Could New York See Gas Prices Hit $5 a Gallon Next Month?
Gas prices hit their highest level so far this year and are expected to keep climbing into the fall.
Continued pain at the pump
It's official, the nation just recorded the highest gas prices of the year. Unfortunately, the numbers are expected to climb even higher in the following weeks. In fact, some regions in the U.S. are already seeing fuel prices hitting $5 a gallon, such as California.
It's possible the same thing will happen in New York.
The national average for a gallon of regular gas currently sits at $3.82 a gallon, which sounds like a bargain to us Central New Yorkers.
According to AAA, Utica-Rome residents are paying more to fill up their tanks than the majority of the state.
Last week, gas prices in the area averaged around $3.81, Today, that price sits at $3.92, which is two cents more than yesterday and 11 cents more than last Thursday. It's possible the number will go over $4 by next week in Central NY.
Those who drive vehicles that don't take regular are already paying well over that. The average price for a gallon of mid, premium and diesel is respectively $4.31, $4.70, and $4.50.
As for where residents can fill up their car for a little less, they need to head to the Batavia area, where the average price of a gallon of regular gas rests at $3.81.
Conversely, the highest prices out of all the state's metro areas can be found in Glens Falls, which is averaging $3.97 for a gallon of regular gas.
The only other metro areas with more expensive fuel prices than the Utica-Rome area are Binghamton and the Albany-Schenectady-Troy area, who are selling a gallon of regular gas for a penny more - at $3.93.
The Utica-Rome region is tied in third place with Watertown-Fort Drum and White Plains metro areas for the state's highest fuel prices.
In all, this is still better than what we were paying a year ago. Last year at this time, residents were paying an average of $4.68 a gallon for regular.
It's been a little over a year since New York witnessed its highest recorded average price for gas. On June 14, 2022, the price of regular unleaded gas hit $5.04 a gallon. Those with diesel engines also endured record-high prices back in May 2022, when it cost them $6.54 a gallon.
The big questions are: When will we see those prices again and will we see new records?
Why are prices going up all of a sudden?
Since last month, fuel prices surged by 26 cents. People have complained of seeing increases virtually every day since July, which is raising some serious questions and alarm.
As for what's causing prices to rise so rapidly, experts say the extreme heat affecting the globe is triggering these unprecedented costs.
Energy experts say the record-setting heat is harming output from the globe's refineries. Basically, refineries aren't exactly built to function in temperatures above 95 degrees.
This is especially true for Texas and Louisiana, who are both on track to record their hottest summers in history. Temperatures in both states have surpassed 100 degrees.
Because refineries aren't designed to withstand extreme heat, companies are slashing production for safety and efficiency reasons. High temperatures increase the odds of power outages, which could have catastrophic consequences on the supply chain.
The heat isn't just impacting America, it's also affecting global refinery operations by forcing countries like Saudi Arabia to burn oil to keep their electrical grids online as they combat record-high heat. Temperatures in the country have soared over 120 degrees, not including high humidity.
Experts say the cost of oil is also instigating higher gas prices. Oil is currently trading around $80 a barrel, which is a jump of $12 from the previous month. Because the U.S. depends on crude oil, that's influencing the price you see at the pump.
And, lastly, the OPEC+ alliance is also contributing to America's growing woes. Both Saudi Arabia and Russia are reducing the amount of oil it exports to the global economy.
Saudi Arabia has slashed its production by a million barrels a day while Russian exports fell to their lowest level since January 4.
This all comes as the U.S. saw an uptick in demand for fuel, which is up 2.2% since last week.
But when will we see relief?
However, while some experts say we could see relief by October, it all depends on the whims of Mother Nature.
Summer heat could spell disaster in the fall
Remember last month's article about how the extreme heat could trigger a catastrophic hurricane season? Guess what.
If the continued heatwave does create a more active hurricane season, refineries on the Gulf Coast could face serious damage. That would significantly impact the prices we see at the pump.
Remember Hurricane Ida in 2021?
The Category 4 hurricane slammed into Louisiana, which is one of the nation's largest hubs for petroleum and natural gas. Multiple refineries shut down or limited production to repair the extensive damage. Gas prices jumped by roughly 10 cents in response.
Hurricane Harvey in 2017 had a similar ripple effect on national gas prices. After the Category 4 hurricane pummeled the Gulf Coast with days of heavy rain and flooding, gas prices surged by 10 to 25 cents.
So with everything going on in 2023, plus the potential of a catastrophic hurricane season, it's very possible gas prices will surge past the $5 mark.
Will high gas prices trigger a recession?
When gas prices surge, it impacts input by increasing the price of transportation. It also contributes to higher inflation, which is already at a 40-year high.
Increased prices for food and energy are re-igniting concerns of more interest rate hikes from the Federal Reserve. Last week, the Fed rose its rates by a quarter of a percentage point because the current inflation rates were about a percentage point higher than its 2 percent target.
Additionally, the Fed kept the door open for future rate hikes, with a possible revision coming in September.
That caused market watchers to focus on Wall Street. The stock market serves as an indicator of how people feel about the economy and share prices typically fall when interest rates are increased.
Since the Fed issued its 11th hike since March 2022, economists are worried investors will become even more reluctant to bid up stock prices, which will further set back the economy.
The Fed's decision also has an impact on the consumers' bottom line, because it places an additional financial burden on those who borrow money to pay their mortgages, car loans and credit cards.
You can read more about the Fed's rate hikes impact on consumers in this article.
Also, the fact energy experts think gas prices will cool in October is interesting because that is when student loan repayments are slated to resume.
As reported in today's article, student loan repayments are expected to take $73 billion away from the economy. Borrowers will have to adjust their spending habits to allocate enough money to make these repayments while also ensuring they have enough left to cover the cost of housing, food, utilities, fuel and other necessities.
Economists have raised alarm that this could further cripple the economy, which is still reeling from the pandemic, supply chain issues, and high inflation.
Plus, if that wasn't enough, Fitch Ratings downgraded the country's debt rating from AAA to AA+ this week, which rattled Wall Street and caused the stock market to slide.
Fitch also signaled it believes the country will soon enter a recession.
Tighter credit conditions, weakening business investment, and a slowdown in consumption will push the U.S. economy into a mild recession in 4Q23 and 1Q24, according to Fitch projections.
Essentially, Fitch predicts the nation will enter a recession after October 1, which is when student loan repayments resume and also when gas prices are currently predicted to fall.
Lower gas prices would certainly soften whatever impact all this will have on the economy. Although economists have expressed concern the economy could slow down, nothing is certain yet because of the multiple, volatile factors currently at play.
Let's just keep our fingers crossed that we won't be paying over $5 for a gallon of gas in a couple of months.