The average price of gasoline in the United States hit US$5 a gallon for the first time in history on Saturday (11), further increasing pressure on the highest inflation in four decades, which became politically expensive for the Biden administration.
The new $5 milestone, reported by the AAA Motorists’ Club, means US gas prices have increased by more than two-thirds in the last year and more than doubled since Joe Biden took office.
Rising energy prices have fueled a substantial part of the continued rise in inflation, which picked up again in May and is now at its fastest annual pace since December 1981. The latest consumer price index, released on Friday (10) , showed that prices rose 1% in the last month alone, or 8.6% compared to the same period last year.
The government has repeatedly tried to blame Russian President Vladimir Putin, pointing to Russia’s invasion of Ukraine as the main reason for the sharp rise in oil prices, which in turn has driven up fuel costs.
The international Brent oil index has climbed to more than $120 a barrel since Moscow ordered troops into Ukraine — up from lows of nearly $10 a barrel during the deep phase of the pandemic two years ago.
In recent months, the White House has announced the release of record volumes of oil from a federal emergency stockpile to ease the supply crisis, and has also called on Saudi Arabia and other OPEC+ countries to significantly increase supply.
The White House also blamed American oil companies for their reluctance to drill.
Speaking in Los Angeles on Friday, Biden took aim at ExxonMobil, the largest US oil company, saying it “has made more money than God this year”.
American oil company executives say the demand by Wall Street investors that they spend the profit from high oil prices on dividends rather than new production has held back spending on new supplies.
Biden and other officials, including Treasury Secretary Janet Yellen, have repeatedly said that tackling high inflation is the administration’s “number one priority,” a message they understood when the president’s approval ratings hit record lows.
Republican lawmakers took the opportunity to cross-examine Yellen this week in congressional testimony, forcing her to defend the Biden administration from accusations that it fueled price pressures through its spending.
Biden also encouraged the Federal Reserve to do whatever it takes to fight inflation, emphasizing its independence as it rapidly raises interest rates. Since March, the US central bank has raised the benchmark interest rate by 0.75 percentage point, and next week it is expected to implement another 0.5 point increase, after applying the first since 2000 in May.
A series of such increases is expected through the second half of 2022, as the Fed aims to “quickly” shift its monetary policy to a “neutral” scenario, which no longer stimulates demand.
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