• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 hours How Far Have We Really Gotten With Alternative Energy
  • 9 days What fool thought this was a good idea...
  • 12 days Why does this keep coming up? (The Renewable Energy Land Rush Could Threaten Food Security)
  • 7 days A question...
  • 12 days They pay YOU to TAKE Natural Gas
  • 18 days The United States produced more crude oil than any nation, at any time.
Red Sea Attacks Could Spark Spike in Gasoline Prices

Red Sea Attacks Could Spark Spike in Gasoline Prices

Oil prices have risen sharply…

Electric Dream On Pause? UK's Fuel Car Ban Faces Delay

Electric Dream On Pause? UK's Fuel Car Ban Faces Delay

Car manufacturers are urging the…

My Top Energy Stock Pick for 2024

My Top Energy Stock Pick for 2024

Oversupply and lower domestic prices…

Robert Rapier

Robert Rapier

More Info

Premium Content

Is $5 Gas Inevitable?

  • Russia’s war in Ukraine has forced much of the world to turn its back on Russian oil products.
  • The loss of distillates, gasoline, and gasoline ingredients has refiners scrambling to make up a deficit.
  • The global supply crunch is happening just as gasoline demand nears record levels.
Gas Prices

As Russian troops were massing on Ukraine’s border back in February, I wrote Russia Is A Major Supplier Of Oil To The U.S. I warned: “Russia supplied 7% of U.S. oil imports in late 2021 – a significant number. Replacing that oil will put additional upward pressure on global oil prices, virtually assuring that oil will exceed $100/bbl if the situation further escalates.”

What I didn’t explain in detail in that article is that most of the imports coming from Russia were finished products. The U.S. imported some gasoline, but it was primarily distillates (e.g., diesel), and unfinished oils like naphtha that are used by refineries to make gasoline.

Following the decision to stop importing Russian oil, there has been a number of cascading effects. The loss of distillates, gasoline, and gasoline ingredients has refiners scrambling to make up a deficit.

At the same time, jet fuel demand has come roaring back as people are now taking trips that they put off during the pandemic. Both the loss of Russian oil products and surging demand for jet fuel have forced refiners to maximize diesel and jet fuel production. That negatively impacts the ability to maximize gasoline output.

Adding more fuel to the fire, demand for gasoline is near historic highs. Thus far, high gasoline prices haven’t negatively impacted demand. The reason for that is that the job market is strong, so consumers are still paying whatever it takes to fill their tanks.

The net result is that inventories of both distillates and gasoline are well below the normal range for this time of year, while refiners are running at over 90% operable capacity. There isn’t a lot of room for additional production.

Related: Sky-High Commodity Prices Have Been A Boon For Glencore Despite Record Fines

I noted last month that Gasoline Prices Have Peaked For Now, but I also warned that we were unlikely to see significant relief any time soon. From late March to late April, gasoline prices declined. However, diesel prices remained strong.

The need for refiners to respond to high diesel prices — at a time when gasoline demand is soaring — once again caused gasoline prices to begin rising. In the past week, the national average price for gasoline has exceeded the peak levels of March.

Unfortunately, there is no immediate relief in sight. U.S. oil production continues to rise, but there is a refining constraint that will continue to impact the finished product market for months.

We are unlikely to see significant relief until after summer driving season peaks, when higher oil production and lower gasoline demand will probably combine to send prices lower.

Until then, it seems likely that the national average price of gasoline will exceed $5 per gallon. This poses a significant risk to the U.S. economy as consumers will find themselves short of discretionary income.


By Robert Rapier

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mamdouh Salameh on May 29 2022 said:
    Global oil demand is already in a super-cycle phase of accelerated demand growth that could last up to ten years and take Brent crude beyond $120 a barrel.

    If this is the case, then we should also expect gasoline prices to exceed $5 a gallon and continue rising underpinned by almost lack of global spare refining capacity.

    The claim that the world has turned its back on Russian oil products is unsubstantiated. If this was the case, we would have seen Brent crude heading towards $140-$150 a barrel by now.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Joshua Lee on May 30 2022 said:
    What does the author mean? It's already above $5/gal... (In more than one state.) And has been for a while now.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News