In what is a record high, the average price of a gallon of regular unleaded gas hit $5 across the US last week. The high fuel price is expected to last through the summer driving season, which is when driving levels are at their peak.
The surging cost of fuel comes at a time when consumer inflation is at its highest level in four decades and crude oil prices are hovering at elevated levels.
The steep price of gas is putting unbearable inflationary pressure on the US economy. Not only are Americans facing strain at the pump, but this is tightening their household budgets that are already creaking under high prices for everyday basics like food.
Energy prices have skyrocketed by 34.6% within the last year. Consumer food inflation has seen shoppers pay almost 12% more today for the same basket of goods as last year.
Analysts are predicting that high energy prices are here to stay. As forecasted by experts from JPMorgan, gas prices could reach a staggering $6.20 a gallon average by August.
What does this mean for me?
The genesis of the current fuel crisis lies in Russia’s invasion of Ukraine. Traders and financiers are staying away from Russian oil, putting pressure on global reserves that were already under strain from the re-opening of economies after COVID-19.
For as long as the crisis in Ukraine continues, global energy supplies will be constrained, meaning high energy costs and rising consumer costs will continue to keep inflation levels elevated.