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Gasoline prices in the United States reached just $ 5 per gallon for the first time, and there is little relief in sight.
Average national prices rose to $ 5,004 on Saturday, according to AAA, although not adjusted for inflation. The milestone comes just when the high summer driving season is underway.
The news will hardly surprise many drivers given that gas prices have already risen above this level in a handful of states, including California and Nevada, and are making a big dent in family budgets across the country.
Analysts warn that gas prices are likely to rise even higher, given that global factors pushing up crude oil prices are unlikely to ease any time soon.
Here are four things to know.
How did gas prices become so high?
Two main factors are driving the rise in gas prices: the recovery from the pandemic and Russia’s invasion of Ukraine.
Crude oil prices fell during the pandemic, and even became negative at one point, but demand has returned roaring.
Oil prices have risen further recently in the hope that China, the world’s largest consumer of energy, would ease some of the restrictions and barriers imposed during an increase in Covid-19 cases, although the country went back on alert this week.
The rise in energy prices has also been exacerbated by Russia’s invasion of Ukraine.
The invasion has led the United States and its allies to impose a wide range of sanctions on Russia, and the EU has even implemented an oil ban, a major step for a region dependent on Russian energy exports.
As a result of both of these factors, the Brent oil price, the global reference for oil, is trading above $ 120 a barrel after rising above 50% this year.
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How does this affect the economy and the people?
Predictable, not so good.
Gas prices have been a major driver of inflation, which has risen to the highest rate in almost 40 years.
The pain of the gas pump is putting a serious strain on many household budgets, and it is also beginning to force people to adapt.
Marlon Iberra says, for example, that he now has to think about where he drives in busy Los Angeles.
“It’s tough to just want to go anywhere on a whim like we did before,” he says.
“Now you have to think about it. Is this going to be worth the price of gasoline?”
He is grateful that he works from home most days, and only needs to commute two days a week.
“If I were to go on a regular basis every single day, I would look for around $ 100 in gasoline a week,” he adds.
Recent polls have consistently shown record gas prices and high inflation is a major contributor to pessimism about the state of the economy as the US approaches midterm elections in November.
So what can be done?
President Biden has said fighting inflation is his highest economic priority, but when it comes to curbing oil prices, there is little he can do.
Biden announced a plan in March to release up to 180 million barrels from the country’s emergency oil reserves, spread over six months.
According to analysts, the unique downturn is helping, but it has not been enough to curb price increases at the petrol pump.
Biden has also urged US oil producers to increase drilling, but oil producers have faced restrictions, including securing materials and enough workers.
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Oil companies are also under pressure from shareholders not to chase high oil prices too much given the industry’s history of boom-and-bust cycles.
Biden has also called on the oil cartel OPEC + to increase production significantly.
The group this month announced that it would increase production modestly, but data show that a handful of OPEC + countries are producing well under their current allocations due to various challenges facing members.
So will the gas price ease anytime soon?
Quite simply, no, unless there is a big unexpected development.
The oil ban on Russia further exacerbates the imbalance between supply and demand in global energy markets, and it is unlikely to be resolved soon.
In addition, refineries, which refine crude oil into products such as petrol, are struggling to increase production as total capacity across the industry has been limited by several factors, including lack of investment and natural disasters.
In fact, analysts are warning Americans to prepare for even higher gas prices.
According to JPMorgan, average national gas prices could rise above $ 6 by August, making another bleak milestone for drivers across the country.