An estimated 35 million people will take to the streets this Memorial Day weekend, a reminder of rising gasoline prices and the impact it will have on drivers’ budgets.
That pinch of gas pump could only harden in America, now that European Union leaders have agreed on a ban that will wipe out 90% of Russia’s oil by the end of the year, gas price experts say.
“Agreement to ban Russian oil exports to EU. This immediately covers more than 2/3 of Russia’s oil imports, reducing a major source of funding for its war machine,” he said. the President of the Council of the EU, Charles Michel. he wrote in a tweet late monday.
“This package of sanctions includes other strong measures: removing the Sberbank from the largest Russian bank, banning 3 more Russian state broadcasters and sanctioning individuals responsible for war crimes in Ukraine,” he added.
“The EU ban contributes to the trend of higher prices,” said Andrew Lipow, president of Lipow Oil Associates, a Houston, Texas-based energy industry consulting firm. “I expect that over the next 10 days, gasoline prices will go up to $ 4.75 a gallon. $ 5 a gallon is becoming a growing possibility.”
The near-total ban on oil imports announced on Monday is another coordinated economic sanction against Russia for its invasion of Ukraine, which has now been exhausted for the past three months. The EU agreement will stop 90% of Russian oil imports into the EU by the end of 2022.
On Tuesday, AAA said the national average price of a gallon of gasoline was $ 4.62, another record price. AAA data show that average prices in about 20 states exceed that price.
The $ 5 mark can be a psychological price when drivers start taking steps to save gas, such as car sharing, group work, and generally driving less, according to previous surveys.
So when does the national average $ 5 gas arrive? It could be a matter of weeks, GasBuddy’s chief oil analyst Patrick De Haan said on Twitter on Monday. The announcement of the EU ban increased the chances of gasoline by $ 5, De Haan said.
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Analysts predicted national averages of $ 6 per gallon in late August. California drivers are already paying $ 6.16 a gallon on Tuesday, according to AAA data.
“As refineries look for alternative supplies, prices will rise,” Lipow said, noting that this means refineries in America and Europe.
The question remains: how long can the American consumer endure rising prices before reducing demand?
Some aggregate traffic data suggests that there has been no drop in demand and, anecdotally, the high costs are not seriously putting some summer plans into phase. However, some government data suggest that cracks are emerging in consumer demand.
Lipow noted four-week averages from the U.S. Energy Information Administration. At the end of April, 8.79 million barrels of finished gasoline were supplied to the market for drivers. That’s less than the 8.94 million barrels of finished gasoline supplied a year ago at the same time.
The same dynamic applied to the four-week averages at the end of May, when 8.84 million barrels of gas were supplied to drivers, compared to a year earlier, when they were 9.09 million, showed the data.
“Weekly estimates indicate that gasoline demand from March to May 20, 2022 was on average 6% lower than 2019 levels, a significant increase from April 2020, when it fell to 38% below 2019 levels, “the federal agency wrote last week.
“I think the destruction of demand will only get worse as more statistics reach the $ 5 threshold,” Lipow said.
Consumer financial tensions are a serious issue, but rising costs are linked to Russia’s violent invasion of Ukraine, a conflict that has caused at least 6.8 million Ukrainians to flee the country, according to data from the United Nations. The UN says about 8 million people have also been displaced within the country.
President Joe Biden has previously called the rise in gas prices “Putin’s price hike” and kept his finger on Russian President Vladimir Putin in a Wall Street Journal opinion piece on Monday about his plans. to fight inflation. It has already announced plans to release 180 million barrels of oil from the Strategic Oil Reserve by early fall.
“The price of the pump is high in large part because Russia’s oil, gas and refining capacity are out of the market,” Biden wrote on Monday. “We cannot ignore our global effort to punish Mr. Putin for what he has done, and we must mitigate those effects for American consumers.”