Why is gasoline in the US close to $5 a gallon?

(CNN Business) – Another day, another record in the price of gasoline in the United States.

The average gallon of regular gasoline in the United States averaged $4.96, according to the latest reading from the American Automobile Association (AAA) on Wednesday. It is the 12th consecutive day and the 29th time in the past 30 days that gasoline has hit a record level in the United States.

In most parts of the country, there’s already $5 for gasoline.

There are now 16 states, plus the city of Washington, averaging $5 or more. Idaho, Ohio, and Pennsylvania were the latest states to cross this line. California continues to have the highest prices, with an average of $6.39 per gallon statewide.

The state average has increased at least a penny in every state except Florida, where prices are essentially unchanged. And on Tuesday, 29% of the country’s 130,000 gas stations already sold gasoline for more than $5 a gallon.

The worst is yet to come for drivers.

As the summer travel season approaches, the demand for gasoline, along with the cut-off of Russian oil shipments due to the war in Ukraine, has sent oil prices soaring on global markets.

The national average gasoline may approach $6 by the end of this summer, according to Tom Kloza, global head of energy analysis at OPIS, which tracks gasoline prices at PRASA.

“Everything runs from June 20 until Labor Day (September in the US),” Kloza said of gasoline demand. “Whatever the price of gasoline, people will go on vacation.”

Although the United States has never imported large quantities of oil from Russia, the product is traded on world markets, and Europe relied heavily on Russian exports. The recent decision by the European Union to ban tanker shipments from Russia has pushed up oil prices in those world markets.

Crude oil is now above $120 a barrel, up from under $100 a month ago, and prices continued to rise in early trading on Wednesday. Goldman Sachs forecast that the average price of Brent crude, the benchmark used for oil traded in Europe, will average $140 a barrel between July and September, up from its previous forecast of $125 a barrel.

There are stations and states where gasoline is cheaper. About 20% of gas stations across the country still sell gasoline for less than $4.50 a gallon. But even in many states where gas is cheaper, like Mississippi, lower average incomes can mean drivers have to work longer to fill their tanks than in some states with higher gas prices, like California.

How much are drivers willing to pay before reducing their consumption? So far, the number of gallons pumped to gas stations in the last week of May was just 5% down from the same week last year, despite gasoline prices rising more than 50% over the same period. Car trips in the US are down 5% since the start of May, according to mobility research firm Inrix, though those trips are still up 5% since the start of the year.

The concern is that consumers will cut back on other spending to continue getting the miles they want or need, which could push an economy that is already showing some signs of weakness into a recession.

CNN’s Matt Egan contributed to this report*

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