Gas Heads Back Toward $5

By Douglas A. McIntyre Published Sep 7, 9:30AM EDT

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Gas Heads Back Toward $5 — © PamWalker68 / iStock via Getty Images

Goldman Sachs analysts believe that oil prices will move to $107 a barrel. Based on how oil and gasoline prices rise in tandem, a gallon of regular gas should be about $5. (These states have the highest and lowest gas taxes.)
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The primary reason that oil will rise to a much higher level is supply cuts by Saudi Arabia and Russia, two of the largest suppliers in the world. The United States is also on this list but cannot pump enough oil to offset these declines. Presumably, Saudi Arabia wants to add more money to its national treasury. The Russian decision is more geopolitical.
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The price of oil is about $88 a barrel, up from $67 in June. The current price for an average gallon of regular nationwide is nearly $4.

Gas prices reached $5 for the first time last June. Russia’s invasion of Ukraine cut supply. China’s economy was doing well. China is the world’s largest consumer of crude, and therefore demand rose.
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What does $5 gas mean? First, household budgets will be damaged. This is particularly true of lower- and middle-class households. This, in turn, threatens the upcoming holiday season. Some retailers make all of their profits in the fourth quarter.
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Other industries hit hard by high fuel prices include airlines and trucking.

At $5, gas prices raise the specter of recession. Goldman Sachs said a few days ago that the chance of a recession in the near term had dropped to 15%. With gas at $5 a gallon, that forecast is wrong.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.