- US gas prices hit an average price-per-gallon of $4.065 on Monday, according to new AAA data.
- That's the highest level since July 2008 and nearly 13% higher from last week's reading.
- Risks from the Ukraine crisis and strained gas market stand to push prices even higher.
US gas prices now sit at levels not seen since the Great Recession.
The average price per gallon of gasoline crept slightly above $4 on Sunday for the first time since July 2008, according to AAA data. The climb continued into Monday, with the nationwide average edging higher to $4.065 for regular-grade gas. That's up $0.455, or nearly 13%, from levels seen just one week ago.
Surging gas prices have epitomized pandemic-era inflation over the past several months. Prices began to swing sharply higher in early 2021 as vaccine rollouts led the economy to reopen, leading to a rebound in travel. Demand rapidly overwhelmed supply, and gas quickly surpassed its pre-crisis price as supply-chain pressures presented new challenges to the still-recovering economy.
Prices eased for a few weeks in late 2021 as the Omicron variant sparked a new wave of restrictions, but the swift decline in infections has since reversed the trend. Russia's invasion of Ukraine presented yet another source of upward pressure for commodity prices, and weekly price hikes are now some of the largest since the pandemic began.
The surge isn't evenly felt across the US. West Virginia still enjoys prices the rest of the US hasn't seen in weeks, as the state's average price reached $3.891 on Monday. Californians, meanwhile, are struggling with an average price of $5.343, the highest of all US states. That's also $0.055 above yesterday's average, signaling the state could be in for a rapid ascent in pump prices.
Several risks stand to drive costs even higher. Though the US, UK, and European Union haven't yet targeted Russia's energy sector with their sweeping sanctions, the Biden administration is mulling whether to ban Russian oil imports without allies' participation, Bloomberg reported Sunday. Such action would further strain supply and all but guarantee higher prices in the near term.
The market was already under intense pressure before the Ukraine conflict. The Organization of the Petroleum Exporting Countries rebuffed President Joe Biden's urges for increased oil production in November, essentially forcing the US to contend with a prolonged period of high prices. Structural shortages have hammered several commodity markets over the last few months, and the new crisis in Ukraine stands to leave gas prices at a higher level for longer, Seema Shah, chief strategist at Principal Global Investors, said Monday.
"Today, production is not keeping pace with rising consumption, in part due to the focus on renewables," Shah said. "Our view is that, in the longer term and looking beyond wartime market dynamics, commodity prices will remain elevated for a sustained amount of time."
Without any easing on the horizon, surging gas prices could also extend the US's inflation problem. Energy commodities have seen some of the biggest price gains over the past year, and gasoline alone soared 40% in the year through January, according to the Bureau of Labor Statistics. Only used vehicles and fuel oil saw larger gains in the past 12 months among goods and services tracked by the Bureau.
The Federal Reserve is poised to raise interest rates later in March in hopes of cooling demand and, in turn, easing inflation. Yet gas demand is stickier than that for other goods since Americans tend to keep refueling even when prices are much higher. Hopes for weaker inflation could be dashed if gas supply remains strained and prices keep climbing.