A Remarkable Rise in Gas Prices
In an unexpected turn of events, gas prices in 2023 have soared to levels not seen in almost a year. This surge, which defies the usual post-summer drop, can be attributed to the aggressive supply cuts by major oil-producing countries, namely Saudi Arabia and Russia. These cuts have caused oil prices to surge, crossing the $92 per barrel mark.
National Average Hits $3.88 per Gallon
As of Monday, the national average for regular gas has reached $3.88 per gallon, a price point last witnessed in October 2022, according to AAA. What’s more, gas prices have experienced a five-cent per gallon increase in just the past week. This unexpected and rapid rise in pump prices is raising concerns among consumers, the Federal Reserve, and the White House, as it threatens to counteract their efforts in the battle against inflation.
A Comparison to the Past
While the current national average falls significantly below the record high of $5.02 per gallon seen in June 2022, it’s worth noting that gas prices have now surpassed their levels from the same time last year by 20 cents per gallon.
States Feeling the Pinch
A startling fact is that eleven U.S. states now have an average gas price of $4 or higher. This includes states like Colorado, Oregon, and Arizona, as reported by AAA. In California, the situation is even more concerning, with the average price for regular gas reaching a staggering $5.69 per gallon, marking an increase of 49 cents in just one month.
Oil Market Continues to Set Records
Simultaneously, the oil market is experiencing an upward trend, with U.S. crude reaching as high as 1.7% on Monday, soaring to $92.33 per barrel. This marks the first time oil has exceeded the $92 mark since November 8, 2022. The international benchmark, Brent crude, has also surged to a ten-month high of $94.95 per barrel. This remarkable rally in the oil market is not only due to supply cuts but also the catastrophic floods in Libya and decreasing U.S. recession fears.
Predictions for the Future
Citigroup has issued a warning that geopolitics could temporarily push oil prices above $100 per barrel. However, they believe that the current $90 prices are unsustainable. They anticipate that U.S. oil prices will decrease and fall below $70 per barrel by the second quarter of 2024.
Treasury Secretary’s Perspective
Treasury Secretary Janet Yellen, in a recent interview with CNBC, expressed her expectation that energy prices will eventually stabilize. She noted that gas prices have already decreased from their highs of the previous summer. When asked about potential actions from the Biden administration, Yellen pointed out that the president has already released significant amounts of emergency oil from the Strategic Petroleum Reserve. She also mentioned that they are closely monitoring the evolving situation.