The average price of a gallon of gas hit $5 a gallon over the weekend, according to the latest data from AAA, which reports that the national average on Monday crept up to $5.01.
That’s a 58-cent increase from last month and almost $2 more than a year ago, when the national average was just $3.08.
Even in the cheapest state, Georgia, a gallon of regular is averaging $4.84. At $6.44, California is leading the pack with the highest price for gasoline. Other states with big increases include Colorado, Delaware, Maryland and Michigan, according to AAA.
Analysts predict even higher prices as we move further into summer: According to a May report by JPMorgan, the US could surpass $6.20 a gallon by August. Eventually, the high price at the pump will lead to demand destruction, when motorists actively curtail gas use to save money — canceling road trips and even reconsidering regular rides to the store.
“At some point, drivers may change their daily driving habits or lifestyle due to these high prices, but we are not there yet,” AAA spokesperson Andrew Gross said in a June 6 statement.
But Peter McNally with the investment research firm Third Bridge says demand destruction may have already started.
“Since the start of March, US gasoline consumption is 6% lower than the corresponding period in 2019,” McNally told Yahoo Finance.
Here’s what you need to know about gasoline prices, including how high they could get, what the White House is doing to turn that around and how you can save money on gas.
Why is gas so expensive?
The ongoing adds almost a quarter to the price of a gallon of gas.is an obvious factor. The price of gas is inextricably linked to the cost of crude oil, from which it’s refined. Every $10 increase in the cost of a barrel of crude
Even though the US doesn’t import much crude from Russia, oil is traded on a global market, and any change affects prices all over the world. The cost of a barrel of oil is nearing $120, according to AAA, almost double what it was in August 2021, as demand swiftly outpaces a global supply restricted by the.
Troy Vincent, a senior market analyst at energy analysis firm DTN, says the Russian invasion isn’t the only factor.
Demand for gas plummeted during the pandemic, causing oil producers to put the brakes on production. Even though demand is nearing pre-pandemic levels, producers are still gun-shy about increasing production. In April, OPEC fell short of its targeted production increase by 2.7 million barrels a day.
“We’ve had a supply-and-demand imbalance for a while,” Vincent told CNET. “And it will remain, regardless of whether this conflict goes away.”
In addition, gas companies have switched to the more expensive summer blend of gasoline, which can add between seven and 10 cents per gallon. In the warmer months, gasoline is reformulated to prevent excess evaporation caused by higher temperatures outside.
How high will gas prices go?
Though $5.01 a gallon is a record dollar amount, adjusted for inflation it’s still below the 2008 peak of $4.14, which would be about $5.37 now.
Experts don’t believe we’ve seen the end of rising gas prices, though.
“This supply/demand dynamic, combined with volatile crude prices, will likely continue to keep upward pressure on pump prices,” AAA said in a May 19 statement.
With expectations of strong driving demand through Labor Day, JPMorgan analysts have predicted $6 a gallon nationwide before fall. Natasha Kaneva, JPMorgan’s head of commodities research, said the price per gallon could jump to $6.20 per gallon by August, Insider reported in mid-May.
Refineries typically increase production in spring in expectation of higher need in summer, Kaneva said. But gasoline inventories have actually fallen to their lowest seasonal levels since 2019, in part because gas companies underestimated how quickly demand would bounce back from pandemic lows.
What is the government doing to lower gas prices?
In late March, Biden announced he’d be releasing a million barrels of oil a day from the US Strategic Petroleum Reserve over the next six months. According to the White House, the unprecedented withdrawal could lower gasoline prices between 10 and 35 cents a gallon.
But insiders say it probably won’t help much in the long run.
“It will lower the oil price a little and encourage more demand,” Scott Sheffield, chief executive of Texas oil company Pioneer Natural Resources, told The New York Times. “But it is still a Band-Aid on a significant shortfall of supply.”
In April, the Environmental Protection Agency allowed for year-round sales of cheaper E15 gasoline, which contains a 15% ethanol blend. The impact will be modest, as only about 2,500 of the more than 100,000 gas stations nationwide sell the higher-ethanol blend.
The White House continues to pressure US oil companies to increase drilling and production. Criticizing energy firms for “sitting on” more than 12 million acres of federal land and 9,000 approved production permits, the administration would like companies to face fines if they leave wells leased from public lands unused.
But Transportation Secretary Pete Buttigieg said, “The price of gasoline is not set by a dial in the Oval Office.
“When an oil company is deciding, hour by hour, how much to charge you for a gallon of gas, they’re not calling the administration to ask what they should do,” he told ABC News This Week. “They’re doing it based on their goal of maximizing their profits.”
The government is looking at getting energy products from other sources: The Biden administration has been working at improving diplomatic relations with Venezuela, which has been banned from selling oil to the US since 2018, and is negotiating another nuclear nonproliferation treaty with Iran, which could bring Iranian oil back onto the market.
There’s also a bill in Congress that would pause the federal fuel tax, though it faces stiff opposition. Individually, Connecticut, Maryland, New York and Georgiato help consumers, and at least 20 other states are considering similar moves.
How can drivers save at the gas station?
There’s not much we can do to change the price of gas, but drivers can cut down on unessential trips and shop around for the best price, even crossing state lines if it’s not inconvenient.
Apps likescan for the best gas prices in your region. Others, like , track your car’s gas mileage and can help determine if it’s getting decent fuel economy. In addition, many gas station chains have loyalty programs, and that give cash back for gas purchases.
DTN’s Vincent advises against hoarding gas or other extreme measures but encourages budgeting more for gas. High energy prices have been a major contributor to inflation for a while, he said, and won’t be going away immediately.
“When the cost of crude rises, prices at the pump tend to reflect it very quickly,” he said. “But gas prices tend to linger higher longer even when crude falls.”