With the busy summer travel season approaching, many are wondering how high could U.S. gas prices get?
Prices hit a nationwide record on Tuesday, May 24 — $4.598 a gallon — according to AAA.
This comes after a JPMorgan analyst predicted a “cruel summer” with gas prices potentially hitting a nationwide average of at least $6 in a Global Commodities Oil Flash Note published May 17.
“With expectations of strong driving demand — traditionally, the US summer driving season starts on Memorial Day, which lands this year on May 30, and lasts until Labor Day in early September — US retail price could surge another 37% by August to a $6.20/gal national average.”
Here’s what experts say as Memorial Day nears:
Supply and demand for fuel
“Typically, refiners produce more gasoline ahead of the summer road-trip season, building up inventories. But this year, since mid-April, US gasoline inventories have fallen counter seasonally and today sit at the lowest seasonal levels since 2019,” the JPMorgan report said.
The disconnect between supply and a higher seasonal demand is why the analyst has predicted prices could spike further and hit $6, a price never seen before, according to the report.
Patrick De Haan, GasBuddy’s head of petroleum analysis, told McClatchy News over the phone that for “various reasons,” roughly half a dozen refineries have been lost in the U.S. since 2019 and “amidst demand, that’s very high.”
“There’s a diminished ability for refineries to meet that demand. So they’re going to be critical this summer delivering enough fuel,” he added.
Robert Johnston, an adjunct senior research scholar at the Columbia Center on Global Energy Policy, told McClatchy News in a statement that JPMorgan’s prediction is “probable” as “some parts of the country are already at that price level.”
In California, the average price for a gallon of gas is $6.06 as of May 24, according to AAA.
“Combined with low inventories and strong demand that is a recipe for high prices,” Johnston said.
He added that prices will likely stay high this summer “to encourage conservation and lower demand. That is the job of the market at this point.”
Meanwhile, De Haan responded to JPMorgan’s $6.20 a gallon national average prediction May 18 on Twitter writing “this is ‘not’ a guarantee.”
“However- there’s little margin for error. $5 is a strong possibility. But $6? Not impossible. But improbable. For now.”
When asked why the $6 range gas prices prediction was “improbable,” De Haan told McClatchy News that President Joe Biden “would likely pull out more tools, to try and bring prices down, given how high” that would be.
“If it were to happen, I certainly think that there would be a significant toll on the economy that would likely cause demand to go down much sooner than we reach that $6/$6.20 a gallon mark.”
Abhiram Rajendran, who is also an adjunct research scholar at Columbia’s Center on Global Energy Policy and the head of Global Oil/Downstream Markets and North America Energy Research for Energy Intelligence, told McClatchy News over the phone that he agrees the impact of demand is a “key point” in rising prices but views JPMorgan’s $6.20 a gallon prediction as “probably a little bit of a stretch.”
However, he said “we share a similar view that it’s going to be a fairly strained summer” and he believes there is a possibility for gasoline prices to reach around $5 per gallon nationwide average during the peak of summer around the 4th of July.
“You sort of have this big rush around 4th of July, then things taper off to some degree,” Rajendran said. “As you kind of get closer to Labor Day, you have another kind of surge in demand.”
He also said there’s likely going to be “a steady increase” in gas prices once Memorial Day weekend hits.
One issue driving summer demand, according to Rajendran, is high diesel prices and how this “tends to filter over to the jet fuel market.”
Airline “ticket prices have been increasing and will continue to increase,” he said. As a result, “for folks looking to travel over the summer, instead of flying, they may end up driving more.”
Other factors that push prices higher
In regards to the possibility of the nationwide average reaching $5 a gallon this summer, De Haan said that’s also not a “guarantee,” but “there are conditions that could push us there…conditions that could worsen over the course of the summer.”
“At a time that demand remains high and the economy’s recovering…my fear is that any small disruption could morph into a price event that does bring the national average over $5 a gallon,” De Haan told McClatchy News.
“Now, I don’t think we’ll get there without some sort of drastic departure from where we stand today on a few different issues, mainly Russia and Ukraine and the state of the economy.”
Meanwhile, Johnston said a major factor driving gas prices “is a combination of high global crude oil prices and inflation.”
“Global crude oil prices are high because of strong demand, low spare capacity, and a reduction in Russian supply because of the military situation and associated sanctions,” he noted, referring to Russia’s invasion of Ukraine.
De Haan said the Russia and Ukraine situation is “significant” due to “the responses that it has invoked from countries” such as “essentially cutting Russian oil off from the global market.”
Another separate condition he said that could push gas prices to the $5 region is if a major hurricane occurs because this has impacted refining and oil production in the past, according to De Haan.
Hurricane season in the Atlantic region usually lasts from June until the end of November, according to the National Oceanic and Atmospheric Administration. In the Eastern Pacific region, it begins May 15 and goes through late November.
“There’s just a lot of different factors that are playing into, you know, what we’re paying at the pump,” De Haan said.
When could there be some relief?
Rajendran and Johnston said gas prices could be expected to ease after Labor Day on Sept. 5.
De Haan said that “there may be some relief in August barring a hurricane but I think more reliable relief will start coming in mid-and-late September as demand starts going down more noticeably.”
What typically happens is “prices generally fall in the fall” and “they spring in the spring,” he said.
“Again, that could be subject to change depending on geopolitical tensions and other issues that could affect supply or demand.”
