Across the country, including the Chicago area, gas prices are skyrocketing, and fast, but how high could they go?
Regular gasoline prices topped $4 a gallon on Sunday for the first time in nearly 14 years and are now up nearly 50% from a year ago. Monday’s national average of $4.104 a gallon broke an all-time high, though that’s not adjusted for inflation, according to GasBuddy.
The previous record was set in 2008, when prices averaged $4.103 per gallon. When adjusted for inflation, however, the all-time high would be around $5.24.
Yet even this figure, which some experts fear, could be exceeded.
“Americans have never seen gas prices so high, and we’ve never seen the pace of increases so fast and furious. This combination makes this situation all the more remarkable and intense, with crippling sanctions against Russia that are curbing their flow of oil, leading to a massive spike in the price of all fuels: gasoline, diesel, jet fuel and more,” Patrick De Haan, Director of Petroleum Analysis at GasBuddy, said in a statement. “The situation is dire and will not improve anytime soon. High prices are likely to last not days or weeks, as they did in 2008, but months. GasBuddy now expects the annual national average to reach its highest ever.
Here’s what we know so far and what you can expect:
How high could prices go?
De Haan said “forget the $4 a gallon mark,” the nation is actually approaching a national average of $4.50.
“We’ve never been in this situation before, with this level of uncertainty…Americans will feel the pain of rising prices for a while,” he said.
According to GasBuddy, prices should continue to rise during the summer months, even more than usual. Some forecasts predict that the national average could hit $4.25 a gallon by Memorial Day.
Some experts fear that a ban on Russian oil imports could even push averages over $5 a gallon.
What does the US ban on Russian oil imports mean for prices?
President Joe Biden announced on Tuesday that the United States would ban all imports of Russian oil, increasing the toll on the Russian economy in retaliation for his invasion of Ukraine, but he acknowledged that this would come at costs for Americans. , especially at the gas pump.
He warned that Americans would see a price hike, saying, “Defending freedom is going to be expensive.”
Biden said it was understandable for prices to rise, but warned the US energy industry against “excessive price increases” and consumer exploitation.
“The United States economy can fully handle all the challenges associated with rising oil prices,” said Jason Furman, a Harvard professor and former economic adviser to President Barack Obama. “But it will bring challenges. We’re going to have higher prices at the pumps, and there’s no getting around that.
News of the impending oil ban in the United States sent gasoline prices to their highest level on record.
A month ago, oil was selling for around $90 a barrel. Now prices are climbing around $130 a barrel as buyers shun Russian crude. Refiners had previously feared ending up with oil they could not resell if sanctions were imposed.
Energy analysts warn that prices could hit $160 or even $200 a barrel if buyers continue to avoid Russian crude. This trend could push U.S. gasoline prices past $5 a gallon, a scenario Biden and other politicians are desperate to avoid.
Where are things now?
The average price of a gallon of gasoline in the United States hit a record $4.17 on Tuesday, rising 10 cents in one day and 55 cents since last week, according to the AAA auto club.
As of Tuesday morning, the average gasoline price in Illinois was $4,425, according to figures from the AAA automobile club. This is up from $4.304 a day earlier.
While Illinois remains among the highest in the nation, several West Coast states are seeing even higher prices. California saw totals of $5,444 and Nevada saw prices at $4,674
What causes the price spike?
Prices at the pump were rising long before Russia invaded Ukraine and have skyrocketed faster since the start of the war. The US national average for a gallon of gasoline climbed 45 cents per gallon last week, according to AAA.
Gas prices have been rising for weeks due to the conflict and in anticipation of potential sanctions on the Russian energy sector.
Even before the United States banned, many Western energy companies, including ExxonMobil and BP, moved to cut ties with Russia and limit imports. Shell, which bought a shipment of Russian oil over the weekend, apologized for the move on Tuesday amid international criticism and pledged to halt any further purchases of Russian energy supplies. Preliminary data from the US Department of Energy shows Russian crude imports fell to zero in the last week of February.
How much oil does the United States get from Russia?
The United States is the largest oil producer in the world – ahead of Saudi Arabia and Russia – but it is also the largest consumer of oil, and it cannot meet this staggering demand with domestic crude alone.
The United States imported 245 million barrels of oil from Russia last year, about 8% of all U.S. oil imports, compared to 198 million barrels in 2020. That’s less than the US gets from Canada or Mexico, but more than it imported last year from Saudi Arabia. .
Russia’s increasingly violent attack on Ukraine has prompted calls to cut Russia off from the money it makes from oil and natural gas exports. Europe is heavily dependent on Russian gas.
Talk of a ban on Russian oil has led US officials to consider other sources that are currently limited. In what was supposed to be a secret trip, top US officials visited Venezuela over the weekend to discuss the possibility of easing oil sanctions against the major crude exporting nation.