Rising gas prices to hit $7 a gallon if crude oil cost spikes and tension between Russia and Ukraine escalates

02/21/2022 / By Roy Green

Even with no lockdowns, Americans may be inclined to travel less this year.

That’s because of rising gas prices brought about by a spike in the cost of crude oil, an unsteady supply chain and the escalating tension between Russia and Ukraine. (Related: Russia warns Ukraine of full-scale conflict along the country’s eastern border.)

An energy expert already predicted gas prices could soar to a crippling $7 a gallon, which would be double the prevailing $3.5 a gallon average this year in the United States.

“My guess is that you are going to see $5 a gallon at any triple-digit [oil price] … as soon as you get to $100. And you might get to $6.50 or $7,” Dan Dicker, founder of Energy Word, told Yahoo Finance.

Crude oil currently trades at $91 per barrel, driving gasoline prices in the U.S. to an average of $3.53 per gallon, up by 6.46 percent in January and 37 percent from the same month last year, according to data from the American Automotive Association (AAA).

And there’s no sign the speeding price hikes will slow down, brake or stop.

“Between the tight supply of oil worldwide and an increase in demand, that’s a recipe for higher prices at the pump,” said Tiffany Wright, spokesperson for the AAA – The Auto Club Group in the Carolinas. “Unfortunately for motorists it doesn’t appear that this trend will change anytime soon.”

Gasoline price situation bound to worsen if Russia pushes through with Ukraine invasion

The gasoline price situation is even bound to worsen if Russia pushes through with its intention to invade Ukraine.

Russia, of course, produces 10 million barrels of oil per day which covers 10 percent of global demand. A Russian intrusion into Ukraine would mean a disruption in supply, which would deplete the international oil reserve if the Organization of Petroleum Exporting Countries (OPEC) doesn’t intervene.

And President Joe Biden, who has been harping on the Russian invasion of its neighbor for over a month, said on February 18 that Russian President Vladimir Putin had decided to invade Ukraine.

Citing US intelligence reports, Biden said: “We have reason to believe the Russian forces are planning to, intend to, attack Ukraine in the coming week. “We believe that they will target Ukraine’s capital Kyiv, a city of 2.8 million innocent people.”

Putin has repeatedly denied the purported invasion and even chided Biden for “warmongering.”

In 2014, Putin said the same thing and yet Russia proceeded to annex the Crimean Peninsula from Ukraine. No wonder, Urainine President Volodymyr Zelenskyy has called for a meeting with Putin in a bid to defuse the volatile situation between the two former Soviet republics. According to reports, around 150,000 to 190,000 Russian troops are deployed near the border.

If a war erupts and the U.S. and the European Union impose sanctions on Russia, then the $7 per gallon projection would be feasible.

What’s more frightening is former President Donald Trump’s earlier projection that gas prices would hit the roof.

Trump foresees $10 per gallon of gasoline

“It’s going to be over $10,” Trump told Fox News host Jeanine Pirro on Oct. 31, 2021 as he lashed at Biden’s inability to solve the soaring inflation.

Trump just doubled the $5 a gallon he told Maria Bartiromo, also of Fox News, in March 2021.

High gas prices are nothing new in the U.S., especially in the Bay Area, where the average price for regular unleaded hit $4.74 in January, and Alaska, although it has the Prudhoe Bay Oil Field – the biggest in North America with an estimated 25 billion barrels of oil.

In 2008, the remote Lime Village in Alaska merited attention when it recorded gas price of $8.55 a gallon. That exceeded the $7.59 average price posted in the remote central coast community of Gorda, California in October 2021.

According to fuel price tracking website GasBuddy.com, the national average of gas prices has been climbing for seven straight weeks, with diesel rising by 8.9 percent and hitting $3.87 a gallon, the highest in nearly eight years.

As per data from the Energy Information Administration (EIA), the highest weekly average price of gas in the country occurred in July 2008 at $4.11 per gallon for regular grade fuel. That time, crude oil reached $145 a barrel.

Although oil prices are expected to rise further with the increased demand as the Wuhan coronavirus (COVID-19) mandates ease off, trade analysts don’t see a similar peak.

Unless, of course, Russia attacks Ukraine and impacts global supply and economy as a whole. As UK Prime Minister Boris Johnson stated before the Munich (Germany) security conference recently, the shock would echo around the world if Russia launches an attack on Ukraine.

And the Americans would be on the tight watch for troop movements as well as price upheavals.