LITTLE ROCK, Ark. — Expect to keep seeing rising prices at the pump following Russia’s invasion of Ukraine.
Although the U.S. is still the world’s largest oil producer, it’s producing 1 million barrels per day short of pre-COVID numbers, Patrick De Haan, head of petroleum analysis with GasBuddy said during an update on prices on Facebook. He said that shortages of fracking sand and steel are also impacting gas production.
“The price of oil took a big jump up today, which is hardly unexpected,” De Haan said. “Earlier this morning the price of oil had jumped up by almost 8%. By the end of the day, it had faded down to about a $2 per barrel increase.”
The average cost per gallon of diesel fuel in the U.S. on Monday was $3.530 per gallon, an increase of .043 cents from the week before, according to the U.S. Energy Information Administration.
Russia invaded the Ukraine earlier this week in a bid to take over the country.
De Haan said that because of the invasion, gasoline was up by 16 cents per gallon at the beginning of the day but closed the day in many areas up about 8-10 cents per gallon.
“Right now, gas stations are raising their prices to reflect the increase in cost,” De Haan said. “The increase is likely to play out over the course of the next several days.”
He said that prices could rise 5-15 cents per gallon over the next one-two weeks.
“The primary risk in this situation is Russia’s oil flow,” De Haan said. “It is the 2nd largest oil producer globally. What happens in Russia will have a profound impact on energy availability and price.”
He said the primary impact will be on Americans’ wallets.
“The national average has the potential to eventually rise to $4 gallon,” De Haan said. “The national average stands at $3.55 per gallon.”
How will Russia’s invasion impact prices?
De Haan said things are likely to escalate, which will set off a chain of events that could result in potential disruption of Russia’s oil flow.
“It’s possible that Russia could use oil as a weapon,” De Haan said. “Russia has already used natural gas as a weapon.”
He said that gasoline prices in the future will likely be above GasBuddy’s 2022 forecast that was released in December 2021.
“The Russia situation will likely push prices higher than we had initially expected,” De Haan said. “GasBuddy had forecasted the national average to be $3.41 per gallon. GasBuddy’s forecast may need to be revised in light of the situation.”
The highest average price as far as regions for diesel fuel is $4.233 per gallon on the West Coast, according to the EIA. The lowest prices are on the Gulf Coast where they are $3.237 per gallon.
He said traditionally low-cost states like Arkansas, Alabama and Texas may not even hit the $4 average.
He said wholesale racks where tanker trucks fill up are already seeing an adjustment in prices. He said that by the end of the day, the racks will have a higher price than they did when the day started. He said that means stations will be paying higher prices and in turn consumers will pay more too.
“The Russian situation is not the only factor pushing prices up,” De Haan said. “Motorists across the country are starting to see the switch to summer gasoline. Not only that, but demand is likely to rebound as temperatures warm up.
He said that those factors combined with refinery maintenance is likely to push up prices as high as $4 as we move forward, likely in April.
The previous high national average price record was $4.10 per gallon in 2008. He said it’s possible that prices could breach that record in May or June.
He said the average in California has already hit $5 per gallon but is unlikely to rise high as $6 per gallon. He added that most Americans are unlikely to be seeing the national average hit $5 and most Americans won’t be paying that amount on the pump.
He said it is possible that President Joe Biden could tap the national strategic reserve.
“It’s not yet known when we’ll see an organized drop at the pump,” De Haan said. “If the situation improves in Russia dramatically, we could see prices go down relatively quickly.”
He said oil prices could plummet with any positive development.
He said that there is the potential that the U.S. could sign a new nuclear agreement with Iran. He said Iran produces 2 million barrels a day and that could potentially offset what’s going on with Russia.
“Beyond that I don’t see a decline in prices until later this summer or fall,” De Haas said.
He said to lower prices right now, it’d take a decrease in global demand and an increase in global supply.
“Both of those appear somewhat unlikely at this point,” De Haas said. “For now, Americans will have to dig deeper.”
Joseph Price has been a journalist for almost two decades. He began in community media in 2005 and has since worked at media outlets in Virginia and Arkansas. He is also a commercial drone pilot and video editor. He hosts a weekly community radio show focused on goth, metal and industrial music that airs Wednesday evenings at 6 p.m. at www.kuhsradio.org.