Unprecedented Surge in 2023 Gas Prices Driven by Oil Supply Shortage
Gas prices in the United States for the year 2023 have reached historic highs, propelled by a tightening global oil supply chain.
Gas prices in 2023 have skyrocketed due to a global oil shortage. The US average is $3.88/gallon, with California at $5.69. Diesel is now $4.57/gallon. Airlines, including United and Delta, face profit challenges. The Fed grapples with inflation amidst rising energy costs. Geopolitical factors, not Fed policies, drive this surge. Crude oil exceeds $91/barrel. Saudi Arabia and OPEC+ maintain high prices for domestic goals, extending production cuts, while Russia reduces exports.
Record National Gasoline Averages: $3.88 per Gallon
Recent data from AAA reveals that the national average for gasoline in the United States has soared to an unprecedented $3.88 per gallon. However, Western states are experiencing prices well above the national average, with California's average reaching an astonishing $5.69 per gallon.
Diesel Prices Surge by 23 Cents: Now at $4.57 per Gallon
The surge in prices extends to diesel as well, a crucial fuel for the transportation of goods. Diesel prices have risen by a substantial 23 cents compared to the previous month, currently standing at a noteworthy $4.57 per gallon.
Implications on Industries: Airlines Sound the Alarm
This surge in energy costs has reverberated across various industries. Notably, jet fuel prices have seen a significant uptick, leading to concerns for major airlines such as United Airlines (UAL), Delta (DAL), and American (AAL). These carriers have recently expressed apprehensions about dwindling profits in light of escalating fuel expenses.
Broader Economic Concerns Amidst Fed's Inflation Control Efforts
The surge in energy prices is causing apprehensions about potential wider economic impacts, particularly as the Federal Reserve seeks to rein in inflation. While Fed officials are anticipated to maintain interest rates in their upcoming meeting, the possibility of one more rate hike remains on the table.
Gasoline's Role in August's CPI
It's worth noting that energy prices, particularly gasoline, played a significant role in the higher-than-expected Consumer Price Index for August, as disclosed in last week's report.
Expert Insights on Geopolitical Drivers of Energy Prices
Claudia Sahm, a former economist at the Federal Reserve Board, emphasized, "The oil issue, the higher gas prices — this should be a reminder to all of us that the Fed is not in charge of inflation. These are geopolitical vents that are driving energy prices."
Crude Oil Trends Upwards
Over the past three months, crude oil prices have displayed a steady upward trajectory. West Texas Intermediate (CL=F) has shown an impressive climb of approximately $23 per barrel since late June, reaching over $91 on Monday. Similarly, Brent crude futures (BZ=F) have witnessed a comparable surge of more than 30% over the same period, hovering above $94 per barrel on Monday.
OPEC+ and Saudi Arabia's Role in Maintaining Elevated Prices
In a bid to support domestic initiatives in the forthcoming years, Saudi Arabia, a key member of OPEC+, is keen on maintaining elevated oil prices. Andy Lipow of Lipow Oil Associates weighed in, stating, "I expect crude oil prices to remain above $90 per barrel as OPEC+, and specifically Saudi Arabia, seek higher prices to balance their domestic budget."
The Saudi government recently extended its independent production cuts for the next three months. Additionally, Russia has curtailed its exports by 300,000 barrels per day through the end of the year. These reductions supplement the previously announced OPEC+ cuts in the fourth quarter of 2022.