Average gas prices in the United States reached $4.00 a gallon. This is the highest gas price for fuel in America since 2008. Traders are fearing that the current Russia-Ukraine war will keep oil supplies low.
National Average Gas Price Hit $4.009
According to the Automobile Association of America (AAA), the national average for a gallon of gas hit $4.009 on Sunday morning. This represents yet another round in the spiraling cost of fuel.
This week, consumers will pay 40 cents more per gallon compared to a week before. They’re also paying 57 cents more than a month ago.
In some states, Americans are paying more. For example, California’s average is now $5.288 per gallon.
The hike in fuel prices followed a surge in oil prices amid the ongoing Russia-Ukraine war. Oil accounts for more than 50% of the cost of gas. Currently, oil is trading at levels last seen in 2008.
Coming Soon: $4.50 A Gallon
Andy Lipow, president of Lipow Oil Associates, doesn’t see any relief for the short term. In fact, he said that supply disruptions will continue. He foresees the next stage of fuel hikes will put the national average at $4.50.
Russia, currently embroiled at the center, is a key exporter of oil and gas. Despite Western financial sanctions against Moscow, its oil trade remains unblemished.
However, almost all markets are avoiding Russian oil. The difficulty of processing payments and the lack of willing ships make Russian oil more trouble than its worth.
As a result, JPMorgan estimates that 66% of Russian oil can’t find buyers. For the rest of the world including the US, this means an even tighter oil market.
Higher Average Gas Prices Fueling Inflation
Meanwhile, the spike in average gas prices is further raising inflationary fears among Americans. Many already complained about high prices even before Russia invaded Ukraine. Now, with oil supplies further tightening, economists are seeing no relief in sight.
The federal government already tapped releasing oil from the Strategic Petroleum Reserve. Now, some groups are calling on President Joe Biden to temporarily suspend the federal gas tax.
US Crude Prices Hit $130
On the global front, oil prices continue to spiral higher and higher. West Texas Intermediate crude surged more than 8% Sunday as it briefly hit $130.50.
Thankfully, WTI closed lower at $125 per barrel. Meanwhile, Brent crude went up 9% higher to $128.60. It hit an intraday high of $139.13 before closing below $130.
The markets are reacting to news that the US is leading a discussion to include Russian oil and gas into the current embargo.
Western allies want to close the gap that allows Moscow to leverage its status as a key oil and natural gas producer.
John Kilduff of Again Capital warns of another round of hikes if this happens. “Prices in some states will be pushing $5 pretty quickly,” he noted.
Watch the Yahoo Finance video reporting that gas prices are likely to reach a national average of $4 a gallon:
What do you think of rising gas prices in America right now? Will it be enough for you to rethink your budget or change your driving plans?
Let us know what you think. Share your thoughts in the comments section below.