low may be able to avoid the $4 averages, Kloza noted. Texas, Oklahoma, Arkansas, Kansas, Missouri, Kentucky and Mississippi all had Thursday average prices of $3.25 or less. And some states may temporarily eliminate their gasoline taxes to relieve drivers.
Few price spikes generate more backlash from the public than those at the gas pump, and politicians are afraid to pay the price for those spikes. “Gasoline is a third rail in American politics,” Kloza said.
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