The Resurgence of Gas Price Inflation: Impact on Consumers and Economy
Gas price inflation has made a comeback, with pump prices higher than the same period last year for the first time since late 2023. This trend is anticipated to persist in the upcoming weeks and months, potentially causing concern for consumers and economic officials aiming to claim victory over inflation.
The recent surge in gas prices has contributed significantly to the overall inflationary pressure. Last week, the consumer price index reported a hotter-than-expected increase, while the wholesale inflation report also disappointed. The national average price for regular gas stood at $3.47 a gallon on Monday according to AAA, up from $3.45 a year ago and marking the highest price since Halloween.
The last time gas prices rose on a year-over-year basis was in late December 2023, according to AAA records. The record high for unleaded gas occurred in June of 2022, with an average price of $5.02 per gallon. Over the past week, the national average has increased by seven cents and 19 cents over the past month. Since mid-January, gas prices have risen by a substantial 40 cents.
Some of this late winter increase in prices is normal due to annual refinery maintenance and the switchover to more expensive summer fuel. Additionally, demand for gas rises during warmer weather as people drive more. However, extreme cold-related refinery outages have also contributed to the price jump.
Moreover, tensions between Russia and Ukraine have led to drone attacks on Russian oil facilities, impacting global gasoline and oil prices. Tom Kloza, the Global Head of Energy Analysis at the Oil Price Information Service, stated that these attacks have disrupted Russian refineries and could potentially lead to higher global prices if they persist.
US oil prices rose nearly 1% to $81.70 a barrel on Monday, leaving crude 20% more expensive than this time last year. OPEC+, the producer group led by Saudi Arabia and Russia, continues to restrain supply in an effort to boost prices.
The potential repercussions of these rising gas prices are significant for consumers and the White House, as some battleground states may face substantial increases. For instance, Michigan drivers currently pay an average of $3.65 a gallon, nearly 20 cents higher than at the same point last year.
Kloza noted that despite these concerns, a return to prices above $5 a gallon, as seen in mid-2022, is unlikely. The United States currently pumps more oil than any other country and OPEC+ possesses the ability to add supply if needed. However, unless a major hurricane strikes US Gulf Coast refineries or production cuts are lifted, gas prices may not exceed $4 a gallon this year.
