U.S. gasoline prices rise again on talk of banning Russian oil

yir-june-gas-450bp.jpg

Gasoline prices are pushing even farther above $4 a gallon, the highest price that American motorists have faced since July 2008, as calls grow to ban imports of Russian oil.

Prices at the pump were rising long before Russia invaded Ukraine and have spiraled faster since the start of the war. The U.S. national average for a gallon of gasoline has soared 45 cents a gallon in the past week and topped $4.06 on Monday, according to auto club AAA.

Average prices in the Indianapolis area climbed to $4.13 per gallon, GasBuddy reported.

“I am looking at the possibility of walking to work,” said Asiya Joseph, who had just paid $4.29 a gallon at a BP station in Brooklyn, New York. “This is the first time that I am filling up my tank in like, 10 days.”

In Huntington Beach, California, Julian Mesa earns $15 an hour cleaning offices. On Monday, he paid $92 to fill his pickup at $5.79 a gallon.

“It’s very expensive, high for people who are earning the minimum,” Mesa said. His family had already scaled back on eating out to cut their spending during the pandemic.

The price of regular broke $4 a gallon on Sunday for the first time in nearly 14 years and is now up nearly 50% from a year ago.

The price is even higher in Europe, averaging 1.75 euros per liter last week, according to the European Commission, the equivalent of $7.21 per gallon.

GasBuddy, which tracks prices down to the service-station level, said Monday that the U.S. was likely to break its record price of $4.10 a gallon, but that does not account for inflation. In today’s terms, the record price would be equal to about $5.24 after accounting for inflation.

“Forget the $4 per gallon mark, the nation will soon set new all-time record highs and we could push closer to a national average of $4.50,” said GasBuddy analyst Patrick De Haan. “We’ve never been in this situation before, with this level of uncertainty. … Americans will be feeling the pain of the rise in prices for quite some time.”

Energy prices are contributing to the worst inflation that Americans have seen in 40 years, far outpacing higher wages. Consumer prices jumped 7.5% in January, compared with a year earlier, and analysts predict a 7.9% increase when the government reports February figures later this week.

Oil prices soared early Monday before retreating. Benchmark U.S. crude surged to $130 a barrel overnight, then moderated to around $119, a 3% gain, in afternoon trading. The international price skyrocketed to $139 before falling back to about $123 a barrel. U.S. stocks tumbled, with the S&P 500 falling 3%, its biggest drop in 16 months.

Crude prices plummeted in early 2020 as economies around the world shut down because of COVID-19—the price of futures even turned negative, meaning some sellers were paying buyers to take oil. Prices rebounded, however, as demand recovered faster than producers pulled oil out of the ground and inventories dried up.

Still, few forecasters saw this week’s surge coming. Just a month ago, the Energy Department predicted oil would average around $80 a barrel this year. That was before Russia invaded Ukraine on Feb. 24.

The United States is the world’s largest oil producer—ahead of Saudi Arabia and Russia—but it is also the biggest oil consumer, and it can’t meet that staggering demand with domestic crude alone

The U.S. imported 245 million barrels of oil from Russia last year—about 8% of all U.S. oil imports—up from 198 million barrels in 2020. That’s less than the U.S. gets from Canada or Mexico but more than it imported last year from Saudi Arabia.

The increasingly violent Russian attack on Ukraine has raised calls to cut off Russia from the money it gets from oil and natural gas exports. Europe is heavily dependent on Russian gas.

President Joe Biden has been reluctant to ban Russian oil, fearing it could further fuel inflation heading into the midterm elections this November.

Many Republicans and a growing number of Democrats in the House and Senate, including House Speaker Nancy Pelosi, D-Calif., have endorsed banning Russian crude as a way to put more pressure on Russian President Vladimir Putin to end the shelling of Ukraine. On Monday, a bipartisan group of committee chairmen reached agreement on legislation to ban Russian oil imports and suspend normal trade relations status with Russia and its ally, Belarus — the latter move could lead to steep tariffs on other goods from the two countries.

The White House hasn’t ruled out a ban, and Secretary of State Antony Blinken said Sunday that the United States and its allies were discussing a ban “while making sure that there is still an appropriate supply of oil” on the world market.

Talk of a ban on Russian oil has led U.S. officials to consider other sources that are currently limited. In what was supposed to be a secret trip, senior U.S. officials traveled to Venezuela over the weekend to discuss the chance of easing oil sanctions on the major crude-exporting country.

Ronnie James, an Uber driver in Brooklyn, wants the government to do something to bring prices down — get oil from Venezuela or tap more from the Strategic Petroleum Reserve.

“The folks who are every day building the wealth of this nation could use a break,” he said.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.

8 thoughts on “U.S. gasoline prices rise again on talk of banning Russian oil

  1. Hammer & Nigel were livid about this during the opening segment of their drive-time Monday afternoon, March 7, show on WIBC. One of them suggested two-tier pricing; one current-market-price pump for people who voted for Biden and a second, lower-price pump for people who voted for Trump. Not a bad idea; albeit unenforceable.

    1. The blame for gas prices belongs with Putin. Those who blame someone else or think Putin is a swell world leader should re-evaluate their life choices.

      That you thought the drivel from Hammer and Nigel is worth repeating troubles me, Bob. “Not being Rob Kendall” is not exactly a ringing endorsement for the intelligence of the folks they let have radio shows on WIBC nowadays.

    2. Joe, is anything ever really Biden’s fault or will your mental gymnastics always find a way to deflect his ineptness?

    3. gas prices were way up before putin invaded. come on Joe B – pay attention to the real news.

      my question is why is Indiana’s gas prices 30 cents more than surrounding states? is that a tax we have they don’t or are we getting gouged?

    4. Oil prices are dictated by the following:

      -What global market will pay for oil, which is mostly a function of supply and demand.

      -The cost of production of oil

      Obviously, these two are linked.

      On the global market:

      On the global market, there is a lot of demand for oil right now. Russia has been shut off from half of the world, which reduces supply in respect to demand, and increases prices.

      On oil production costs:

      During the height of COVID, oil demand was so low that barrels of oil had no market value. Oil companies lost $$$$$$ in drilling and storage costs, and Trump tried to do everything he could to increase oil prices so that America’s oil industry didn’t fall apart. Now that there is demand for oil, oil companies have to offset their losses during COVID by increasing the cost of oil.

      The people claiming that we do have/would have oil price security by producing more oil than we use have been misguided by bad actors. The amount of oil that we produce is largely driven by market prices and economics. When US oil refiners can import oil from the Middle East for a fraction of the cost of buying it from US sources, they will buy oil from the middle east or make American sources price match. This is especially problematic because the geological reality of the earth is that North American oil is difficult to extract and expensive, but Middle Eastern and Russian oil is easy to extract and cheap. When the market value of oil is low – like it has been during COVID – US oil producers cannot afford to keep drilling at full capacity and they slow down. Then the market value of oil is high – like it is now – US oil producers can drill as much as they want and it’s actually good for them. The only way to insulate the US from global oil prices is to nationalize and isolate the US oil industry, which would be communist in nature and not a prosperous way forward. And, because North American oil is hard to access and difficult to extract, oil prices would still be high.

      On the current situation:

      Biden does have some influence on the global market in that he could have not sanctioned Russian oil. If you think that our oil prices are more important than the sovereignty of Ukraine and the repercussions of setting the precedent that Russia can take over sovereign nations with immunity, I vehemently disagree with you, but it’s your prerogative.

      If you champion US oil production, you should champion the sanctioning of Russian oil: it will be a boom for domestic oil production. That is, until the Saudis or some other oil-producer decides to flood the market with oil and US oil producers can no longer afford to produce large quantities of oil.

      And if you think that the entire basis of US oil costs are things such as the cancellation of a pipeline whose construction was never finished and other trivial actions that Biden has taken, you have probably been taken for a ride by hyper-partisan media. Relying on global commodities for energy is never going to ensure stable prices nor national security.

    5. Lance:

      “is anything ever really Biden’s fault or will your mental gymnastics always find a way to deflect his ineptness?”

      I prefer to think of it as his mediocre-ness.

      Look, Joe Biden is not going to be a great president. He doesn’t have to be. He’s better than the alternative, someone who was/is/always will be not qualified to hold elected office. Was I excited to vote for Hillary Clinton in 2016? Oh heck no. But the alternative was Trump. I sleep well with the choice I made, knowing I didn’t have to compromise my values or integrity like a bunch of folks who sold themselves out between 2016 and 2020.

      Let’s look at Biden’s response to Delta or Omicron. More masks and tests were a lovely idea, but they were far too late. They gambled months ago they would be able to vaccinate their way out of the pandemic which was not a smart play given that 35% of the population was never going to get vaccinated even if Donald Trump himself showed up to give them the shot.

      Of course, the Republican alternative to that plan is … pushing treatments that science says don’t work, banning mask mandates and telling private businesses they’re not allowed to mandate vaccinations, and basically, pretend COVID’s not a thing.

      Sorry, I’m not capable of the mental gymnastics to pretend those are equally bad or equally wrong. One is bad within normal parameters. One is disqualifying. (Yes, I’m looking at you, Ron DeSantis.)

      The same people whining about Biden being inept were silent as Trump went through a cavalcade of bootlickers, thieves, and fools in his Cabinet. I can’t understand how anyone who sat through his administration thinks that a) the first term was great or b) a repeat is in the best interests of America.

      I mean, hello, Infrastructure Week? It became a punchline. What’s the point of electing a “master developer” if he can’t be bothered to stop tweeting and watching Fox long enough to try to deliver it? Then he had the gall to complain about Biden’s infrastructure plans, told Republicans to vote no, and those same Republicans went back to their districts and tried to take credit for the infrastructure being delivered to their constituents… that they didn’t vote for.

      Or, what about the Republicans who promised for a decade that they had a better healthcare plan than the ACA, and they should be elected because they would “repeal and replace”. What happened when Republicans finally got power? They were revealed … to not actually have a plan to replace the ACA. I missed where Republican voters punished their elected officials for lying to them for a decade and not delivering. That Ron Johnson is out there persisting with the fiction that if Republicans just get re-elected again, this time they’ll REALLY repeal and replace … tells me he takes Republican voters for suckers.

      Or we get to what Trump’s biggest success will be, Operation Warp Speed. He doesn’t even mention it in public because his voters boo him.

      Give me a competent Republican candidate who actually plans on assembling an administration of competent people and I’ll vote for them. That’s how Eric Holcomb got my vote in 2020. That I’m attacked for that vote because “Holcomb is a RINO” reminds me of the rot present in the Republican Party. They may as well call themselves the Know-Nothing Party… they have much in common with that failed movement.

      https://www.brookings.edu/research/tracking-turnover-in-the-trump-administration/

  2. Gas prices follow oil prices. If I understand it correctly, oil prices (like other commodities) are all about speculation about what the value of oil will be in the future. Traders are concerned that the global supply will decrease as the world economy grows and demand increases.

    I share Dustin’s question about Indiana gas prices. My recollection is that our gas prices were consistently below the national average until maybe the last couple years. Did we lose refining capacity recently?

  3. Why do so many people point at Presidents when it comes to gas prices but ignore oil companies. Does it really take a rocket scientist to draw a line between things like Exxon having its highest profits since 2017, and the price of gas at the pump? Exxon isn’t the only oil company sitting on high profits.

    Granted, this is just one factor, but it seems like increased profit would be much clearer to tie to increased price than many of the other things people keep saying.

{{ articles_remaining }}
Free {{ article_text }} Remaining
{{ articles_remaining }}
Free {{ article_text }} Remaining Article limit resets on
{{ count_down }}