Tired of High Gas Prices—Get Used to It

Oil prices dipped below $100 a barrel this month, but gas still costs around $4.50 a gallon. What gives?

The Ukraine war continues, as do international boycotts against Russian oil, and the world continues to recover from the 2020 pandemic recession. The only other time gas prices skyrocketed near this level was in July 2008 at $4.11 a gallon ($5.37 in today’s dollar, adjusted for inflation).

Average gas prices topped out at $5.03 a gallon last month but have been falling in recent weeks, primarily because of diminished demand and an increased supply of gas. But the outlook is far from certain and forecasts for future energy prices are all over the board:

• The U.S. Energy Information Administration (EIA) found that crude oil prices decreased earlier this month in response to slowing economic growth, decreasing personal spending and the unfolding impact of the Federal Reserve’s interest rate increases. The EIA subsequently cut its 2022 and 2023 U.S. and global crude oil benchmarks for this month’s short-term energy outlook. Futures for Brent crude oil declined from $107.37 to $104.05 a barrel for 2022 and from $97.24 to $93.75 a barrel for 2023. Futures for WTI crude oil decreased from $102.47 to $98.79 a barrel for 2022 and declined for 2023 from $93.24 to $89.75 a barrel.
• Citigroup signaled that oil prices could cave to $65 a barrel later this year and slump further to $45 by the end of 2023 if global recession fears are realized, crippling the world’s appetite for crude.
• Goldman Sachs experts expressed concern that low levels of oil inventory globally will remain unresolved, leading to $135 a barrel between the second half of this year into the first half of 2023.
• JPMorgan Chase analysts warned that oil prices could reach a “stratospheric” $380 a barrel if Russia retaliates against the European Union’s decision to reduce oil imports from Russia by 90% by year end.

The big issue for American consumers is high gas prices, and the problem is that existing U.S. refineries are already running near capacity. Though the United States pumps plenty of its own oil, the lack of refining capabilities, not the lack of production, will likely mean high prices at the pump for some time to come.