The national average of $4.06 a gallon is up 45 cents from a week ago, AAA said.
Red-hot prices at the pump are not only showing no signs of cooling down — but are instead set to soar even higher.
The national average price for a gallon of gas hit $4.06 on Monday, up a staggering 45 cents from a week ago, to reach its highest level since July 2008, according to AAA.
Analysts say consumers can expect new record high gas prices as soon as this week, as strong demand and supply disruptions, fueled by Russia’s invasion of Ukraine, send crude oil prices soaring.
“A big price factor for the market is risk, and at the moment this entire escalation for the conflict appears very risky,” AAA spokesperson Devin Gladden told ABC News. “The market puts that risk premium back onto consumers.”
GasBuddy’s Patrick De Haan tweeted the national average for a gallon of gas has now increased at its fastest weekly pace since Hurricane Katrina, adding prices have already eclipsed their all-time highs, according to GasBuddy data.
Crude oil surging as geopolitical risk rises
Crude oil prices, which account for more than half of the cost of retail gasoline, have spiked roughly 30% in the nearly two weeks since the war began.
“The big question will be how high crude goes,” Gladden said.
Oil had already been edging higher at the start of the year, as consumer demand outpaced global supply. Major oil producers slashed supply during the pandemic – and it takes time to ramp up production again as more drivers hit the roads and travelers take flights, requiring more fuel.
“We were already in a relatively tight market,” John Kilduff, an energy expert and partner at Again Capital, told ABC News.
Traders fear the market will become even tighter if Russia’s oil supply to the rest of the world is cut off. Russia is the third-largest producer of crude oil in the world, accounting for about 12 percent of global crude exports, according to the Information Energy Agency.“The problem is it’s a global market,” Kilduff said.
There are already signs of supply constraints from Russia’s invasion of Ukraine. Analysts at J.P. Morgan estimated last week about 66% of Russian oil is currently struggling to find buyers. A growing number of companies are pulling business from Russia, facing hurdles from new sanctions on the banking and payments system, and fearing global backlash from customers.
“The commercial entities involved in this market are shunning the supply,” Kilduff added. “We are already in the process of losing a chunk of Russian crude oil supplies.”
Import bans on Russian oil would further exacerbate supply shortages. While the U.S. only imports a fraction of its crude oil from Russia, analysts say a coordinated move between the U.S. and European allies would drastically alter supply to the critical European market.
The International Energy Agency reported European countries imported 34% of their oil from Russia in November 2021, the latest month official oil statistics are available.
Oil traders expect it will take time for other countries to ramp up production and fill the void if that supply is cut off. So as long as oil prices remain near multi-year highs in anticipation of further disruptions in the global market, consumers and businesses will feel the pinch.
“When the price of oil goes up, the cost of everything goes up because oil is used as a component in manufacturing and a range of products,” AAA’s Gladden said.