Gasoline & Diesel Prices Spike to New WTF Records, But Don’t Blame Crude Oil

Predictions a few weeks ago of peak gasoline prices have been obviated by the inflationary mindset.

By Wolf Richter for WOLF STREET.

The average price of all grades of gasoline at the pump spiked to a record $4.33 per gallon on Monday, May 9, the third week in a row of increases, and was up 46% from a year ago, edging past the prior record of Monday, March 14 ($4.32), according to the US Energy Department’s EIA late Monday, based on its surveys of gas stations conducted during the day.

Gasoline price increases slap consumers directly in the face every time they get gas, and the classic ways of hiding price increases – such as making gallons smaller (shrinkflation) – would be illegal.

Adjusted for CPI inflation, it’s still not a record. In July 2008, gasoline at $4.11 would amount to $5.37 a gallon in today’s dollars. Long way to go, baby.

Back then, demand destruction rippling out of the Financial Crisis and the Great Recession toppled the price spike. We’re not there yet either – but the Fed has started to work on it.

Gasoline futures have been breath-takingly volatile since February, with huge spikes and drops, that led to a new record on Friday, but on Monday, they fell from that record (chart via Investing.com):

The average retail price of No. 2 highway diesel spiked to a record $5.62 a gallon at the pump on Monday, the EIA reported late Monday. Year-over-year, the price of diesel has spiked by 76%!

Adjusted for CPI inflation, that spike in diesel prices is still not a record. In July 2008, diesel peaked at $4.76 a gallon, which would be $6.22 in today’s dollars. Long way to go, baby.

Unlike gasoline, diesel doesn’t impact most consumers directly at the pump; it hits them indirectly. This price spike adds cost pressures on truckers who pass them on essentially to everything that is moved by truck, namely just about all goods sooner or later, and to whoever ends up paying for those goods, thereby piling more costs on households, offices, construction sites, and manufacturing plants.

But hang on a minute… crude oil WTI futures have been in a trading range for weeks, and on Monday ended at $102 a barrel, a the lower end of the trading range that started in March, and below where it had been in 2013 and 2014, and well below the peak in July 2008, when it touched $150 a barrel.

Note the historic mind-bender back in April 2020, when WTI futures kathoomphed to minus $37 a barrel for a moment.

Adjusted for CPI inflation, that $150 a barrel back in July 2008 would be $196 in today’s dollars. So, today’s price of $102 is far below the spike of 2008 in “real” terms and doesn’t yet amount to any kind of actual oil shock.

This gap between the record gasoline and diesel prices and the far-below-record crude oil prices shows that the inflationary mindset is firmly in charge, that consumers pay whatever prices, no matter how much they gripe about it. And truckers pay the prices because there is still huge demand for transportation services in this still overstimulated economy, and they can pass on those prices, including via fuel surcharges, and their customers pay those prices and surcharges, and there hasn’t been the kind of demand destruction that would cause the price of diesel to come down – regardless of what the price of crude oil does.

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