US gas prices continue to rise to record highs. Expect a 'cruel summer' ahead

Brace yourselves for more pain at the pump this summer.

Crude oil prices jumped to a more than two-month high after the European Union approved a plan to ban most Russian oil imports for its invasion of Ukraine, and China showed signs of easing its COVID-19 lockdowns – meaning even less oil will be available on the world market.

The latest round of sanctions will immediately affect 75% of Russian oil imports, and by year end, 90% of the Russian oil imported to Europe will be banned, Charles Michel, president of the European Council, tweeted on Monday.

Because oil makes up more than half the price of gasoline, consumers are likely to see gas prices break new record highs in the coming weeks.

“After several weeks of soaring gas prices, last week saw prices nationally slow down ahead of Memorial Day, but I’m afraid the good news ends there,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

When will gas prices go down?

Consumers should prepare for a “cruel summer,” with gas inventories at the lowest seasonal levels since 2019 as the summer driving season heats up, Natasha Kaneva, JPMorgan head of global commodities strategy, said last week. She predicted the national average for regular unleaded would climb to $6.20 per gallon by Labor Day.

Tuesday’s national average was $4.62, which is 45 cents more than a month ago and $1.58 more than a year ago, AAA said.

Even before the EU’s announcement, analysts had already been warning that gas prices would remain elevated this year due to dwindling oil supplies and consumers’ seemingly insatiable desire to travel after two years of pandemic restrictions.

“Crude oil inventories are down to a dangerously low point” in Europe, North America and parts of Asia, Bank of America’s global commodities researchers said in late May.

This is happening just as spare production capacity from the Organization of the Petroleum Exporting Countries and 10 other oil-producing nations (collectively known as OPEC+) has fallen to the lowest levels since April 2020, they said. OPEC+ is slated to meet on Thursday to consider increasing production to replenish supplies more quickly, but analysts say that’s unlikely.

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“We are assuming that OPEC+ will not deviate away from its current production policy of modest supply increases every month,” Warren Patterson, ING head of commodities, wrote in a commentary.

What’s more is that China looks to be loosening COVID-19 lockdowns in Shanghai, which could boost demand for oil at a time when stocks are low. That’s likely to keep adding upward pressure to oil and gas prices, analysts said.

How will gas prices impact travel?

So far consumers have been resilient in the face of ever-rising gas prices. Despite record gas prices, AAA forecast nearly 35 million travelers hit the road for Memorial Day, the most since 2019.

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“So far, the pent-up urge to travel caused by the pandemic outweighs high pump prices for many consumers,” said Andrew Gross, AAA spokesperson. “But 67% of drivers recently surveyed told us they would change their driving habits if gas hit $4.50 a gallon. That number rises to 75% at $5 a gallon.”

Medora Lee is a money, markets, and personal finance reporter at USA Today TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: Gas prices expected to climb higher after EU plan to ban Russia oil