Gasoline prices in the United States are rising, especially on the West Coast. In California, prices have risen 55 cents in the last month and 31 cents in the last week, approaching $6 a gallon. The Los Angeles-Long Beach metro area saw even more dramatic increases: Gasoline prices reached $6.07 a gallon, up 49 cents in a week. In other areas of the San Francisco Bay Area, such as San Ramon and San Francisco, gas prices are $5.67 per gallon.
The increase in gasoline prices is due to various factors. Severin Borenstein, a professor at UC Berkeley, explains that the global price of crude oil is rising, accounting for only 25% of the increase. The rest is due to California factors such as rising refining margins and last year’s refinery outages. Borenstein warns that once gas prices rise, it could take time to come back down.
Rising gasoline prices aren’t just in California. Drivers in 11 states now face gas prices of $4 or more per gallon. Nationwide, gasoline prices rose to $3.88 a gallon, the highest this year. The main driver of these prices at the pumps is the rise in oil prices, which peaked at nearly $94 a barrel before declining slightly.
These rising gas prices have a significant impact on consumers, particularly low-income families. They also pose challenges to President Joe Biden, who could face criticism from voters. The Federal Reserve is also facing difficulties in controlling inflation due to rising energy prices. However, experts do not believe that energy prices are currently at a level that poses an immediate risk to the US economy.
Although the recent rise in gasoline prices may be a cause for concern, some experts believe prices could soon cool off. Andy Lipow, president of consulting firm Lipow Oil Associates, expects prices east of the Rocky Mountains to fall by five to 10 cents a gallon in the coming days. He cites declining gasoline futures, sufficient inventories, a decline in demand and the end of hurricane season as factors.
Uncertainty about gasoline prices and the oil market poses challenges for the Federal Reserve. However, analysts do not expect any significant impact on Fed policy unless prices continue to rise. Core inflation, which excludes food and energy, remains relatively stable for now. The Fed will likely take note of the rise in energy prices but focus on long-term trends.
Definitions:
– Refining margins: The difference between the cost of crude oil and the wholesale price of petroleum products produced by refineries.
– Crude oil: Unrefined petroleum extracted from the ground.
– Inflation: The rate at which the general price level for goods and services increases and, as a result, purchasing power decreases.
