For the first time ever, a gallon of regular gas now costs $5 on average nationwide, according to AAA’s Saturday reading.
The record is hardly a surprise. Gas prices have been rising steadily for the last eight weeks, and this latest milestone marks the 15th straight day that the AAA reading has hit a record price, and the 32nd time in the last 33 days.
The national average stood at $4.07 when the current run of price increases began April 15. The current price reading from OPIS represents 23% increase in less than two months.
And the rising gasoline prices is doing more than just causing pain at the pump for drivers. They are a major factor in the prices paid by consumers for a full range of goods and services rising at the fastest pace in 40 years, according to the government’s inflation report Friday.
Inflation caused consumer confidence to hit a record low on Friday, according to a survey by the University of Michigan. Worries about what the Federal Reserve will do to battle inflation has sent US stocks plunging in recent months, wiping out billions in household wealth.
While a $5 national average is new, $5 gas has become unpleasantly common in much of the country.
Data from OPIS, which collects the readings from 130,000 US gas stations used to compile the AAA averages, showed that 32% of stations nationwide, nearly one of every three, were already were charging more than $5 a gallon in readings Friday. And about 10% of stations across the nation are charging more than $5.75 a gallon.
The statewide average was $5 a gallon or more in 21 states plus Washington DC in Saturday’s reading.
$6 gas could be next
And gas prices are unlikely to stop there. With the summer travel season getting underway, demand for gasoline, coupled with Russian oil shipments cut off due to the war in Ukraine, oil prices are soaring on global markets.
The US national average for gasoline could be close to $6 later this summer, according to Tom Kloza, global head of energy analysis for the OPIS.
“Anything goes from June 20 to Labor Day,” Kloza said earlier this week about the demand for gas as people hit the road for long-anticipated getaways. “Come hell or high gas prices, people are going to take vacations.”
The highest statewide average has long been in California, where the average stood at $6.43 a gallon in Saturday’s readings. But the pain of higher prices is being felt across the country, not just in California or other high-priced states.
Cheap gas hard to find
That’s partly because the cheapest price wasn’t all that cheap — the $4.47 a gallon average price in Georgia gives it the cheapest statewide average. Less than 300 gas stations out of 130,000 nationwide were charging $4.25 a gallon or less in Friday’s reading from OPIS. For purposes of comparison, before the run-up in prices earlier this year, the record national average for gas had been $4.11, set in July 2008.
And even in some states with cheaper gas prices, such as Mississippi, lower average wages mean that drivers there have to work more hours to earn the money needed to fill their tank than drivers in some of the higher priced gas states, such as Washington.
There are some early signs that people are starting to cut back on their driving in the face of the higher prices, but it’s still a modest decline.
The number of gallons pumped at stations in the last week of May was down about 5% from the same week a year ago, according to OPIS, even though gas prices have risen more than 50% since then. The number of US trips by car has slipped about 5% since early May, according to mobility research firm Inrix, although those trips are still up about 5% since the start of the year.
The chief concern is that consumers will cut back on other spending to keep driving which could push an economy already showing signs of weakness into recession.
Numerous reasons for record prices
Beyond the strong demand for gasoline, there is also a supply problem that’s driving up the price of both oil and gasoline. Russia’s invasion of Ukraine, the sanctions on Russia imposed in the United States and Europe since then is a major factor, since Russia was among the world’s leading oil exporters. But it is only part of the cause.
Oil is a commodity traded on global markets. The United States has never imported significant amounts of oil from Russia, but Europe has traditionally been dependent on Russian exports. The EU’s recent decision to ban oil tanker shipments from Russia sent oil prices soaring globally.
The price of a barrel of crude closed above $120 a barrel Friday, up from just less than $100 a month ago. Goldman Sachs recently predicted the average price for a barrel of Brent crude, the benchmark used for oil traded in Europe, will be $140 a barrel between July and September, up from its prior call of $125 a barrel.
Other factors beyond Russia’s withdrawal from the global market are limiting supply. OPEC and its allies have sharply cut back oil production as demand for oil crashed in the early months of the pandemic, as much of the world’s businesses shut down and people stayed close to home. Global oil futures briefly traded in negative territory due to lack of space to store the glut of oil. Some oil producing nations slashed production in an effort to support prices, and some of that production is back online but not all of it.
US oil production and refining capacity also have not fully recovered to the pre-pandemic levels. And because prices are even higher in Europe, some US and Canadian refineries that would normally supply the US market with gas are exporting gasoline to Europe.
Many oil companies have been slow to increase production, despite the high price that the oil could fetch, instead using those soaring profits to buy back their own stock in an effort to raise their share price. ExxonMobi has announced it intends to repurchase $30 billion of its stock, more than its total capital spending budget for the year.
– CNN’s Matt Egan and Michelle Watson contributed to this report.