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Why gasoline prices are close to $ 5 per gallon and how high they will go

New York
CNN Business

Another day, another record for US gas prices.

The US average for the price of a gallon of ordinary gas reached $ 4.96, according to the latest reading from AAA on Wednesday. It marked the 1[ads1]2th day in a row, and the 29th time in the last 30 that gas has set a record in America.

For large parts of the country, $ 5 gas is already here.

There are now 17 states with an average of $ 5 or above. Idaho, Ohio and Pennsylvania were the last states to cross this threshold. The highest priced state is still California, with a state average of $ 6.39 per gallon.

The average for the entire state rose by at least a penny in all states except Florida, where prices remained largely unchanged. And as of Tuesday, 29% of the nation’s 130,000 gas stations were already selling gas for more than $ 5 per gallon.

And the worst has not yet come for the drivers.

With the summer travel season just beginning, the demand for gasoline, combined with the halting of Russian oil shipments due to the war in Ukraine, is sending oil prices higher in global markets.

The national average for gasoline could be close to $ 6 later this summer, according to Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA.

“Everything runs from June 20 to Labor Day,” Kloza said of the demand for gas as people embark on long-awaited excursions. “Hell or high gas prices, people are going to take a vacation”

While the United States has never imported significant quantities of oil from Russia, the commodity is traded on global markets, and Europe was heavily dependent on Russian exports. The EU’s recent decision to ban shipments of oil tankers from Russia led to a sharp rise in oil prices in these global markets.

The price of a barrel of crude oil is now over $ 120 per barrel, up from just under $ 100 a month ago, and prices continued to rise in early trading on Wednesday. Goldman Sachs predicted that the average price of a barrel of Brent oil, the benchmark index used for oil traded in Europe, would be $ 140 a barrel between July and September, up from the previous call of $ 125 a barrel.

There are stations and states where gas is cheaper. About 20% of stations across the country still sell gas for less than $ 4.50 per gallon. But even in many states where gasoline is cheaper, such as the Mississippi, lower average incomes may mean that drivers have to work longer to fill up their tanks than in some states with high gas prices such as California.

How much are drivers willing to pay before they cut back on driving? So far, the number of gallons pumped at stations in the last week of May was only down around 5% from the same week a year ago, although gas prices rose more than 50% in the same period. The number of trips in the US by car has fallen around 5% since the beginning of May, according to the mobility research company Inrix, although these trips are still up by around 5% since the beginning of the year.

The concern is that consumers will cut back on other expenses to continue driving the miles they want or need to drive, which could drive an economy that is already showing some signs of weakness into recession.

– CNN’s Matt Egan contributed to this report

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