Gasoline at $10 a gallon would ruin the U.S. economy, which makes it among the largest threats to cause a sharp downturn in GDP. Middle class and lower class families would move into deep financial holes, if $10 gas was added to their housing, clothing and food costs. JP Morgan says crude could rise to $380 a barrel, if Russia takes revenge against the West for its participation in the war in Ukraine.
Gas prices primarily rely on oil prices. Other components include refinery costs, transportation, and state and federal taxes. President Biden and some state governors have suggested a temporary suspension of these taxes would help consumers.
Oil prices at $380 would push gas prices above $10 a gallon, and perhaps toward $15.
A recession in America is almost certainly already in the cards. The stock market, a major source of net worth, has collapsed. High interest rates have made mortgages expensive, and this will erode prices in residential real estate. Inflation has robbed people of buying power. The CPI has risen over 8% for three months, And, many key components like some foods are up much higher.
Gas prices across the country are not uniform. Usually, California has the most expensive gas. If the U.S. average per gallon of regular is $10, it will be close to $15 in California. The state has about 12% of the population. The states with the least expensive gas tend to be near the big refineries southeast of Houston. These include Oklahoma, Texas, Arkansas, Louisiana, and Alabama.
One argument that much higher oil prices will not cause a surge in prices is that people simply drive less and use more public transportation. This is only true to a modest extent. The range of public transportation is limited. Many people drive to work. Others take children to school. For them, there are no alternatives.
A year ago, $100 oil and $5 gas were unimaginable. They are now the real world. Another large jump seemed impossible until recently. Now, that has changed, too.
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