SAN FRANCISCO (KCBS RADIO) – As of Wednesday, AAA estimated the average gas price in California at just over $6 – the highest in the U.S. By late summer, this could be the average price at the pump nationwide, said one expert.
“There is a real risk the price could reach $6 [or more] a gallon by August,” Natasha Kaneva, head of global oil and commodities research at JPMorgan, told CNN Business Tuesday in an email.
In a May 13 report that backs up her statement, JPMorgan said “drivers are not likely to see gasoline prices dip in the short term, as inflationary pressures are set to keep costs elevated.” Recently inflation, an increase in prices over a period of time, has hit highs last seen in the 1980s.
Back in April 2021, the White House released materials about projected inflation for months and years stemming from the COVID-19 pandemic.
“In next several months we expect measured inflation to increase somewhat, primarily due to three different temporary factors: base effects, supply chain disruptions, and pent-up demand, especially for services,” said the White House at that time.
Then came the Russian invasion of Ukraine, which began in late February and continues to cause suffering. According to JPMorgan, the invasion “sharply increased global commodity prices, particularly for oil, sending the cost of crude oil and in turn, prices at the gasoline pump, soaring.”
This spike in crude oil costs related to the invasion was part of a 20% average increase in U.S. gas prices, said the company.
“The implied additional dollar burden of higher gas prices, assuming no change in the quantity of gas consumed, is around $7 billion per month,” JPMorgan explained.
Although oil prices are down this month compared to the surges seen right after the attacks on Ukraine began, oil prices that stood 70% higher than their year-over-year levels are expected to remain at that level “into mid-year,” according to the company.
In March, President Joe Biden announced efforts to lower gas prices that included an increase in domestic oil production, release of oil reserves, calling on Congress to approve plans to transition the U.S. to clean energy and “authorizing the use of the Defense Production Act to secure American production of critical materials to bolster our clean energy economy.”
However, prices have continued to rise. When Biden announced the plans, the average national per gallon cost for gas was $4.20. As of Wednesday, it was close to $4.60 and no state had an average price per gallon under $4.
Apart from inflation issues and the impact of war overseas, stations “that charge much higher prices inflate the average,” said CNN Business. For example, 52% of stations in California sold gas for under $6 per gallon as of Tuesday, the outlet said.
While JPMorgan predicts gas prices will stay high in the U.S. through at least the summer, other experts are not as sure, according to CNN Business. Andy Lipow, president of Lipow Oil Associates and Patrick De Haan, head of petroleum analysis at GasBuddy, told the outlet reaching $6 nationwide isn’t likely.
Additionally, the federal government is optimistic that prices will eventually drop. Last week, the U.S. Energy Information Administration projected that oil prices will soon decrease.
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