High Gas Prices: Where They’re At & Where They’re Headed

If you cancel your summer road trip, you’re not the only one… Gas prices have hit record highs this year, due largely to the Russia-Ukraine conflict, and in part, to high inflation. These two factors have created a perfect storm for oil prices, leaving many Americans staying put.

With US gas prices hitting a peak of $4.33on average back in March (Californians would be happy to pay $4.33 a gallon), the pain at the pump is being felt nationwide. And it’s not just vacationers. Commuters who were just beginning to return to their offices are now getting comfy in their home office once again. Because if you don’t have to fill up to go to work, why would you? Now, every extra mile has a much larger impact on the bottom line of your budget. It’s estimated that the average American family will spend an additional $2000 on gas this year due to the higher price tag.  

Understandably, many are wondering why prices are so high and how long they’ll stay that way.

How Did We Get Here?

Many factors have caused gas prices to skyrocket. Like a lot of what we’re experiencing today, it starts with the Covid-19 pandemic. An influx of stimulus money and a quick recovery has led to the highest rate of inflation we’ve seen in decades. Some sectors that have seen the greatest increase in prices are housing, food, and—yep—oil. All of these categories are considered essential living expenses, which means the average American household is feeling an extreme amount of pressure on their finances. This, of course, can make it difficult for verify investors to have the discretionary income to invest.

Another reason we saw the price per gallon tick up is that the demand increased. As the world began to open and people started going places, they needed to fill up to get there. Unfortunately, much of the oil supply was cut during the pandemic when demand plummeted. Low supply and high demand = high price.

This describes the situation as it was in January of 2022. Then, Russia invaded Ukraine. An already-stressed oil supply became even direr as the US slapped sanctions on Russia, one of the world’s top oil exporters. This global event is to blame for the major price increases we’ve seen in the past few months.

Will these stressors continue? Or can we expect prices to stabilize in the near future?

What’s Ahead for Gas Prices?

To tamp down prices, the Biden administration has made a couple of announcements that will increase the supply of oil. Starting in May, it will sell 180 million barrels of crude oil from the Strategic Petroleum Reserve at a rate of 1 million barrels per day. This will be the biggest release since the stockpile of oil was created in the 1970s. Biden also announced that he will expand the availability of ethanol, a gasoline source that has previously been limited due to its potential impact on air quality.

These moves could mean lower fuel prices in the future, but we will just have to wait and see how they play out. Currently, we’re seeing average prices that are a few cents lower than recent peaks. Hopefully, this trajectory continues.

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