Gas Prices Surge With Oil, Threaten Inflation
Oil prices are surging for geopolitical reasons. That means gas prices will rise, and oil companies should experience windfall profits. This spells inflation; therefore, the Federal Reserve may hold off on rate cuts this year. What has been a robust economy may no longer be one.
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The price for a gallon of regular gas nationwide rose 6.5 cents last week to $3.57. It is also 17.5 cents from a month ago. Patrick De Haan, head of petroleum analysis at GasBuddy commented, “With oil prices rising to nearly $87 per barrel last week, their highest since October, we are not only facing the seasonal factors that push prices up—refinery maintenance, the switch to summer gasoline, and rising demand—but also escalating crude oil prices as OPEC’s production cuts continue to cause declining global oil inventories, with escalations between Iran and Israel adding to concerns of further destabilization.”
$5 Gas
One of the significant international incidents that moved oil prices sharply higher recently was the Russian invasion of Ukraine. In the months afterward, starting in June 2022, crude moved to $120, and gas prices reached $5.
The American economy tends to slow as oil price inflation decreases consumer buying power, particularly for middle and lower-income Americans. What has been a “soft landing” of the economy because of falling inflation could quickly become hard as inflation returns.
Oil company investors have already begun to bid shares up. Exxon’s stock has risen 18% this year, while the S&P 500 is up 12%. Geopolitical tensions in the Middle East and Russia could increase oil stock prices.
