If your wallet has been hurting a little extra at the pump lately, you're not alone. The national average for a gallon of gas is hovering around $4, the highest we've seen since last year. The surge in gas prices can't be ignored, and we safely assume that we will see prices climb even higher in the coming days.
What's driving this surge in gas prices, and what can we expect in the near future for gas prices?
Strategic Petroleum Reserve (SPR) Depletion
It all started last year when President Joe Biden made the call to tap into our SPR, which is supposed to be used as a safety net to stabilize gas prices in emergencies. The government manages large oil tanks, and when Biden released oil from the SPR, it functioned as designed and lowered gas prices.
However, now the SPR is at the lowest levels it has seen in over 40 years, causing its own set of problems.
SPR Refilling and Supply Reduction
Now, the Biden administration announced their intention to refill the SPR, and while this is obviously a good idea, it doesn't come without a cost– a literal cost to Americans. The oil used to refill the SPR has to come from somewhere, which means it's taken from the oil supply that would go out to market, and instead of being sold to consumers, it's being stored in emergency tanks.
Basic economics tells us prices proportionately hike when supply is lower than demand. The timing for this refilling is unfortunate since we're already seeing gas prices at a one-year high.
Inflation and Gas Prices
SPR refilling is not the only thing causing high prices. We can also thank good ol' inflation. The Consumer Price Index (CPI), the way we measure inflation, has spiked to 3.7% in August, which was already up 3.2% from July.
Why are we seeing such considerable jumps in inflation? Well, you can thank the soaring gasoline prices. It's a vicious cycle to get caught up in.