Gas prices are likely to see another surge ahead of Memorial Day, as existing increases combine with the first summer driving season since 2019 without major COVID-19 restrictions.
On Tuesday, the national average for gas prices hit a new high, an unadjusted-for-inflation $4.37 per gallon, according to AAA.
And in the run up to Memorial Day weekend, gas prices are likely to increase, Devin Gladden, a spokesperson for AAA, told The Hill.
There are a few reasons for the likely hikes.
Gladden noted that the European Union’s proposal to ban imports of Russian oil has “created more volatility and uncertainty in the market” by tightening supplies.
Prices are now rising chiefly in reaction to that proposal.
Demand traditionally rises in the U.S. near Memorial Day, a three-day weekend that is the unofficial beginning of summer — when many drive to the beach and beyond with school out for the year.
This year could be a busier weekend than the last two years, when many were locked down due to the pandemic.
“Schools are out, students are also traveling. And … for the past two years in light of the pandemic, people haven’t been able to travel as often or frequently as they might have wanted to,” Gladden said.
On Memorial Day 2021, gas prices hit what was then a seven-year average high of $3.04, up from under $2 the previous year only months into the COVID-19 pandemic.
This year, prices will be even higher.
“This summer, later this spring, next few months, unless I wake up one morning and Vladimir Putin is not in charge of Russia, I think we’re going to be dealing with very escalated prices, escalating tensions and kind of a lot of impingement on spending power for consumers,” said Tom Kloza, global head of energy analysis at IHS Markit’s oil price information service.
The Biden administration has taken a number of steps to try to cushion the blow of higher prices, including the largest-ever release of oil from the Strategic Petroleum Reserve as well as allowing the sale of certain ethanol-heavy fuel blends normally restricted over the summer.
Those steps have not prevented prices from soaring well above $4 per gallon.
“The price that we see at the pump is primarily driven by the price of crude oil in the global market, and crude oil’s primarily been driven by supply and demand factors coming out of the pandemic,” said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute.
Since then, despite a global economic rebound and a sharp uptick in demand, supply has not kept pace, Macchiarola said.
“I think on top of that, one of the major global suppliers of crude oil, Russia, created additional volatility in the marketplace through their aggression in Ukraine,” he added. The U.S. announced a ban on imports of Russian oil soon after the invasion, while the EU proposed to follow suit last week.
Russia is the third-largest producer of crude oil in the world, accounting for about 10 percent, “and so putting that supply in question has created additional market volatility,” Macchiarola added.
The White House has heavily emphasized the role of Russian aggression in the price increases, repeatedly referring to the consumer costs as the “Putin price hike.”
Going forward, Macchiarola said the Biden administration “needs to send a clear, consistent message to the marketplace [that] the United States is open to oil and gas development.” He faulted the administration for its announcement in April that royalties for oil and gas leasing on public lands will increase from 12.5 percent to 18.75 percent.
U.S. oil production in 2021 was roughly equivalent to the previous year, and higher than in 2017 and 2018, according to the U.S. Energy Information Administration. The administration has also repeatedly pointed to some 9,000 currently unused drilling leases on public lands held by fossil fuel companies.
“There aren’t many levers that the president can pull. … I wouldn’t be shocked to see him temporarily suspend the federal tax on gasoline, but that’s only 18.3 cents,” said Kloza. “But there’s not much else he can do.”
The national average for gas prices will likely continue to climb in the days ahead, Kloza speculated, “but I’m actually more concerned about diesel … think we’ll get a little bit of a break because demand for gasoline is still running somewhere between 10 and 16 percent.”
“It’ll break today’s record, don’t get me wrong, but I don’t think it’s going to be a relentless march higher between now and Memorial Day weekend,” Kloza added.