Gasoline could top $5 a gallon this summer, causing more pain for consumers

Gasoline prices are a wildcard for consumer wallets this summer, as tight supply and uncertainty in Ukraine could drive fuel costs sharply higher.

Gasoline prices are climbing towards $5, and they seem set to stay high even beyond the peak driving season in July. Already, Yardeni Research projects households are spending the equivalent of $5,000 a year on gasoline, compared with $2,800 a year ago.

In a normal summer, gasoline prices rise into May and then peak in the middle of the month. Summer driving season kicks off at the end of the month on Memorial Day weekend, with the largest number of drivers hitting the roads in July — just after the Fourth of July holiday.

And with inflation running at more than 8%, drivers are unlikely to catch a break this year. After dipping in April, the price of gasoline has been rising this month to record levels as oil prices climb. Gasoline experts see prices rising to $5 or more per gallon, and JPMorgan analysts are even forecasting a national average of $6.20 per gallon in August.

The national average for unleaded gasoline was at a new high of $4.56 per gallon Wednesday, according to AAA. That is 4 cents higher than Tuesday’s price and a 16-cent per gallon jump in just the past week. Last year at this time, the price was $3.04 per gallon.

“The goal posts are moving constantly. I think we probably have somewhere in the neighborhood of a one-in-three shot of the national average getting to $5,” said said Patrick DeHaan, head of petroleum analysis at GasBuddy. “We’re definitely heading a little higher short-term, but we’re still waiting t o see if the EU sanctions Russian oil. They talked about it. That could boost the momentum of getting close to $5.”

For the first time ever, the average price for unleaded gasoline was $4 per gallon or above in all 50 states this week, AAA data shows. Due to taxes and other factors, prices vary widely — with California at an average $6.05 per gallon, and Florida at an average of $4.50.

The price of gasoline is influenced most by the price of oil, the outlook for crude looks less than certain.

Before the Ukraine invasion, Russia had been exporting 5 million barrels a day of oil to the world market, along with more than 2.5 million barrels in refined products. Sanctions by the U.S. and allies have limited Moscow’s ability to sell its crude, and that has created tight supplies on everything from diesel to jet fuel.

Now, the European Union’s efforts to end Russian oil purchases altogether is just one wild card for the price of fuel, which is also in tight supply due to a decline in refining capacity.