Gas prices are
nigh daily, causing financial pain at the pump for millions of Americans. Only information technology'south also spurring questions nearly why fuel is so expensive — and who's to arraign. Consumers are also wondering when they might see some relief.
Not surprisingly, soaring gas prices are having a very real impact on household budgets: A typical family unit may incur
simply due to the higher costs, according to one Wall Street estimate. On March 11, gas prices again reached a new peak, an average of $4.33 a gallon, co-ordinate to AAA. Prior to this calendar week, the previous tape was $4.10 a gallon in 2008, just before the financial crunch.
Drivers may come across some relief with the price of crude oil falling below $100 a barrel on Tuesday, down from $123 afterward Russia invaded Ukraine. Prices at the pump fell by two pennies to $four.31 a gallon on Tuesday, according to AAA.
"If this trend holds, it may remove some of the extreme up price pressure consumers accept found at the pump, but not all," the motorists' grouping said.
Until that happens, fuel prices remain a major topic of discussion, with families budgeting for higher gas costs and cut spending in other areas. Some Americans are already driving less due to the higher prices. One in iii adults say they reduced their car usage last month, with well-nigh blaming gas-pump sticker stupor, co-ordinate to Morning Consult.
So how did nosotros get here? Today's stratospheric gas prices have their root in the
pandemic, with Russian federation's war on
pushing prices higher in recent weeks, said Patrick De Haan, GasBuddy's head of petroleum assay.
"The overall aspect is that supply and demand accept changed," he told CBS MoneyWatch. "Everything was upended by COVID. If it hadn't happened, we would have been in a unlike state of affairs."
Hither are three reasons why gas prices are spiking — and when experts call back they might come down.
Post-pandemic demand for gas
When the pandemic get-go hit the U.S. in March 2020, demand for gasoline plummeted equally Americans sheltered at home due to nationwide lockdowns. The typical driver cut their driving in half, according to AAA.
That sharp turn down in demand caused gas prices to plunge to an average of $1.94 per gallon in Apr 2020.
Only as the economic system recovered — equally vaccines rolled out, making Americans feel safer about traveling and shopping — people resumed driving. With demand rising, gas prices also started to creep upwards. By March 2021, the average per-gallon price for gas stood at $ii.82, an increase of 45% from its pandemic depression.
Cuts to oil production
When demand for gas and oil plunged during the pandemic, OPEC and oil-producing nations such as Russia
, slashing information technology by an unprecedented ten million barrels. To put that in perspective, that represents ten% of the global supply.
Just as the global economy recovered from the pandemic, OPEC was slow to ramp upwards production, De Haan said. "We're nearing pre-COVID levels for consumption, but production is withal lagging. OPEC didn't showtime increasing production until July 2021. They were already too late — they were severely behind the curve."
Meanwhile, U.S. producers said they are boosting product, just warned that supplies could accept a while to trickle through to the market place and move prices at the pump, Politico reported.
U.S. sanctions on Russia impacts global market place
Against that backdrop of steadily rising prices, Russia'due south war in Ukraine has caused a rapid 20%-plus spike in oil and gas prices in mere weeks. Benchmark U.South. crude oil rose $iii.31 to $109.33 a butt March eleven, while Brent rough rose $3.34 to $112.67 a barrel.
President Biden on March 8, taking aim at Russia'due south main revenue source among the conflict.
The U.S. imports less than 10% of its oil and gas from Russian federation. So why are prices rise so much in the U.S. if the nation doesn't depend on Russia for fuel? The surge in gas prices is due to the larger global oil market place, De Haan said.
"When the U.S. issues sanctions, that has wide ramifications on the ability of Russia to export oil," he said. "We don't import a lot, merely somebody else does and we are making it hard for Russian oil to flow to the global market, and prices are reacting to that."
Are Biden'south policies causing price hikes?
Republican lawmakers are blaming President Joe Biden's policies for higher gas prices, pointing to the administration's decision last year to cancel the Keystone Forty pipeline, for case. They also blame Mr. Biden's executive lodge to suspension oil and gas drilling on federal country in January 2021. (A federal estimate in Louisiana blocked that order in June.)
But experts say the U.South. is producing more oil at present than it was it was in 2020, prior to Mr. Biden's inauguration. The latest data shows that for the week of March 4, 2022, the U.S. was producing 11.6 million barrels per day, compared with an boilerplate of 11.three million barrels per mean solar day in 2020, according to information from the U.S. Energy Information Administration.
Oil and gas drilling has increased under Biden, only companies in the U.S. are constrained by tight supplies of rigs, trucks and labor that they need to supply more than oil.
"That caste of finger-pointing is unwarranted," De Haan said of blaming Mr. Biden'due south policies for loftier gas prices.
But, he added, Mr. Biden's emphasis on shifting abroad from fossil fuels and toward electric vehicles may add uncertainty for oil and gas producers, which could requite them a disincentive to heave production.
Tipping indicate for gas consumers
It's possible that the boilerplate per-gallon cost
. In some regions, it already has — such as in California, where drivers are paying $5.72 per gallon.
But where the cost of gas goes from here depends on a number of factors, such as whether the U.S. makes a
to import fuel from that nation, De Haan said.
It's also important to recollect that when adapted for aggrandizement, today's fuel prices are notwithstanding below their peak in 2008, he noted. In today's dollars, the price was closer to $5.25 a gallon. De Haan believes most consumers won't cut back on driving until prices reach that $v per gallon marker.
"Nosotros're not close to that," De Haan said. "$5 [per gallon] is the one-time $4, and somewhere n of $5 could exist a tipping point" that causes drivers to calibration back.
And then when will gas prices go down?
Look gas prices to remain elevated for weeks if non months, experts say. Overall inflation will likely go worse in March and April before improving, Beak Adams, master economist for Comerica Banking company, said in a study.
"Inflation will advance in March and Apr every bit the knock-on effects of the Russia-Ukraine war push prices fifty-fifty higher at supermarkets, gas pumps and on utility bills," Adams said.
The avalanche of rising costs is taking a toll on consumer sentiment, polls bear witness.
"With gasoline prices surging and the war in Ukraine dominating the headlines, it was footling surprise that the University of Michigan consumer confidence index fell to an 11-year low in early March," Majuscule Economics said in a report.
Inflation could kickoff easing later in the twelvemonth but is likely to remain high, many experts think. Ian Shepherdson, chief economist at Pantheon Macroeconomics, forecasts that the headline rate volition dip to 5.5% by September, nigh 3 times the Federal Reserve's 2% target.
If oil prices remain below $100 for a while, drivers may eventually encounter some relief at the pump, with prices falling below $4 a gallon, De Haan said in a Monday tweet.
"Stations lost their shirt on the mode up, but now margins are improving and they will starting time passing the discounts on to you," he said.
The Associated Press contributed to this study.
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