Retail gasoline prices
are inching up again, to a national average of $3.829 a gallon on Monday afternoon, according to AAA.
Pump prices are 8.3% higher, or 29 cents a gallon more, than last month’s average of $3.537 a gallon.
While lower than last year’s high of more than $5 a gallon, it’s still a blow to household budgets, especially during the summer when people are driving more for vacations and excursions. Falling energy prices earlier this year helped cut growth in the consumer price index to a 3% annual rate in June.
One of the biggest drivers of rising gasoline prices appears to be Russia’s war in Ukraine, which has gone on for nearly 18 months. And adding to the upward pressure are the decisions by major oil producing nations Saudi Arabia and Russia to cut production.
This weekend, Ukrainian maritime drones hit two Russian ships, including a Russian oil tanker near occupied Crimea on Saturday and another Russian ship near a key naval port of Novorossiysk on Friday.
Analysts for the Eurasia Group wrote before the tanker was hit that since crude exports from Novorossiysk average around 1.8 million barrels a day, or about 2% of global supply, the loss of volume from that region could push oil prices to over $100 a barrel.
JPMorgan commodities analysts are forecasting
West Texas Intermediate
to rise to $81 a barrel in the fourth quarter, and for
Brent
to reach $85 a barrel by then.
The last time front-month WTI settled above $100 was on July 20, 2022, when it settled at $102.26, according to Dow Jones Market Data. The last time front-month Brent settled above $100 was on August 29, 2022, when it settled at $105.09.
Rising benchmark crude prices threaten to increase the cost of driving, shipping and supply chains, and undo inflation trends that had appeared to be on the way down.
Over the past three months, the national average wholesale diesel price jumped 23.1% through Monday, according to Oil Price Information Service, a Dow Jones company. The national average wholesale gasoline price is up 12% over the same time, and the national average retail gasoline price is up 8.2%.
Oil prices notched their sixth straight weekly gain last week, the longest winning streak in more than a year, boosted by Saudi Arabia’s decision to keep curtailing production by an additional one million barrels a day through September and possibly longer.
Russia will reduce its production cut to 300,000 barrels in September from 500,000 barrels in August. Both announcements were generally positive for crude prices.
The U.S. announced that oil storage levels are falling quickly, with inventories dropping by 17 million barrels last week—the largest drop on record, and a sign that demand is quickly outpacing supply. The Biden administration canceled plans to buy six million barrels of oil for the Strategic Petroleum Reserve.
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