U.S. gasoline average price tops $5 per gallon in historic first -Breaking
© Reuters. FILE PHOTO A customer fills up their car at the Beverly Boulevard Mobil station, West Hollywood, California. March 10, 2022. Picture taken March 10, 2022. REUTERS/Bing Gaan
By Laura Sanicola
(Reuters] – The price of gasoline in the United States averaged over $5 per gallon Saturday for the first ever time, according to data from AAA. It is extending a spike in fuel costs which is driving higher inflation.
AAA data revealed that the national average cost of regular unleaded gasoline rose to $5.004 per gallon, from $4.986 one day earlier.
With midterm elections in November, President Joe Biden’s high gas prices will cause problems for congressional Democrats.
Biden used many levers to reduce prices. This included a record-breaking release of U.S. strategic reserve barrels, waivers on production rules and relying on major OPEC nations to increase output.
However, fuel prices are still rising around the globe due to rebounding demand and sanctions against Russia following its invasion of Ukraine.
DEMAND DESTRUCTIONU.S. However, road travel remains strong and is only slightly below levels pre-pandemic.
However, economists predict that the demand for oil will start to fall if it remains above $5/barrel for a prolonged period.
Reid L’Anson senior economist, Kpler said that the $5 level was where there could be very heavy gasoline demand destruction.
Inflation adjusted, U.S. gasoline is still an average of 8% below the June 2008 highs at $5.41/gallon according to U.S. Energy Department statistics.
Consumer spending has been resilient, despite the fact that inflation is at its highest in four decades. This has been aided by a strong job market and household balance sheets being strengthened by programs of pandemic relief.
The U.S. Energy Information Administration reported that gasoline product supply, which is a proxy of demand, reached 9.2 million barrels/day last week. It was broadly consistent with seasonal averages over five years.
High prices for drivers are a result of record profits by major oil and gas companies. Shell (LON) recorded a record quarter for May. Chevron Corp (NYSE -) and BP, (NYSE -) both posted their highest figures in a decade.
There are also other majors like Exxon Mobil TotalEnergies (NYSE:) reported solid figures, which have prompted share repurchases as well as dividend investments.
Numerous companies have said they will avoid excessive investment to boost output due to investors’ desires to hold the line on spending, rather than respond to $100-plus barrel prices that have persisted for months.
Refiners are struggling to replenish inventories that have declined, particularly on the U.S. East Coast. This is due to exports to Europe, where Russian oil has been withdrawn.
Refiners currently use 94% of their capacities, however, overall U.S. refinery capacity has dropped, with at most five oil-processing facilities closing during the pandemic.
An analysis revealed that this has resulted in the United States being structurally under-refined for the first times in many decades.