(CNN) – For the first time in history, a gallon of regular gasoline is now $5 on average across the country, according to the American Automobile Association (AAA).
The record is no surprise. Gasoline prices have risen steadily over the past eight weeks, with this latest milestone marking the 15th consecutive day the AAA reading has reached a record high and the 32nd time in the past 33 days.
The national average was $4.07 when the current series of price increases began on April 15. The current OPIS price reading represents a 23% increase in less than two months.
And higher gas prices do more than just cause drivers a pain at the pump. It’s a major factor in the pace of prices consumers pay for a wide variety of goods and services that are rising at the fastest pace in 40 years, according to a government inflation report on Friday.
Inflation caused consumer confidence to plunge to a record low on Friday, according to a survey by the University of Michigan. Concerns about what the Federal Reserve will do to combat inflation have led US stocks to plummet in recent months, wiping out billions of household fortunes.
While the national average of $5 is new, $5 of gas has become uncomfortably common in most parts of the country.
Data from OPIS, which collects readings from 130,000 U.S. gas stations used to compile AAA averages, showed that 32% of stations nationwide, nearly one in three, were already charging more than $5 a gallon in readings on Friday. . And about 10% of stations across the country charge more than $5.75 a gallon.
The state average was $5 a gallon or more in 21 states plus Washington, D.C. in Saturday’s reading.
$6 gas could be next
Gas prices are unlikely to stop there. With the start of the summer travel season, the demand for gasoline, along with the cutoff of Russian oil shipments due to the war in Ukraine, increased oil prices on world markets.
The national average for gasoline in the United States could approach $6 by the end of this summer, according to Tom Kluza, global head of energy analysis at OPIS.
“Anything goes from June 20 through Labor Day,” Kloza said earlier this week of gasoline demand as people head out on the road for long-awaited holidays. “Come to hell or high gas prices, people are going to take vacations.”
The highest statewide average has always been in California, averaging $6.43 a gallon in readings on Saturday. But the pain of high prices is becoming felt across the country, not just in California or other high-priced states.
Cheap gasoline is hard to find
That’s partly because the cheapest wasn’t that cheap: the Georgia average price of $4.47 a gallon is the cheapest statewide. Fewer than 300 of the 130,000 gas stations nationwide were charging $4.25 a gallon or less in Friday’s reading. For comparison, before the price hike earlier this year, the national record average for gasoline was $4.11, recorded in July 2008.
And even in some states with cheaper gas prices, like Mississippi, lower average wages mean drivers have to work longer hours to earn money to fill their tank compared to drivers in some higher priced states, like Washington.
There is some early evidence that people are starting to cut back on driving in the face of higher prices, but it’s still a modest decline.
The number of gallons pumped at stations in the last week of May was down about 5% from the same week a year ago, according to OPIS, although gas prices have risen more than 50% since then. Car trips to the US are down about 5% since the start of May, according to mobility research firm Inrix, though those trips are still up about 5% since the start of the year.
The main concern is that consumers will cut back on other spending to continue driving, which could push an economy already showing signs of weakness into recession.
Many reasons for standard prices
In addition to the strong demand for gasoline, there is also a supply problem that causes the prices of both oil and gasoline to rise. The Russian invasion of Ukraine, and sanctions against Russia in the United States and Europe since then are a major factor, with Russia being among the world’s largest oil exporters. But it is only part of the reason.
Oil is a raw material that is traded in world markets. The United States has never imported large quantities of oil from Russia, but Europe has traditionally relied on Russian exports. The European Union’s recent decision to ban tanker shipments from Russia has pushed up oil prices globally.
Crude oil prices closed above $120 on Friday, down from under $100 a month ago. Goldman Sachs recently forecast that the average price of Brent crude, the standard used for oil traded in Europe, will be $140 a barrel between July and September, up from its previous price of $125 a barrel.
A factor other than Russia’s withdrawal from the global market is limited supply. OPEC and its allies cut oil production as demand for oil fell in the early months of the pandemic, as most companies in the world closed and people stayed close to their homes.
Global oil futures were briefly trading in negative territory due to a lack of space to store excess oil. Some oil-producing countries have reduced production in an effort to prop up prices, and some of that production has returned to the Internet, but not all of it.
US oil production and refining capacity has not fully recovered to pre-pandemic levels. Due to high prices in Europe, some US and Canadian refineries that normally supply the US market with gas are exporting gasoline to Europe.
Many oil companies have been slow to increase production, despite potentially higher oil prices, and have instead used those higher profits to buy back their shares in an effort to increase the price of their shares. ExxonMobi has announced that it intends to buy back $30 billion of its stock, more than this year’s total capital spending budget.
CNN’s Matt Egan and Michelle Watson contributed to this report.