Retail gasoline and diesel prices soared to record highs in many countries across the world this week, prompting governments from Brazil to France to consider pumping up subsidies or trimming taxes to shield consumers from the financial strain.
The moves reflect the economic and political risks governments see in the current energy spike, which has been driven by a rebound in fuel demand since the darkest days of the coronavirus pandemic and supply disruptions in the wake of Russia’s invasion of Ukraine.
If prices keep rising – as many analysts expect – they could take a bite out of economic growth, force lower consumption, and in some cases trigger political unrest.
In past years, rising fuel prices have caused deadly protests in countries including Kazakhstan, Iran, and Zimbabwe, reports Reuters.
“Sky-high energy prices for a prolonged period of time, risks of energy rationing, and ultimately a recession are growing by the day,” Livia Gallarati, oil markets analyst at Energy Aspects told the Reuters Global Markets Forum.
Global benchmark oil prices were trading around $115 a barrel on Thursday, up from around $80 a barrel at the end of last year.
The United States on Tuesday imposed a ban on oil imports from Russia, the world’s third-biggest producer, as retaliation for Moscow’s invasion of Ukraine, and Britain also said it would phase them out.
Analysts at JP Morgan Chase & Co and Bank of America have predicted disruptions to Russian oil flows could push oil prices to $185 to $200 per barrel.
In the United States, the average price for gasoline has already reached a record $4.3 per gallon this week. Pump prices could rise to around $5 per gallon in time for the Memorial Day holiday in late May, when the country’s summer driving season begins to ramp up, said John Kilduff, partner at Again Capital in New York.
Devin Gladden, manager for federal affairs for the American Automobile Association, said if oil goes as high as $200 per barrel, gasoline could reach $6-$7 per gallon.
Many U.S. motorists are considering ways to cut other expenses to afford to pay for fuel. read more
In Britain, the average price of unleaded petrol at the pump rose to 1.58 pounds per litre, while diesel hit 1.65 pounds per litre, both record highs, data from automotive services firm RAC unit Fuel Watch showed.
Australia’s gasoline prices are also at record highs, just under A$2 per litre.
