Rising gas prices could cost American households $2,000 more this year
Prices topped $4 a gallon this month for the first time since 2008
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American consumers are grappling with the worst inflation in four decades, and more economic pain could be coming.
A recent analyst note from Yardeni Research estimated that a recent spike in gas prices triggered by the Russian invasion of Ukraine could add up to $2,000 in annual costs to the typical household budget. That's on top of another $1,000 in additional costs for food.
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The average price for a gallon of gas was at $4.23 nationwide Thursday, according to AAA, up from $2.87 one year ago but down slightly from last week's level. In California, prices are as high as $6 a gallon. Until this month, prices had not topped $4 a gallon nationally since 2008.
The sky-high gas prices have roots in the faster-than-expected economic recovery from the pandemic, which has triggered the hottest inflation in decades amid strong consumer demand, an influx of government stimulus and disruptions in the global supply chain.
The Labor Department reported earlier this month that consumer prices soared 7.9% in February, the fastest pace since 1982, when inflation hit 8.4%. And that was before the war between Russia and Ukraine sent global prices even higher as it impedes the world's access to energy supplies.
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Brent crude, the international benchmark, topped $120 a barrel on Wednesday as European Union nations considered joining the U.S. in banning Russian oil imports and as Russia-Ukraine talks appeared to yield no signs of success.
Signage displaying fuel prices at a Shell gas station in San Francisco March 7, 2022. The average price of gasoline in the U.S. jumped above $4 a gallon for the first time since 2008. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
Surging prices — which come as consumers confront the highest inflation in 40 years — have prompted lawmakers across the country to look for ways to provide some relief for motorists.
Georgia and Maryland became the first states to suspend their gasoline taxes last week, and lawmakers in Illinois, Massachusetts, Maine, Michigan, New York, Tennessee and Virginia are considering similar proposals. There is also a push in Congress to pause the federal gasoline tax.
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Estimates from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School, show that suspending the federal gas tax of 19 cents per gallon through the end of the year would result in just $50 of savings for the average driver, based on current gas prices.