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Feb 15, 2022 - Economy

Russia-Ukraine fears drive gasoline prices toward $4

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Illustration of a gas sign with a dollar sign for the "S"

Illustration: Sarah Grillo/Axios

Russia’s potential invasion of Ukraine is putting the U.S. on the doorstep of $4-per-gallon gasoline for the first time in nearly 14 years.

  • Oil prices fell a few dollars per barrel on Tuesday on hopes that Russia may not attack, but lingering tension promises continued volatility for the commodity.

Why it matters: Spiking energy prices have played a central role in the current 40-year inflation peak and threaten to cause further disruption to America’s political landscape.

  • The Biden administration and Democrats are considering a temporary suspension of the federal gas tax, which would lead to an immediate nationwide price cut of 18.4 cents per gallon.

By the numbers: Gasoline prices have jumped from their early pandemic low of less than $2 to average $3.50 on Tuesday, according to AAA.

  • The global economic rebound has fueled growing demand for oil, which has more than quadrupled since April 2020 to above $90 per barrel.

The big picture: Russia produces about 10% of the world’s oil, leading to fears that sanctions or a plan by President Vladimir Putin to cut off oil supplies could trigger global price increases.

  • An invasion would likely lead U.S. gasoline prices above $4 per gallon and California above $5 in the next few months, GasBuddy petroleum analyst Patrick De Haan tells Axios.

What they’re saying: Putin “knows President Biden has been trying to rein in high gas prices,” De Haan says. “He knows how to inflict some damage if the U.S. doesn’t respond the way he wants them to do.”

Context: Prices typically rise at this time of the year anyway due to a nationwide transition to the more-expensive summer blend of gasoline, plus scheduled refinery maintenance.

  • “There’s not a whole lot of breathing room if something goes wrong this year,” De Haan says.

Flashback: The national average price of gasoline peaked at $4.11 in July 2008 only to crash soon thereafter when the global financial crisis erupted.

Be smart: Gas prices might seem high, but when you account for inflation, they’re still far below 2008’s peak, which would equate to $5.26 today.

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