While gasoline prices are on the rise nationwide, the most significant jumps have been observed in Midwestern states, with average gas prices increasing by 18 to 25 cents, as reported by AAA. Notably, California and Washington state are experiencing the highest gas prices in the nation, with averages at $5.00 per gallon. Conversely, the lowest gas prices are found in Mississippi, where the average price stands at $3.32 per gallon.
It’s important to note that current gas prices are considerably lower than the record highs reached in June 2022, when prices peaked at $4.62 per gallon. At that time, gas prices were approaching $5.00 across the nation, impacting Americans’ summer travel plans and contributing significantly to the inflationary pressures experienced throughout the previous year, according to data from the Federal Reserve Bank of Kansas City.
As the summer season drew to a close and fewer drivers took to the road, the national average prices began to decline in mid-August.
Typically, rising gas prices can often be attributed to increased oil costs. However, this month, oil prices are just part of the equation. Here are three key reasons behind the recent surge in gas prices:
- Extreme Heat: July marked one of the hottest months on record for various parts of the country, including Arizona, Texas, and New Mexico. Prolonged high temperatures forced oil refineries to reduce their output, as many can only operate within the temperature range of 32 to 95 degrees Fahrenheit. This reduction in output has contributed to the recent spike in gas prices.
- Increased Oil Prices: Crude oil prices have recently hovered around $80 per barrel, up from around $70 per barrel just a month ago. Rising global oil prices often lead to corresponding increases in gas prices. The decision by Russia, the world’s third-largest oil producer, to cut production starting in August has contributed to the upward trajectory of oil prices. Analysts at UBS predict further increases in crude prices to reach $85 to $90 per barrel in the coming months due to rising oil demand.
- Falling Oil Production: Saudi Arabia, the second-largest oil producer globally, also reduced its oil exports last month, cutting production by 1 million barrels per day. This move was aimed at maintaining elevated oil prices. The Saudi Energy Ministry recently announced an extension of reduced production until the end of September. The motivation behind these cuts lies in the kingdom’s desire to support the stability and balance of oil markets. This is particularly crucial for funding Vision 2030, an ambitious initiative aimed at overhauling Saudi Arabia’s economy, reducing its reliance on oil, and creating job opportunities for its youthful population.
