Will Gas Prices Ever Go Down?

Average US gas prices hit a record high of $4.62 per gallon over the Memorial Day weekend, per data from AAA.

⛽ Why is it so expensive?... Broadly speaking, a mishmash of several things.

• When the Covid pandemic first hit, crude oil prices fell to record lows and remained cheap for most of 2020, leading major suppliers to slash production. Oil demand is now roughly back to where it was pre-Covid, but oil production – which takes a lot longer to restart – has only partially recovered.
• Gas prices also jumped in the aftermath of Russia’s Feb. 24 invasion of Ukraine. Many developed nations imposed retaliatory energy sanctions on Russia, which supplies ~10% of global oil demand.
• In recent months, gas companies have also switched to the more expensive summer blend of fuel, which can add up to 15 cents per gallon.

🧠 In the know: The price of gas is directly linked to the cost of crude oil (from which it's refined). Every $10 increase in the cost of a barrel of crude adds roughly 25 cents to the price of a gallon at the pump.

👀 Looking ahead… According to a recent JPMorgan report, the nationwide average for a gallon of gas could surpass $6.20 by August, after California crossed the $6 threshold this month for the first time in state (and US) history.