Three-Week Gas Price Increase Threatens Economy

Marcin Jozwiak Pexels

After a huge price increase in oil and gas around the time Russia invaded Ukraine, the price of an average gallon of regular nationwide has settled between $3,25 and $3.50. Many economists believe this drop from close to $5 was crucial to tempering inflation, almost as much as the Fed’s move to push higher interest rates. Gas, recently, has jumped high enough to be of concern. 

Gas Prices —$5 Gas

US Sets Record-World Record For Production

This is the third week that gas prices have risen. According to GasBuddy, they are at $3.44 for the average cost of a gallon of regular nationwide. This is up about $.20 from a month ago, and the increase is not over. One reason is seasonal; however, some critical causes are not.  “Most Americans continued to see average gasoline prices march higher last week. The reason is the season: gasoline demand is rising as more Americans are getting out, combined with the summer gasoline switchover, which is well underway, and continued refinery maintenance,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

$80 A Barrel Oil

However, GasBuddy is quick to point out, “After struggling to hit the $80/bbl mark, West Texas Intermediate crude oil has now stayed above that level for the last few trading sessions as IEA suddenly revised its global demand forecast higher and drone attacks on Russian refineries hit fuel output there. In addition, the possibility of peace between Hamas and Israel seems even less likely to happen, with Prime Minister Netanyahu saying an attack on Rafah could continue even against the wishes of the United States.”

Houthi Rebels And The Red Sea

Attacks by Houthi rebels on ships in the Red Sea have become more frequent. US and allied military forces have not been able to shut these down. An increasing number of shipping companies, some of which transport crude, have sent their ships on longer routes to avoid Suez.

The effects of gas prices on American households and companies vary. Low-income families often bear the brunt of increases, as do households where cars are driven long distances. The airline and trucking industries and other oil and gas-dependent sectors will be affected. Also, petrochemical products Would become more expensive. 

The question now is whether gas prices will rise toward $4. At that level, most Americans will feel an economic pinch.

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