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Gallon of gas jumps to record $4.37 high

by Compiled Democrat-Gazette Staff From Wire Reports | May 11, 2022 at 7:17 a.m.
FILE - Gas prices are displayed at a BP gas station in Elgin, Ill., on March 19, 2022. Just as Americans gear up for summer road trips, the price of oil remains stubbornly high, pushing prices at the gas pump to painful heights. AAA said Tuesday, May 10, 2022, drivers are paying $4.37 for a gallon of regular gasoline. (AP Photo/Nam Y. Huh, File)

Gasoline prices surged to a new high this week with the average price for a gallon of gas nationwide rising to $4.37, the highest price AAA has recorded since it started keeping track in 2000.

The average price per gallon in Arkansas Tuesday was $3.96, up from $3.72 a month ago and about a penny lower than the state's highest recorded average price, set in July 2008, according to AAA.

The price for a gallon of diesel fuel also reached a national record at $5.55.

The surge is set to add to inflationary pressures gripping the world's biggest economy. The U.S. summer driving season starts in about three weeks.

Oil prices have risen quickly this year as Russia's invasion of Ukraine upended commodity markets, jeopardizing the supply of fuels globally just as demand in most economies rebounded from the effects of the pandemic. That's pushing up the prices of everything from motor fuel to food.

Fuel consumption is being monitored closely, with Americans expected to drive more this summer than in 2021 even as pricier gasoline limits some travel. The nation's motorists are expected to use 9.2 million barrels of gasoline a day from April to September, up by 0.8% from the same period last year, the Energy Information Administration's summer outlook showed last month.

This is not the most expensive gasoline on record, when adjusted for inflation, but the increase comes despite President Joe Biden ordering the use of a million barrels per day from the Strategic Petroleum Reserve a little over a month ago. The administration's move to allow more ethanol into the nation's fuel supply hasn't brought much relief to consumers, either.

"I know families all across America are hurting because of inflation," Biden said Tuesday in a speech at the White House complex. "I want every American to know that I am taking inflation very seriously."

He outlined his latest plan to reduce the price pressures throughout the economy. He also has tried to place blame for the nation's economic challenges on Republicans, pointing to a plan released this year by Sen. Rick Scott, R-Fla., for a minimum federal income tax. About half of Americans do not pay federal income taxes because they do not earn enough.

"My plan is to lower everyday costs for hard-working Americans and lower the deficit by asking corporations and the wealthiest Americans not engage in price gouging and pay their fair share," Biden said. He accused Republicans of pursuing an agenda that would instead raise taxes on working class voters.

MORE NEWS TO COME

Biden's remarks precede what is likely to be more tough news today for the White House when the federal government releases its report on the Consumer Price Index for April.

Nowhere is the pain more obvious than at the gas station. Tuesday's prices are below what consumers were paying at the high-water mark in July 2008, when gas was $5.36 per gallon in today's dollars, but the sting for consumers remains.

"The tools the federal government can use to influence prices are limited," said Devin Gladden, manager for federal affairs at AAA National. "They are already using almost the whole toolbox."

This month's gasoline price increase, Gladden said, is largely a response to the European Union's announcement that, with a few exceptions, it aims to stop all imports of Russian oil by the end of the year in response to the invasion of Ukraine. The European move has a much bigger effect on world markets than any short-term measures to blunt rising gas prices.

RUSSIAN SHADOW

Analysts warn it could be a long time before prices come down significantly. At the very least, it is likely to be a long, challenging summer for drivers.

"No one has any idea how long this war will last or how long and deep its global energy impact will be," said Edward Chow, an energy security scholar at the Center for Strategic and International Studies who previously worked in the oil industry for decades. He said the reshuffling of the global oil export map could leave the United States facing the kind of prolonged, high prices it endured during the Organization of Petroleum Exporting Countries embargo of the early 1970s and the Iranian revolution that followed in that decade.

"It may well be bigger and longer lasting," he said. "You simply cannot take the country [Russia] that was the world's largest combined exporter of oil and gas off the board without major impact."

Compounding the challenge for the United States is a pandemic during which demand dropped so low early on that at one point oil was trading for zero dollars a barrel. That, combined with market uncertainty as the United States and Europe race to transition from fossil fuels, gave oil companies little incentive to invest in costly new drilling infrastructure. Those kinds of things don't ramp back up in days or weeks.

It is not just a matter of getting more crude oil flowing. The United States' ability to refine oil has diminished as older, dirtier, less efficient facilities have been replaced with updated refining equipment, said Kevin Book, managing director at ClearView Energy partners, a research firm. The nation's refining capacity, he said, is considerably less than it was at its peak.

"It takes years to build new refineries, and years to expand existing ones," Book said. "We will see more capacity in the world. Just not right here, right now."

The other remedies that might help marginally right now are not very politically palatable. One of them, said Patrick De Haan, the head of petroleum analysis at Gas Buddy, is relaxing the environmental rules around gasoline in the summer months in major metropolitan areas. Suspending requirements that cleaner blends be used in these places, he said, could ease prices 20 to 40 cents per gallon.

"It is not a whole lot of relief, and it comes at the expense of cleaner air," De Haan said.

A gas tax holiday is another fraught option. It takes away badly needed funding for roads and sends an artificial signal to consumers that prices are dropping and they can drive more, when the reality is the supply is still tight. Urging states to reduce speed limits, De Haan said, could go a long way toward helping consumers save gas. But there is not a huge political appetite for that, either.

Steadily rising gas prices are just one element of the politically toxic economic reality Biden faces.

The Bureau of Labor Statistics is likely to deliver more bad news with its inflation report today. As economists and policymakers look for any evidence that inflation has peaked, such as potential cooling in the housing market, promising signs are few. Price growth has exceeded expectations for more than a year, with the nation stuck in an inflation spiral.

Overall prices had climbed 8.5 percent in March from March 2021.

A White House that was largely dismissive at the onset of inflation pivoted after price increases persisted and voter anger grew. One remedy was supposed to be the administration's Build Back Better agenda, centered on a legislative package aimed at lowering household costs. That package is stalled in the Senate.

REPUBLICAN PLANS

That leaves the White House pointing instead to more-modest measures, including oil releases from the Strategic Petroleum Reserve. The White House also points to Biden's action to extend a Trump-era freeze on student debt payments.

Scott's tax proposals, coming at a time of economic pain for many Americans, has opened rifts within the Republican Party that Democrats plan to exploit. Senate Minority Leader Mitch McConnell, R-Ky., denounced Scott's plan but has refused to outline the Republican policy positions, arguing that voters will learn about them once Republicans retake Congress. Scott, the chairman of the National Republican Senatorial Committee, also released his 11-point plan for forcing Congress to have to re-approve every federal program after five years, a measure that would threaten entitlement programs such as Social Security and Medicare.

As Biden tries to make the political case that he is doing everything he can to fight inflation, the corner of government that has the most authority to confront it is out of his control. The Federal Reserve, empowered to fight inflation by setting interest rates, is aiming to calm inflation with seven rate increases this year. The second was approved last week.

Yet, the effectiveness of those rate increases in curbing inflation remains to be seen as the Federal Reserve also tries to avoid pushing the economy into recession with its corrective steps.

"We understand the pain" of inflation, Fed Chair Jerome H. Powell told reporters last week. "It's our job to make sure that inflation of that unpleasant high nature doesn't get entrenched in the economy."

Relief for motorists may be on the way, with oil prices this week falling below $100 a barrel, a drop of roughly 10% since the weekend.

It can take a week for prices at the pump to reflect the gyrations of the crude oil price, which have dropped from a high of over $120 for West Texas intermediate, the U.S. bench mark, in March.

That weakness reflects a slowing of the Chinese economy because of a lockdown of several cities combating the covid-19 pandemic, along with a growing consensus among traders that the global economy is also slowing.

"I think the consumer will get a bit of a break here," said Tom Kloza, global head of energy analysis at Oil Price Information Service. "Just watch out for July and August. I think the consumer will drive this summer whether it's $4 a gallon or $6 a gallon."

Information for this article was contributed by Evan Halper, Jeff Stein and Rachel Siegel of The Washington Post, Alex Longley and Sharon Cho of Bloomberg News and Clifford Krauss of The New York Times.

Print Headline: Gallon of gas jumps to record $4.37 high

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