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- The Memorial Day travel weekend saw a national average gas price reach $4.62 a gallon, a number that has already been surpassed in subsequent days, with $4.73 quoted on Thursday, June 2.
- A number of industry experts predict that gas prices will reach an average of $5.00 nationwide by the July 4 travel week, with some expecting an even higher average.
- The EU’s planned implementation of a ban on 90% of Russian oil, approved this week, is expected to send global crude prices higher later this year, causing a supply crunch in western Europe that will put pressure on the US oil industry.
This past Memorial Day weekend saw record high gas prices across the country, with the national average reaching $4.62 a gallon. But the busy week for travelers also served as a likely preview for the rest of the summer season that could see the national average eclipse the $5.00 mark, with even darker times further on the horizon.
The past month alone saw a dramatic rise in the price of gasoline, with prices climbing 45 cents in May in the run up to the busy holiday travel week, AAA noted, with consumers paying an average of $1.58 more than a year prior. Demand is certainly up compared to a year ago, but at the moment it’s largely factors outside of North America that have prompted a hike in the global price of oil over the past three months.
Of course, the $4.62 average in the days leading up to the Memorial Day weekend obscured the variability among the states. Prices were highest on the West Coast, with parts of California seeing prices well above $5.75 a gallon and some areas eclipsing the $7.00 mark, while in the gulf coast and the South prices were generally milder, but still above the $4.00 mark.
In the days since Memorial Day, the national average has already crept up to $4.73 a gallon, as of Thursday, June 2.
The states currently seeing the highest gas prices are California with a $6.16 average in recent days, according to AAA, with Hawaii not far behind at $5.43. Nevada is third on this list with $5.30 average, with Washington and Oregon following closely with $5.23 and $5.21, respectively.
“So far, the pent-up urge to travel caused by the pandemic outweighs high pump prices for many consumers,” said Andrew Gross, AAA spokesperson. “But 67% of drivers recently surveyed told us they would change their driving habits if gas hit $4.50 a gallon. That number rises to 75% at $5 a gallon. If pump prices keep rising, will people alter their summer travel plans? That remains to be seen.”
This is where we get to the gloomy part.
While gas prices had tended to peak around the Memorial Day weekend in past years, 2022 could see a very different dynamic, with the average gas price now expected to reach $5.00 around the July 4 weekend. Once again, this national average price will mean some regions in states that have historically seen the highest prices could approach $6.50 or higher, while those in the gulf coast and the South could see gas prices around the $4.70 mark.
“My estimation that with EU sanctions on Russia, our odds for $5/gal national average just jumped to 75%… as we sit this morning with RBOB up 10c/gal I see $4.80-$4.90/gal national average in the pipeline- it’s just a matter of time,” oil industry analyst Patrick De Haan wrote on Twitter on May 31.
Potentially fueling this uncertainty are plans by the European Union to enact a ban on the import of 90% of Russian oil later this year. Plans for this drastic step have solidified just earlier this week, with 27 EU member states working to phase in the ban by the end of 2022.
Markets are still in the process of reacting to the mere news of this plan, set to be enacted in the coming months, with EU demand for oil produced in the US and elsewhere expected to rise dramatically.
But the rush for alternative global supplies has already begun in Europe. This means we’re unlikely to have seen a peak in crude prices at this point in the year, to put it mildly, amid existing pressures on domestic oil production that have already caused bottlenecks and continue to strain domestic infrastructure, with refineries in several key US regions already operating above 95% capacity.
“Crude prices also increased last week after EIA reported that domestic crude supply decreased by 1 million bbl to 419.8 million bbl,” AAA notes. “The current level is approximately 13.3% lower than during the third week of May 2021. Crude prices could rise again this week if EIA’s next report shows total domestic supply remains tight.”
The good news, if any, is that higher prices should see consumer demand retract a bit later in the summer, after the busy July 4 weekend. This should ease gas prices in the period between July 4 and Labor Day, which should allow domestic supply to catch up. But later on in the year, as the EU ban on most Russian oil takes effect, all bets are off as energy demand in Europe is expected to put pressure on global production and oil prices.
Will you be traveling more by car this summer, if at all, to offset higher airline tickets, or would higher gas prices motivate you to fly more? Let us know in the comments below.
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