Gas Prices on the Rise Again, Reaching Highest Level Since October
Gas prices in the United States are experiencing another increase, reaching their highest level since October, according to AAA. The national average for unleaded gasoline on Wednesday was recorded at $3.88 per gallon. While this is still below the peak of over $5 a gallon witnessed in June 2022 following Russia’s invasion of Ukraine, it is significantly higher than historical averages.
The rise in gas prices has been occurring steadily over the past few months. Since the start of the year, the price of a gallon of gas has increased by around 20 percent, and it has risen more than 8 percent since June 1. In comparison, after the invasion of Ukraine in February, gas prices jumped over 40 percent in less than four months.
These high gas prices pose challenges for both elected officials and consumers, especially those who are less affluent. Additionally, policymakers at the Federal Reserve are grappling with the task of curbing rapid inflation over the past 18 months.
The increase in gas prices is primarily influenced by the price of oil on commodity markets, which can be impacted by various factors such as geopolitics, weather conditions, and investor sentiment. Crude oil prices have surged in recent months, with the American crude benchmark, West Texas Intermediate, climbing nearly 30 percent since June 1.
One contributing factor to the rise in prices is the production cuts imposed by Saudi Arabia and Russia through the end of 2023. Another factor is the consistent high rate of oil imports by China, despite its economic downturn, to mitigate geopolitical risks and support its manufacturing and transportation sectors.
Moreover, the unusually hot summer in the Northern Hemisphere has led to reduced production capacity at refineries. The Strategic Petroleum Reserve, which has been tapped by President Biden to help drive down oil and gas prices, is currently at historically low levels. The government has postponed restocking the reserve due to high prices and is unlikely to do so until prices decrease.
However, there might be some relief in sight. As the fall season approaches, most states will switch to a cheaper blend of gasoline containing more butane. Gas prices also tend to decrease during this time as demand retreats after the peak driving season.
Additionally, global economic growth is projected to slow in 2024, resulting in less demand for oil and subsequently lower gas prices. Analysts also suggest that the production cuts by Saudi Arabia and Russia may not continue into the new year, removing another pressure point.
The cuts, which have restricted supply and driven prices up, have already benefitted major oil producers, known as OPEC Plus. Analysts argue that there isn’t much need for them to extend the cuts for an extended period, as it could lead to excessive energy price inflation and decreased consumption.
Overall, while gas prices are currently on the rise, there is some optimism for a potential decrease in the future due to seasonal factors and changing market conditions.