Why Gas Prices Keep Rising for Americans in 2018
In Michigan, gas prices surged to $3 just before the July 4, 2018 holiday. That was about 70 cents higher than most gas stations i the state charged the same week in 2017.
However, it wasn’t all that much higher than the national average ($2.85). Overall, drivers across entire country will pay at least $0.45 more per gallon this year than they did for gas in summer ’17.
As health care and other essentials become more expensive under Donald Trump, people may wonder if higher gas costs are another part of the package. However, that’s slightly harder to pin on the president and his Congress, though Trump’s Iran policy is part of it.
1. Start with crude oil prices.
The global oil market has the biggest impact on the price of gasoline in the U.S. Since the summer of 2017, those prices have soared from $43 to over $74 a barrel in July 2018 (a high since 2014).
Meanwhile, that equaled a 58% spike in one year — a staggering number, indeed.
In fact, it was bad enough Trump felt the need to tweet about it. On June 30, he said he spoke to Saudi Arabia leadership and Trump said they agreed to raise output. (Saudi representatives said there was no agreement on the output numbers Trump referenced.)
When CNBC checked in with energy analysts, they said $100 per barrel is not out of the question for 2018. That would mean average gas prices well above $3.
2. Add in global instability.
When Trump sent his June 30 oil tweet, he referenced “turmoil and disfunction [sic] in Iran and Venezuela.” However, he didn’t mention his administration’s role in the Iran bit.
In brief, Trump wants to squeeze Iran’s ability to sell oil by putting pressure on U.S. trade partners around the world. That will cut down on available supply, thus creating a potential price bump (due to higher demand).
Unfortunately, he started a trade war with China at a time when the country might oblige him with a request regarding Iran. As China looks to raise tariffs on U.S. cars in response to Trump, it’s not a good time to be asking favors of Beijing.
While better relations with Iran would ease some of this burden, that doesn’t appear to be on Trump’s agenda.
3. Natural disasters and other factors make the situation worse.
As the U.S. slides into hurricane season, it’s important to remember how a deadly storm can have an impact on gas prices.
Most recently, we saw it happen when Hurricane Harvey hit the Caribbean and Florida in 2017. Prices jumped about $0.15 per gallon in the following weeks.
Other global factors — from the moves of commodities traders to the price of production equipment — play into the equation as well. As we head toward the summer, most Americans will simply notice the part about paying more every time they fill up their gas tanks.
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