Gasoline prices surged to the highest level since 2008 on Sunday, as crude oil supply fears stemming from Russia’s war on Ukraine increase their impact on consumers at the pump.
The national average for a gallon of gas hit $4.009 on Sunday, according to AAA, which is the highest since July 2008, not adjusted for inflation. Prices have been rising at a fast clip. Consumers are paying 40 cents more than a week ago, and 57 cents more than a month ago.
In some places, consumers are paying much more. California’s average is now $5.288 per gallon.
The jump in prices follows a surge in the price of oil amid Russia’s war on Ukraine. The underlying cost of oil accounts for more than 50% of the cost of gas that consumers put in their cars, and U.S. oil is trading at levels last since in 2008.
Russia is a key producer and exporter of oil and gas. While Western allies’ sanctions have so far carved out room for Russia’s energy trade to continue, the market is self-sanctioning — in other words buyers are avoiding Russian products. According to estimates from JPMorgan, 66% of Russian oil is struggling to find buyers. This is creating supply fears in what was an already tight market prior to Russia’s invasion.
Andy Lipow, president of Lipow Oil Associates, said the next stop for the national average is $4.50 a gallon as supply disruptions ripple across the energy complex.
“Oil buyers are reducing their purchases of refined products from Russia causing Russian refineries to shut down,” he said. “Dock workers are refusing to unload vessels carrying oil and gas. Insurance rates are skyrocketing causing vessel owners to cancel ship bookings loading in Russia and this is also impacting on the ability of Kazakhstan to sell their oil.”
The jump in gas price is contributing to inflationary fears across the economy. The Biden administration has said for months that they are working to bring down prices at the pump, and in the fall tapped the Strategic Petroleum Reserve. With prices up sharply since, some are calling on the administration to pause the federal gas tax.