New York (CNN Business) — Gas station prices continue to break records ahead of Memorial Day weekend in the United States.
The national average for regular gasoline hit a new record high of $4.48 a gallon on Monday, according to the AAA. This represents an increase of US$0.15 in the last week and US$0.40 in a month.
Gasoline prices have risen 27% since the day before Russia began its invasion of Ukraine.
“Everything points to prices being even higher. We’re going towards $5,” Andy Lipow, president of Lipow Oil Associates, told CNN on Monday.
Lipow raised his gasoline price forecast to $4.75 a gallon from $4.50, citing a rise in gasoline futures. This suggests drivers heading out on Memorial Day weekend may be in for record prices.
Lipow said reaching $5 is “possible” while admitting that the picture could change considerably if there is a surprise development in the Ukraine war or with covid-19.
According to AAA, the average is already over $5 a gallon in four states: California, Washington, Nevada and Hawaii. Oregon is just a penny shy of $5.
The increase in gasoline aggravates inflation
It is important to point out that gasoline prices are not at their all-time highs after adjusting for inflation. The inflation-adjusted record was set in June 2008, when a gallon cost an average of $5.38, according to the US Energy Information Administration (EIA).
Still, the latest increase in the price of gasoline threatens to aggravate the inflation problems facing families and the US economy in general.
The problem is that supply is still unable to meet demand, especially for gasoline, diesel and other oil derivatives. Gasoline futures hit new all-time highs on Monday.
The good news, according to Lipow, is that gasoline production should pick up in the coming weeks as US refiners finish their maintenance season.
The bad news is that oil prices remain high.
This Monday, oil prices continued to rise to triple digits, which raises fears that gasoline prices will continue to rise in the coming days.
US oil rose 3.4% to $114.20 a barrel, the highest close since March 23. Brent crude, the world benchmark, rose nearly 3% to $114.50 a barrel in late trading.
The demand for energy continues to grow as the world recovers from covid-19. Despite China’s Covid lockdowns, oil demand in March stood at 101% of 2019 levels, according to the International Energy Forum, citing newly released data from the Joint Organizations Data Initiative (JODI).
However, supply continues to lag behind, with production standing at just 97% of 2019 levels.
“The Covid situation in Shanghai is getting a little better. Demand might be going down,” said Robert Yawger, vice president of energy futures at Mizuho Securities. “If there is a breakthrough, that could unleash crude.”
Until the last few days, oil prices have not risen as much as retail gasoline and diesel prices, which are at or near all-time highs.
The supply of petroleum products such as gasoline has struggled to keep pace with demand, in part due to several refinery closures in recent years.
“No one can reset the refineries because there is no spare capacity,” Yawger said.
In the last two years, the United States has lost about 5.5% of its refining capacity, according to the EIA (Energy Information Administration of the United States, for its acronym in English).