Jun 3, 2022 - Economy

Gas is headed for $5 a gallon nationwide

Data: FactSet; Axios Visuals
Data: FactSet; Axios Visuals

Wholesale prices for gasoline keep surging, meaning the angst Americans are feeling at the pump will last.

Why it matters: Gasoline prices are key inflation indicators to the American public, and their persistent climb is a headwind for both consumer spending — as gas bills eat into household budgets — and politicians hoping to stay in power.

Driving the news: Benchmark futures prices for gasoline hit a new high of $4.19 per gallon Thursday, as the Department of Energy reported that gasoline supplies last week hit their lowest level this year.

State of play: Unless those futures prices come down quick, we're about to blow past last week's record retail gas price of $4.71 a gallon, per AAA.

  • That's a nominal record, not an inflation-adjusted high — the all-time inflation adjusted high for a gallon of regular gas was $5.38 set in June 2008, according to the U.S. Energy Information Administration.

How it works: The futures contract is the price for a kind of fuel known as RBOB, which stands for "Reformulated Blendstock for Oxygenate Blending."

  • Basically, it's "unfinished" gas that is then blended with ethanol at gasoline distribution hubs and then delivered to stations where it's sold on to gas-hungry drivers.

The bottom line: The difference between futures prices and national average retail prices for a gallon of regular has averaged roughly 97 cents over the last three years.

  • If that relationship holds, that means we're likely to see average gasoline prices of about $5.15 a gallon quite soon.
  • And yes, Californians, we know you've been there for a while.

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