DALLAS (AP) — There’s little evidence that gasoline prices, which hit a record high of $5 a gallon on Saturday, will drop anytime soon.
Rising prices at the pump are a key driver of the highest inflation Americans have seen in 40 years.
Everyone seems to have a favorite villain for the high cost of filler.
Some blame President Joe Biden. Others say it’s because Russian President Vladimir Putin recklessly invaded Ukraine. It’s not hard to find people, including Democrats in Congress, who accuse oil companies of price gouging.
As with many things in life, the answer is complicated.
What is happening?
Gasoline prices have been rising since April 2020, when the initial shock of the pandemic sent prices plummeting below $1.80 a gallon, according to government figures. They reached $3 in May 2021 and exceeded $4 in March.
On Saturday, the national average for a gallon ticked just above $5, a record high, according to the AAA auto club, which has tracked prices for years. The average price jumped 18 cents the previous week and was $1.92 higher than the same time last year.
State averages ranged from $6.43 per gallon in California to $4.52 in Mississippi.
Why does this happen?
Several factors combine to drive up gasoline prices.
Global oil prices have risen – unevenly, but strongly overall – since December. The price of international crude roughly doubled over that period, with the U.S. benchmark rising almost as much, closing Friday at over $120 a barrel.
Russia’s invasion of Ukraine and subsequent sanctions by the United States and its allies contributed to the rise. Russia is one of the main oil producers.
The United States is the world’s largest oil producer, but the United States’ ability to turn oil into gasoline has shrunk by 900,000 barrels of oil per day since the end of 2019, according to the Energy Department. .
Tight oil and gasoline supplies are hitting as energy consumption rises due to the economic recovery.
Finally, Americans generally drive more starting on Memorial Day, which increases the demand for gasoline.
What can we do to get more oil?
Analysts say there is no silver bullet; it’s a matter of supply and demand, and supply cannot be increased overnight.
On the contrary, the world’s oil supply will tighten as sanctions against Russia take hold. European Union leaders have pledged to ban most Russian oil by the end of this year.
The United States has already imposed a ban even as Biden has acknowledged it will affect American consumers. He said the ban was necessary so the United States would not subsidize Russia’s war in Ukraine. “Defending freedom will be expensive,” he said.
The United States could ask Saudi Arabia, Venezuela or Iran to help pick up the slack in Russia’s expected oil production, but each of those options comes with its own moral and political calculations.
Republicans have called on Biden to help boost domestic oil production — for example, by allowing drilling on more federal lands and offshore, or reversing his decision to revoke a permit for a pipeline that could carry Canadian oil to Gulf Coast refineries.
However, many Democrats and environmentalists would howl if Biden took these steps, which they say would undermine efforts to limit climate change. Even if Biden ignored a large faction of his own party, it would be months or years before these measures led to more gas at American gas stations.
In late March, Biden announced a new use of the country’s strategic petroleum reserve to drive down gasoline prices. The average price per gallon has jumped 77 cents since then, which analysts say is partly due to a refining squeeze.
Why does the United States refine itself?
Some refineries that produce gasoline, jet fuel, diesel and other petroleum products closed in the first year of the pandemic when demand slumped. While a few are expected to increase capacity over the next year, others are hesitant to invest in new facilities because the transition to electric vehicles will reduce gasoline demand in the long term.
The owner of one of the nation’s largest refineries, in Houston, announced in April that he would close the facility by the end of next year.
Who hurts here?
Rising energy prices are hitting low-income families the hardest. Retail and fast food workers cannot work from home – they have to travel by car or public transport.
The National Energy Assistance Directors Association estimates that the bottom 20% of families could spend 38% of their income on energy, including gasoline this year, up from 27% in 2020.
When will this end?!
It could depend on motorists themselves – by driving less they would reduce demand and put downward pressure on prices.
“There has to be a point when people start cutting back on spending, I just don’t know what the magic point is,” said Patrick De Haan, analyst for gas-shopping app GasBuddy. “Is it going to be $5? Is it going to be $6 or $7? This is the million dollar question that no one knows.
How do people cope?
Saturday morning at a BP station in Brooklyn, New York, computer scientist Nick Schaffzin blamed Putin for the $5.45 a gallon he was shelling out and said he would make sacrifices to pay the price.
“You just cut other things — vacations, things that are discretionary, things that are nice to have but don’t need,” he said. “The gas you need.”
At the same station, George Chen said he will have to raise the prices he charges his clients for film production to cover the gasoline he burns traveling around New York. He acknowledged that others weren’t so lucky.
“It’s going to be painful for people who don’t get pay raises right away,” he said. “I can only imagine the families that can’t afford it.”
Julie Walker in Brooklyn, New York, contributed to this report.