Gas prices at an Alliance State Street BellStores Marathon station. Wednesday, May 11, 2022.

The current average price for a gallon of regular gasoline in the United States is about $4.39. That’s roughly 47% higher than a year ago when the national average in the U.S. was $2.96.

With around 97% of Americans still driving gasoline-powered vehicles, the price of gas plays a prominent role in most citizens’ monthly budgets.

So where are gasoline prices headed from here, and what should people monitor going forward?

Most projections suggest that gasoline prices could climb another $0.20-$0.30 cents per gallon heading into Memorial Day weekend. If that uptick occurs, then the peak of that trend will represent a new all-time record for the inflation-adjusted price of regular gasoline in America. 

Memorial Day is traditionally viewed as the official start to the summer driving season. As a result, gasoline demand in the U.S. tends to peak during the months of summer, with daily demand averaging about 318 million gallons from June through August.

Outside of January, which typically marks the low in daily gasoline demand (285 million barrels per day), the remaining months of the year usually see an average daily demand of between 295-305 million gallons.

It’s that expected uptick in demand during the coming weeks that’s projected to push prices marginally higher. 

While most would assume that gasoline prices have remained high due to limited supplies of oil, part of the problem actually ties back to the refinement of gasoline. Crude oil taken from the earth must first be refined—separated, converted and treated—before it can be used in motor vehicles.

Unfortunately, refining capacity in the U.S. is reportedly maxed out, meaning that even if the supply of available oil was hypothetically infinite, the U.S. still wouldn’t be able to increase gasoline inventories by a significant margin in the near term. 

The good news is that gasoline refining capacity is expected to increase by fall, which means that relief at the gas pump may be just around the corner.

The current refining bottleneck —much like many other global supply chain issues—can be tied back directly to the COVID-19 pandemic. In 2020, when gasoline demand dropped off a cliff during economic lockdowns, some of the fringe refiners that were barely squeezing out a profit were forced to shutter their operations. 

Then, when gasoline demand rebounded back toward pre-pandemic levels, the U.S. refining sector wasn’t able to keep up. Fortunately, new refining capacity is expected to go online soon, which should assist in moderating prices. 

Constrained refining capacity isn’t the only reason for higher gasoline prices. Crude oil, the primary input for gasoline, has seen its value spike in 2022, due to the confluence of several geopolitical crises. Year-to-date, crude oil prices are up more than 50%. 

The primary driver of higher oil prices has been the Russo-Ukrainian War, which catalyzed a widespread boycott of oil originating from Russia. Russia is one of the world’s top three producers of crude oil, which means that its absence in world markets has severely constrained global supplies.

That means that the ongoing war in Ukraine will continue to impact prices at the gas pump. An end to the hostilities, via a ceasefire or truce, would undoubtedly push crude oil prices sharply lower. That in turn would more than likely help lower gasoline prices worldwide. 

Some other key narratives that could affect oil and gasoline prices in the coming months include Organization of Petroleum Exporting Countries, a potential U.S. recession and China.

OPEC+ Production

Organization of Petroleum Exporting Countries, or OPEC, is comprised of some of the world’s most influential oil-producing nations. In recent years, the group has expanded to include additional countries (most notably Russia), and the modified group is usually referred to as OPEC+ or OPEC Plus.

OPEC has traditionally coordinated in a fashion that best meets its interests, which generally involves maximizing the price of crude oil in the markets, while also keeping it affordable enough so it doesn’t stifle demand.

In response to Russia’s invasion of Ukraine, OPEC+ agreed to marginally increase production among its members, purportedly to help offset some supplies that were lost to the market as a result of the aforementioned boycotts. However, that increase was nominal, amounting to only 420,000 barrels per day.

Considering that Russia produces about 11 million barrels of oil per day, those 420,000 barrels fall well short of a true stopgap.

In order to truly impact the market, and help bring down oil prices, OPEC+ would need to increase daily production substantially—in the millions of barrels per day. Until that day arrives, OPEC+ should be viewed as one of the forces that’s helping to sustain higher prices. 

Risk of a Recession

In the first quarter of 2022, real gross domestic product (GDP) in the U.S. decreased at an annual rate of 1.4%. That came in stark contrast to Q4 2021 when real GDP increased by 6.9%.

As most are aware, two consecutive quarters of negative GDP growth technically equates to a recession. And if U.S. economic production continues to contract, that could mean that a recession may technically arrive as early as summer 2022. 

And the current decline in economic activity is attributable to the rapid pace at which energy prices have increased during 2022. 

As previously highlighted by Luckbox, dramatic spikes in the price of oil (climbing 50% above the recent trend) have historically signaled that the likelihood of a potential recession has grown substantially. 

Based on Q1 economic data, it now seems clear that spiking energy prices did serve to slow down the U.S. economy. The reality is that sky-high energy prices can’t be sustained by the global economy for long periods of time, and ultimately, consumers respond by purchasing less energy. That in turn results in less overall economic activity.

So if the current trend continues, it’s possible that declining economic activity in the U.S. could result in reduced demand for crude oil and gasoline, which would almost certainly help push prices lower. 

However, an economic recession wasn’t exactly the scenario most were hoping for when it comes to a lower price environment for energy commodities. 


As the world’s largest manufacturer, and second-largest economy on earth, China plays a key role in global energy markets. Along those lines, it’s estimated that the Chinese economy consumes roughly 13 million barrels of crude oil per day.

However, China is currently battling a complicated wave of COVID-19, which has resulted in rolling lockdowns across the country. Shanghai, for example, has been a ghost town for more than a month, as most individuals have been forced to quarantine at home.

As a result of COVID-19, oil and gas consumption in China has declined precipitously in recent weeks. That reality has likely served as a moderating factor for global prices, even if the recent steep upward trajectory in the price of oil and natural gas would appear to suggest otherwise.

But when the current wave of COVID-19 in China wanes, world energy markets will likely see a sudden surge in demand from China. Unfortunately, the timing of that surge could end up coinciding with the start of the summer driving season in the U.S.

Ultimately, that means that upward pressure on energy prices likely won’t be decreasing anytime soon—unless the war in Eastern Europe comes to an abrupt end, or OPEC+ elects to substantially increase daily production.

Gasoline prices in the U.S. will probably remain high for the foreseeable future, and that elevated energy prices will likely continue to serve as a headwind for the underlying economy—potentially pushing the U.S. into another recession at some point in the next several months. 

For more background on the energy trade, review this recent installment of Small Stakes on the tastytrade financial network. To follow everything moving the markets, readers can also tune into TASTYTRADE LIVE.

Sage Anderson is a pseudonym. He’s an experienced trader of equity derivatives and has managed volatility-based portfolios as a former prop trading firm employee. He’s not an employee of Luckbox, tastytrade or any affiliated companies. Readers can direct questions about this blog or other trading-related subjects, to