Across the country, including the Chicago area, gas prices are skyrocketing, but how high can they go?
The price of regular gasoline on Sunday topped $4 a gallon for the first time in nearly 14 years and is now up nearly 50% from a year ago. Monday’s national average of $4.104 a gallon broke an all-time record, according to GasBuddy, though that’s not adjusted for inflation.
The previous record was set in 2008 when the average price was $4.103 per gallon. However, adjusted for inflation, the record price would be around $5.24.
However, some experts fear that even this number could be broken.
“Americans have never seen such high gas prices, and we have not seen such a fast and furious pace of growth. This combination makes this situation all the more remarkable and tense as crippling sanctions against Russia restrict the flow of their oil, causing prices to skyrocket for all fuels: gasoline, diesel, jet fuel and more.” – Patrick De Haan , head of oil analysis at GasBuddy, said in a statement. “This is a terrible situation and it will not improve anytime soon. High prices are likely to last not for days or weeks, as they did in 2008, but for months. GasBuddy now expects the national annual average to rise to the highest level ever recorded.”
Here’s what we know so far and what you can expect:
How high can prices rise?
De Haan said, “Forget the $4 a gallon mark,” the country is actually approaching the $4.50 average.
“We have never been in a situation like this before, with this level of uncertainty… Americans will feel the pain of rising prices for quite some time yet,” he said.
According to GasBuddy, prices are expected to continue to rise during the summer months, even more than usual. Some forecasts predict that the national average could hit $4.25 a gallon by Memorial Day.
Some experts fear that a ban on Russian oil imports could even raise average prices by more than $5 a gallon.
What does the US ban on Russian oil imports mean for prices?
President Joe Biden announced on Tuesday that the US would ban all imports of Russian oil, which would hurt the Russian economy in response to its invasion of Ukraine, but he acknowledged that it would incur costs for Americans, especially at the gas station.
He warned that Americans would see prices rise, saying, “Defending freedom will come at a high cost.”
Biden said it was understandable that prices were rising, but warned the US energy industry against “excessively raising prices” and exploiting consumers.
“The economy of the United States can fully cope with any problems associated with higher oil prices,” Jason Fuhrman, Harvard professor and former chief economic adviser to President Barack Obama. “But it will bring some problems. We will have higher gas station prices and there is no way around that.”
The news of an impending U.S. oil ban pushed gasoline prices to their highest level ever.
A month ago, oil cost about $90 per barrel. Prices have now jumped to around $130 a barrel as buyers shun Russian oil. Oil refiners were already afraid of being left with oil that they would not be able to resell if sanctions were imposed.
Energy analysts warn that prices could rise to $160 or even $200 a barrel if buyers continue to shun Russian oil. This trend could send U.S. gasoline prices above $5 a gallon, a scenario that Biden and other politicians are desperate to avoid.
How are things currently?
The average U.S. gallon gas price hit a record $4.17 on Tuesday, up 10 cents in a single day and 55 cents from last week, according to Auto Club AAA.
As of Tuesday morning, the average gas price in Illinois was $4,425, according to Auto Club AAA. This is up from $4,304 a day earlier.
While Illinois remains one of the highest in the country, prices are even higher in several West Coast states. In California the total was $5.444 and in Nevada it was $4.674.
What caused the price jump?
Gas station prices have been rising long before Russia invaded Ukraine and have risen faster since the start of the war. The US national average per gallon of gasoline is up 45 cents per gallon over the past week, according to the AAA.
Gas prices have been rising for several weeks due to the conflict and in anticipation of potential sanctions against the Russian energy sector.
Even before the US ban, many Western energy companies, including ExxonMobil and BP, decided to sever ties with Russia and restrict imports. Shell, which bought a shipment of Russian oil this weekend, apologized for the move on Tuesday amid criticism from the international community and vowed to halt any further purchases of Russian energy. Preliminary data from the US Department of Energy show that Russian oil imports fell to zero in the last week of February.
How much oil does the US get from Russia?
The United States is the world’s largest oil producer, ahead of Saudi Arabia and Russia, but it is also the largest consumer of oil, and it cannot meet this overwhelming demand with domestic oil alone.
The US imported 245 million barrels of oil from Russia last year — about 8% of all US oil imports — compared to 198 million barrels in 2020. That’s less than the US receives from Canada or Mexico, but more than it imported last year from Saudi Arabia. .
Russia’s increasingly vicious assault on Ukraine has heightened calls to cut Russia off from the money it receives from oil and natural gas exports. Europe is heavily dependent on Russian gas.
Talk of a ban on Russian oil has led US officials to consider other sources that are currently limited. In what was supposed to be a secret trip, senior US officials visited Venezuela over the weekend to discuss the possibility of easing oil sanctions on the world’s largest crude oil exporter.