Updated: 5:45 p.m.
U.S. gasoline prices set a new national record on Tuesday as global crude prices have surged following Russia's invasion of Ukraine.
The average cost of a gallon of regular fuel is now $4.173, according to AAA, after jumping 55 cents in the last week alone. That's the highest ever recorded, not accounting for inflation, surpassing the $4.114 high-water mark set in the summer of 2008. (That would be about $5.37 in today's dollars.)
"We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil," Secretary of State Antony Blinken told CNN on Sunday. "That's a very active discussion as we speak."
President Joe Biden announced the ban on Tuesday, although European allies are not set to join given that they depend more heavily on Russian energy than the U.S.
The spike in energy prices comes as consumers in the U.S. are facing the highest inflation in decades. Gasoline prices had already been rising sharply before Russia's invasion of Ukraine, as demand rebounded from a slump early in the pandemic and supplies were slow to catch up.
But price increases have accelerated since Russia invaded Ukraine late last month.
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The U.S. and its allies have imposed intense financial sanctions on Russia after the country's invasion of Ukraine, but have so far avoided directly targeting Russian energy shipments.
Diesel fuel prices jumped even more rapidly, to a national average of $4.61 per gallon.
"I seen diesel last week for $4.79 and it was a sticker shock for sure," said Monte Wiederhold, an independent trucker based in Lebanon, Ohio. He typically buys 170 to 200 gallons at a time, and said he's going to have to raise the $750 limit on his fuel card.
Wiederhold has a fuel charge built into his trucking rate, which is updated weekly. But with prices soaring more than 60 cents a gallon in the last week, it's hard to keep up.
"We're being squeezed," he said. "If you adjust it and then it takes a big jump, you run that week to where you don't recover."
Biden says the ban is necessary
Biden acknowledged that the ban in Russian oil imports could further drive up crude and gasoline prices in the U.S. but said it was needed to deal "another powerful blow to Putin's war machine."
"The decision today is not without cost here at home," Biden said. "Putin's war is already hurting American families at the gas pump."
Brent crude, the global benchmark for crude oil, was trading above $130 a barrel as of Tuesday morning. Western Texas Intermediate, the main U.S. benchmark, followed closely behind at $129 a barrel.
Gas prices had already been climbing for months, driven by a fundamental mismatch between global demand for oil – which recovered rapidly from early-pandemic lows – and global supply, which has returned more slowly.
Rising energy costs fuel inflation, which is already at 40-year highs. A recent NPR-Marist survey found that 83 percent of Americans support financial sanctions on Russia, and 69 percent say they would continue to support such sanctions even if energy prices rise.
Oil prices could gain even more
How much higher energy prices might climb depends on what form any sanctions take and what additional supplies become available to replace any lost exports from Russia.
The U.S. could simply refuse to buy oil from Russia, but if other countries continue to purchase it, there would be little effect on global supplies and upward pressure on prices would be limited.
However, if the U.S. and its allies act in concert to restrict Russian exports, global prices could climb higher. Russia currently supplies about 7 percent of the world's oil and other oil products, exporting some 7 million barrels each day.
If that supply were significantly curtailed, analysts have predicted that crude oil prices could possibly climb to $180 or $200 per barrel. At the upper end of that range, gasoline prices would be expected to average $5.84 per gallon.
Finding other sources of oil
The Biden administration is eager to find substitutes for Russian oil. The administration has been urging Saudi Arabia and other members of OPEC to boost production.
U.S. officials have also reportedly opened talks with Venezuela about relaxing limits on that country's oil exports. If ongoing talks aimed at reviving the Iran nuclear deal are successful, that could also give a lift to global oil supplies.
Rising prices may also boost domestic production of oil. Federal forecasters expect U.S. oil companies to produce 12 million barrels per day this year, up from 11.2 million barrels per day in 2021.
The war in Ukraine has also contributed to a rise in grain prices, as both Ukraine and Russia are major suppliers of corn and wheat. That could add to price increases at the supermarket. Rising grain prices are a particular concern in the developing world, where people are heavily dependent on imported food supplies.
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