The average cost of gasoline could rise to $4 a gallon this summer, reigniting inflationary pressures and weighing on motorists’ wallets. “Watch out for summer gasoline prices, which some predict may extend above $4 per gallon nationwide and put pressure on inflation,” said Rob Thummel, a senior portfolio manager at Tortoise. Despite gas prices drifting back and forth by a penny for the past week, industry experts warn that the upward movement could reaccelerate. “Gas prices are a lot like seasonal temperatures. They start to rise with the arrival of spring,” said Andrew Gross, a spokesperson for AAA. “Gas prices are settling into a pattern similar to last year when the usual seasonal increase was slow and steady.” “While we seem to be nearing a short-term peak, one word of caution for those in the Mid-Atlantic and Northeast: you haven’t yet finished the transition to summer gasoline, so you may experience some sticker shock in a few weeks,” he said. “Be prepared for somewhat of a punch. For the rest of the nation, so long as we don’t see extenuating circumstances, we’re likely close to a top in prices.” Indeed, summer-grade fuel is costlier to manufacture as the production process is strenuous and longer and can add as much as 15 cents per gallon to the final cost of higher-grade fuels. But while this helps explain part of the problem, the other factor is that the significant climb has been driven mainly by the rally in global
Oil markets. West
Texas Intermediate (WTI) crude prices topped $85 per barrel on the
New York Mercantile Exchange for the first time since October 2023. Brent, the international benchmark for oil prices, is eyeing $90 a barrel on London’s ICE Futures exchange, a level unseen since in six months. Crude oil accounts for more than half of the price of gas. The challenge for the
United States has been back-to-back hotter-than-expected inflation data in the three primary measurements: the consumer price index (CPI), the producer price index (PPI), and the personal consumption expenditure (PCE) price index. Rising energy prices could facilitate a second inflation wave, economists say. “The timing and magnitude of the eventual rate cuts are clearly impacting sector rotations by investors as they try to perceive what the Fed will do and how that will impact the consumer,” said Mr. Thummel. Phil Flynn, an energy strategist at The PRICE Futures Group, warns that robust growth and consumption trends could fuel global supply deficits. According to Mr. Thummel, global crude inventories are at 16-month lows, and demand in the first quarter is anticipated to be higher than expected. Worldwide oil demand is projected to reach an all-time high this year. Geopolitical strife has also contributed to oil’s rally this year. From
Middle East tensions to the Houthis’ bombardment of attacks in the Red Sea, investors have been paying close attention to the region as the developments could result in delivery delays and higher shipping rates. So far, traders are waiting for further news as to whether it could spread into a wider and more intense regional conflict.