Gasoline prices have reached multiyear highs Some experts believe they could hit a record early next year. In one American city, they already have.
Gas prices are tethered to the cost of crude oil. The price of oil recently topped $85. Its low in 2021 was $34. Goldman Sachs analysts expect $90 oil may be the next level. Why is oil so high? Part of the reason is that OPEC has been reluctant to raise supply. Another is that as the global economy rushed out of the COVID-19 driven recession, demand for oil rose quickly.
The average price for a regular grade gallon of gas recently reached $3.41 according to the AAA. That is up from $2.14 a year ago. The number varies widely from state to state. Among the reasons is the cost to transport gasoline. Another is a refinery capacity. Yet another is state taxes.
California usually has the most expensive gas prices among the states. Recently, the price of a gallon of regular reached $4.75 in San Francisco, an all-time record. Patrick De Haan, head of petroleum analysis at GasBuddy commented:
The Bay area just recorded the nation’s highest ever average price of gasoline in the United States; certainly a feat that even last year seemed impossible. But thanks to myriad challenges, derived from the Covid-19 pandemic, the average fillup now costs motorists in the Bay area nearly $62. This is nearly a 65% premium to the average price in the cheapest U.S. city today – Lawton, Oklahoma, where the average stands at just $2.86 per gallon.
California has the highest state gas taxes. According to the American Petroleum Institute, the figure is $0.8538 a gallon. The U.S. average is $0.5659.
The surge in gas prices benefits relatively small parts of the economy. Among the companies that benefit are those that produce oil and those that refine it. Gas retail outlets do well. However, most of the economy suffers, and very high gas prices could slow consumer spending–on things other than gas.
Americans who drive frequently face what could be hundreds of dollars in additional gas prices a month. For families that already have much of their income taken up by housing, food and clothing, discretionary spending helps U.S. gross domestic product. And, discretionary spending tends to be highest during the holidays, which are just around the corner.