As car travelers start traveling over Memorial Day weekend, gas prices may shock them — even if they only started filling up a few weeks ago.
The average price of a gallon of gasoline hit nearly $4.60 on Friday, up about 46 cents from a month ago. Data compiled by AAA. In all 50 states, the average price of a gallon of gasoline exceeds $4 for the first time, AAA data show.
Gasoline prices are likely to rise even higher in the coming weeks as the summer travel boom brings more people to refuel, industry analysts told ABC News. The surge in demand coincided with a shortage of crude supplies during Russia’s invasion of Ukraine, prompting a broad industry exit from Russia that has pulled millions of barrels of oil off the market.
Meanwhile, a slowdown in production due to the pandemic has not caught up with a rebound in demand, experts say, and long-standing oil supply shortages persist.
“The imbalance between supply and demand is widening,” Patrick De Haan, director of oil analysis at GasBuddy, told ABC News.
“When we see energy prices go up, we know it’s going to cost us,” he said. “Whether you want to see it or not, those LEDs at your corner gas station will carve an image in your brain of how you feel about the economy.”
The reasons for high oil prices can be traced back to the beginning of the pandemic in the spring of 2020.
Car use and gasoline consumption plummeted as people quarantined at home. The average daily number of private car trips taken by U.S. car owners in April 2020 fell 45% compared to the same period last year. AAA study found last year. Similar trends affect drivers in many countries around the world. De Haan said that as global demand fell, oil prices fell and producers cut output.
But by March, oil demand had fully recovered to pre-COVID levels, Peter McNally, global head of industry and energy at research firm Third Bridge, told ABC News. However, he added that crude supplies have only recovered to 97% of their pre-COVID levels, leaving a considerable deficit.
“Three percent doesn’t sound like much, but inventory is very low,” McNally said.
The pandemic-induced lag in oil supplies coincides with Russia’s invasion of Ukraine that began on February 24. Since then, oil companies and traders have pulled out of Russia and millions of barrels of oil have been pulled from the market.
Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston, told ABC News that without the usual supply of crude oil, refineries cannot produce enough gasoline.
“One of the most obvious ways that refinery feedstocks have changed is through the Ukraine-Russia war, where some of the crude from Russia no longer comes in,” Krishnamoorti said.
In March, the United States and its allies Announce Over the next few months, they collectively released 60 million barrels of oil from strategic reserves, aimed at easing some of the supply shortage and slow price increases.
But experts say the devastation from the invasion comes at a time when the gasoline market is particularly vulnerable, as demand is set to increase in the summer.
In the first three months of this year, the U.S. consumed about 8.4 million barrels per day of natural gas; but in the summer months, consumption will increase to 9.2 million barrels per day, an increase of nearly 10%, According to the U.S. Energy Information Administration, or the International Energy Agency. Global energy chief McNally said the convergence between supply shortages and increased demand had caused gasoline prices to soar.
“When you go into peak demand months, it’s the wrong time of year for something like this to happen,” he said.
Experts say natural gas prices may not bode well for the coming months.
Two experts, De Haan and Krishnamoorti, said the national average price could be as high as $5 a gallon, with further increases if the hurricane damages refinery infrastructure and further restricts supply.
McNally did not predict the exact price increase, but warned: “It could be detrimental to consumers.”
Rising prices this year will hurt people’s pockets. The EIA expects summer prices to rise, and expects the average U.S. household to spend about $2,945 on gasoline this year, which is $455, or 18%, higher than last year’s average household spending when adjusted for inflation.
“Every mile driven is amplified by the cost of gasoline,” said Krishnamoorti, a professor of petroleum engineering.