Gas prices surge past $4 a gallon

Gas prices are surging as nations step up bans of Russian oil imports in retaliation for its assault on Ukraine.

In Connecticut, prices are blowing past the $4 mark even after Gov. Ned Lamont and state lawmakers suspended a 25-centa-gallon tax. A gallon of regular gas cost, on average, $4.32 Monday, according to AAA, up from $3.93 a month ago and $3 in May 2021, a 44% increase in a year.

The price of regular gas cost an average $4.33 in the U.S.

Andrew Lipow, president of Lipow Oil Associates LLC, a Houston consulting firm, cited significant volatility in oil markets following Russia’s invasion of Ukraine that began in February. Refineries and countries are moving to ban Russian energy, resulting in a “scramble for alternative supplies” that has pushed up prices, he said.

The G7 group of nations agreed Sunday to phase out or end oil imports from Russia. The U.S. has already banned imports.

Among oil-producing nations, Russia is No. 3, behind the U.S. and Saudi Arabia, supplying about 10% of the world’s oil.

Alternatives to Russian oil include increased production by OPEC plus, an expanded group of oil producing countries; more domestic production, which is evident in a rising number of oil and gas rigs in the U.S.; and the release of strategic petroleum reserves in the U.S. and other countries, Lipow said.

“It’s bought us some time,” he said. However, it’s not enough to make up for the anticipated loss of Russian supplies, he said. The national average price of gas could rise another 10 cents or 15 cents a gallon before falling as demand drops. Even then, reduced demand would not be the result of positive market developments, but brought on instead by a slowing economy and the start of a recession, Lipow said.

Motorists are feeling the squeeze on their finances. Personal spending in the U.S. rose $185 billion in March, up 1.1%, according to the U.S. Department of Commerce. An increase in nondurable goods was led by gas and other energy products, the agency said.

Kate Mosley, manager of Saybrook Point Marina, said boaters who fill up with diesel that’s about $2 a gallon more than regular gas are taking shorter trips. Boaters will travel to Greenport on Long Island’s North Fork rather than to Nantucket, Mass., or Newport, R.I., she said.

“There’s still that desire to go out, but it will be local trips,” Mosley said.

Economist Donald Klepper-smith said consumers on average this year will spend $1,000 to $2,000 more on energy to run their cars and heat and cool their homes and the increased cost “siphons off discretionary spending.”

“People are feeling less wealthy,” he said.

The squeeze on consumer spending could be felt in a few months at the start of the Christmas retail season, the economy’s biggest consumer event, Klepper-smith said. Less money to spend is “setting up a nasty situation for the holiday shopping season,” he said.