Gasoline prices in the United States have reached an all-time high for this season, posing a significant challenge to President Joe Biden’s efforts to combat inflation. The average cost of regular gasoline has now soared to $3.866 per gallon, marking a seasonal record over the past 12 months, as reported by the American Automobile Association. In an unexpected late-summer surge, prices have surged by 7.8% in just eight weeks.
This alarming trend has been primarily driven by the sharp increase in the price of oil, which has seen a remarkable 20% surge over the past two months. Prominent analysts from the International Energy Agency and the Organization of Petroleum Exporting Countries have raised concerns about a potential crude-market deficit extending into the end of 2023. This deficit is attributed to the decision by Saudi Arabia and Russia to continue production curbs.
Notably, the rising cost of gasoline has played a significant role in the August consumer price index, accounting for more than half of the overall increase. This ongoing escalation is likely to exacerbate inflationary pressures while eroding consumer confidence.
In response to previous surges in gasoline prices, President Biden had released a substantial emergency oil supply to stabilize prices during the summer season. However, this time, the administration faces the challenge of refilling these reserves, as they currently sit depleted. Furthermore, Biden’s political opponents have seized upon the high pump prices as an opportunity to criticize his climate policies.
What adds to the complexity of this situation is the unusual timing of the gasoline price hike. Typically, prices tend to rise during the summer-driving season due to increased demand, but seeing such a significant increase at this point in the year is unexpected.
Compounding the issue of higher gasoline prices is a concurrent spike in diesel costs. While diesel prices usually climb in the fall due to increased consumption by farmers during harvest season and rising demand for heating, this year’s prices are significantly higher than usual.
Despite efforts by U.S. refiners to ramp up operations to near pre-pandemic levels and a recent increase in gasoline stockpiles (although still below normal), the supply boost is expected to be temporary. Refiners are slated to undergo fall maintenance, which is typically scheduled after the peak summer gasoline season to avoid potential price pressures.
The record-high gasoline prices during this period of the year in the United States are posing challenges for both President Biden’s fight against inflation and his climate policies. The surge, driven by rising oil prices and ongoing global market dynamics, is contributing to inflation and eroding consumer confidence, making it a complex issue with potential political ramifications.