Gas prices are moving higher at an insane pace.
The pre-tax price for gasoline has soared from around $2.60 per gallon in January… to over $3 per gallon this month.
That’s a gain of more than 17% in just the first quarter!
When you add taxes, transportation costs and the retail mark-up to the mix, most of the country is paying prices in the high $3s to low $4s for premium gasoline. And folks in California are paying over $4.90 per gallon for self-serve premium.
Of course, seasonal demand is to blame for much of the momentum…
After being in a deep freeze for most of the past three months, the United States is now thawing out. And that means more people on the roads using more gasoline. With the summer driving season just ahead – along with high airline fares and an improving economy – even more people are going to be on the road this summer.
At this point, though, that’s already been built into current prices.
But mark my words: Gas is destined to head even higher over the next few months.
For one main reason…
Putin’s Crusade Will Send Gas Through the Roof
As you know, the Ukrainian crisis, which prompted the overthrow of the previous regime, gained steam after the New Year and culminated in a coup in February. Then Russia invaded Crimea in the last week of February.
And as you can see in the following chart, gasoline was clearly in a downtrend between December and January. It then began a major trend higher in late January, and has continued to build momentum since.
In other words, the price of gas has clearly mirrored the events in Ukraine – and there is absolutely no reason to believe that the correlation won’t continue.
Ultimately, the continued low-level violence within Ukraine could mushroom into a full-scale civil war.
While that won’t affect the supply of oil or gasoline, it could send prices of oil much higher – and that would result in higher gas prices, as well.
Financial models suggest that a worst-case scenario would push prices to near $10, a dream outcome for Putin!
As I’ve written in the past, it’s in Putin’s best interest to see oil prices trend higher so he can line the pockets of his comrades and fund military operations. (At last count, there were more than 40,000 Russian troops amassed at the Ukrainian border.)
The Biggest Loser…
The key takeaway here? The world is so interconnected that events 5,000 miles away can have a major impact on your lifestyle.
So, despite the fact that the United States is producing more oil than it has in 30 years, gasoline might still hit $5 per gallon this summer.
The shale players are licking their chops, as well, as higher oil prices fatten their margins.
But who are the biggest losers as the trend continues? I’ll share that with you later this week.
And “the chase” continues,