Gasoline averages $5 a gallon for the first time historically

June 11 (Reuters) – Data from the American Automobile Association showed that the price of U.S. gasoline averaged more than $5 a gallon for the first time on Saturday, extending a fuel price hike that has driven up inflation.

AAA data showed that the national average price of regular unleaded gas rose to $5,004 a gallon on June 11 from $4,986 the previous day.

High gasoline prices are a headache for President Joe Biden and Democrats in Congress as they struggle to maintain their slim grip on Congress as the November midterm elections approach.

Biden has used several levers to try to bring prices down, including a record-barrel release of US strategic reserves, waivers from summer gasoline production rules, and a reliance on key OPEC nations to ramp up production.

However, fuel prices have soared worldwide due to a combination of rebounding demand, sanctions imposed on oil-producing Russia after its invasion of Ukraine and pressure on refining capacity.

Destroying demand Despite this, road travel in the US has remained relatively robust, only a few percentage points below pre-pandemic levels, even as prices have risen.

However, economists expect demand to start falling if prices remain above $5 a barrel for an extended period.

“The $5 level is where we could see very large amounts of gasoline demand,” said Reed Lanson, chief economist at Kpler.

Adjusted for inflation, the average US gasoline is still about 8% below its June 2008 high of about $5.41 a gallon, according to US Department of Energy figures.

Consumer spending has so far remained resilient even as inflation has risen to its highest level in more than four decades, with household balance sheets backed by pandemic relief programs and a tight labor market fueling strong wage gains, especially for low-income workers.

Gasoline product supplied, a proxy for demand, was 9.2 million barrels per day last week, according to the US Energy Information Administration, broadly in line with five-year seasonal averages.

The higher prices for drivers come at a time when the major oil and gas companies are making plentiful profits. Shell posted a record quarter in May and Chevron Corp and BP posted their best numbers in a decade. Read more

Other major companies, including Exxon Mobil and TotalEnergies, as well as independent US shale operators, reported strong numbers that spurred share buybacks and dividend investments. Read more

Many companies have said they will avoid excessive investment to increase production due to investors’ desire to conserve spending, rather than respond to prices of more than $100 a barrel that have persisted for months. Read more

Refiners are struggling to rebuild dwindling inventories, especially on the US East Coast, reflecting exports to Europe as buyers wean themselves off Russian oil.

Currently, refineries are using about 94% of their capacity, but overall US refining capacity has fallen, with at least five oil processing plants closed during the pandemic.

Analysts said this has led to a structural shortage of refining capacity in the United States for the first time in decades.

(Reporting by Laura Sanicola and Shivani Tana) Editing by David Clarke and Jason Neely

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