Record-high gas prices are the biggest cause of red-hot inflation heading into the high-demand summer months — and the factors behind the wallet-busting costs show no signs of easing up.
Crude oil prices, which have spiked beyond $100 a barrel, now account for 60% of the price of a gallon of regular unleaded gasoline, according to April data from the federal Energy Information Administration.
The cost of crude shot up amid both increasing demand as the COVID-19 pandemic wanes and the global supply chain disruption caused by the Russian invasion of Ukraine and subsequent Western-imposed sanctions.
Just a year ago, crude oil prices accounted for 52% of the cost of a gallon of gas – and only 25% of the cost during the COVID lockdowns of April 2020, the New York Times reported.
Refining costs account for another 17% of the price per gallon as of this April, while 12% of the cost went toward taxes and 11% toward distribution and marketing, EIA data showed.
The nationwide average cost of a gallon of regular unleaded now sits well above $5. On Wednesday, the national average for regular unleaded hit $5.014, down slightly from the all-time high of $5.016 a day earlier, according to AAA.
That’s up more than $2 from the $3.076 an average gallon cost at this time last year — and up more than 50 cents from the $4.47 an average gallon cost a month ago, AAA data shows.
The national average for a gallon of diesel fuel also hit a new record of $5.78 Wednesday, according to AAA.
The dueling issues of out-of-control energy costs and un-contained inflation have President Biden and congressional Democrats fearing blowback from angry voters at the polls in the November midterm elections.
But despite the president’s demand Wednesday that Big Oil increase production, there’s no evidence that such an effort would cool down prices at the pump.
Although the US is the largest producer of oil, it is also the second largest oil importer in the world — and many refineries that produce gasoline aren’t geared to process what is produced on US soil, according to the Times.
US saw its refining capacity peak at nearly 19 million barrels per day in April 2020, before the effects of COVID hit and lockdowns sent demand plummeting. As a result, oil companies cut staff and shuttered refineries.181
Today, US refineries are operating at 94% of capacity, but output in March was 17.9 barrels per day, short of pre-pandemic levels, according to Reuters.
Oil companies are also believed to be hesitant to reopen closed refineries due to a shortage of labor as well as the long-term expectation that crude prices will come down due to increased supply.