Five dollar gas is here, get used to it.
That’s according to GasBuddy, an aggregator of pump prices, which said the national average on Thursday reached the $5/gallon price point.
“It’s been one kink after another this year, and worst of all, demand doesn’t seem to be responding to the surge in gas prices, meaning there is a high probability that prices could go even higher in the weeks ahead,” said Patrick De Haan, GasBuddy’s head of petroleum analysis. The average price edged down to $4.98 later in the day Thursday, according to GasBuddy’s real time ticking average. But that’s just a snapshot in time.
AAA’s national average on Thursday stood at $4.97, but a spokesman told MarketWatch the organization expects the average to reach the $5 mark over the weekend. There are almost 20 states where gas costs at least $5/gallon, AAA data shows.
It all comes a day before another reminder of the high cost of living these days.
On Friday, the Bureau of Labor Statistics is scheduled to release May inflation data and analysts are predicting a 0.7% monthly rise in costs on consumer goods and services. In April, the year-over-year inflation rate was 8.3%, a slight decline from a month earlier, but still at steamy four-decade highs.
The Dow Jones Industrial Average DJIA, -1.94%, S&P 500 SPX, -2.38% and the Nasdaq Composite COMP, -2.75% all finished sharply lower Thursday with investors sweating over Friday’s forthcoming inflation data.
When it comes to gas prices, increased seasonal demand is on a crash course with high-priced oil, the biggest factor in prices. The economic consequences of Russia’s ongoing invasion of Ukraine have trimmed back global supply in a time of rising demand, GasBuddy noted. Diminished refining capacity has also ratcheted up the costs, it added.
At this point, the global economy is in a ‘critical situation,’ according to some observers.
West Texas Intermediate crude for July delivery closed Thursday at $121.51 a barrel.
Of course, gas priced at least $5/gallon has been a reality in many states already, starting with California. Drivers in the Golden State are currently paying $6.39/gallon, according to GasBuddy data. The rest of America could be paying those prices in a matter of months, with JP Morgan JPM, -2.10% analysts predicting $6 averages by the end of August.
But the $5 mark may carry extra psychological weight, some previous surveys have suggested. That’s the price point where drivers increasingly take steps to scale back their driving habits.
The question will be to what extent hot inflation and high gas prices will melt away summer travel and recreation plans as Americans try to leave the pandemic behind.
“It’s a perfect storm of factors all aligning to create a rare environment of rapid price hikes,” De Haan said in a Thursday statement. “The situation could become even worse should there be any unexpected issues at the nation’s refineries or a major hurricane that impacts oil production or refineries this summer.”