Skyrocketing fuel prices hitting gasoline pump

The Russia-Ukraine conflict is hitting US citizens at the gasoline pump and could drive inflation higher and intensify chain supplies, economists, and energy experts say.

Russia is the world's second-largest oil producer behind the US, putting out about 10 million barrels a day, the equivalent of 10 percent of global demand, the US Energy Information Administration says. Any loss of that could cause already surging prices to go higher. The US is a net importer, meaning it imports more oil than it exports.

On Thursday, the national average gas price in the US was $3.54 a gallon, 88 cents more than a year ago, the American Automobile Association, or AAA, said.

US oil prices were above $100 a barrel for the first time in about eight years in midday trading before closing up just $1.10, or 1 percent, at $93.20. One barrel usually contains about 19-20 gallons of motor gasoline.

"I know this is hard, and Americans are already hurting," President Joe Biden said last week. "I will do everything in my power to limit the pain the American people are feeling at the gas pump."

Biden said he was coordinating with oil producers to secure stability in global energy supplies.

"This will blunt gas prices. I want to limit the pain the American people are feeling at the gas pump. This is critical to me."

But Patrick De Haan, head of petroleum analysis at GasBuddy, said there is little Biden can do about rising oil prices. "We have to get rid of this notion (that) the president has some sort of magic wand."

De Haan said that the $100 a barrel price suggested that a $3.75-a-gallon national average retail price may be coming soon.

The rising price of oil will push inflation higher and intensify supply chain snarls, USA Today quoted Gregory Daco, chief economist at EY-Parthenon, as saying.

The conflict in Ukraine is also pushing up prices of other commodities such as wheat and aluminum that are exported from the region. Higher energy prices will affect food prices because the cost of fuel affects transportation.

Higher oil and commodity prices are likely to stoke US inflation, which was 7.5 percent in January, the highest in 40 years. The effects could add as much as a percentage point to consumer price rises, Daco said.

Key interest rate

And that, he said, could prompt the US Federal Reserve, which has been expected to raise its key interest rate at least three times this year, to make sharper rises, raising borrowing costs for households and businesses.

Lynda Lambert, a spokeswoman for the AAA East Central region, said that with the rising prices of West Texas Intermediate crude oil, which she said accounts for more than half of the cost of gasoline, gas prices have consistently been rising this year.

The country's refineries are starting the multi-month transition to summer gasoline, further adding to the rise at the pump, energy experts say. In addition, cold weather in Texas recently caused some power outages at major refineries, further weighing on markets, said De Haan.

Mark Kelly, a Democratic senator from Arizona, and other lawmakers have suggested suspending the federal fuel tax for the rest of this year to help consumers. But some groups oppose this, saying the loss of government revenue would affect spending on federal highways.

"The federal government would be out $20 billion this year alone, and much more if the (tax) holiday were extended," said Maya Mac-Guineas, president of the Committee for a Responsible Federal Budget.