The US Average Gas Price Has Hit $3 for First Time in Years — for 6 Reasons

1. Colonial Pipeline hack throttles supply

On Friday, a cyberattack carried out by a group of Russian hackers known as DarkSide brought operations at the largest gas pipeline in the U.S. to a complete standstill. Obviously, that's a huge deal.

The Texas-to-New-Jersey Colonial Pipeline provides about 45% of the fuel used by the Eastern Seaboard. According to Colonial's own data, each day the pipeline is down removes about 100 million gallons of gas from the marketplace. Gasoline suppliers and retailers have massive concerns.

"Depending on the duration of the outage, we may experience disruptions in supply based on current inventory levels in our terminals, logistics constraints caused by the outage, and customer demand," Chevron spokesman Tyler Kruzich says, in a statement.

Technicians are working to restore pipeline operations by the end of the week, but all four of Colonial’s main lines are currently out of commission. To beat potential fuel shortages, drivers in some states have rushed to fill up — causing service stations to run out of gas.

Discover how a simple decision today could lead to an extra $1.3 million in retirement

Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.

Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.

Read More

2. Crude oil prices were already going up

As with gasoline, the cost of crude oil tanked in 2020 while COVID-19 was wrecking economies and stopping people from traveling. To prop up oil prices, the OPEC cartel and its allies slashed oil production.

OPEC has been slow to boost output again, and crude prices have responded by surging higher. After a year of soft prices, West Texas Intermediate crude has been trading around $60 a barrel for months now, and Goldman Sachs expects Brent crude prices to hit $75 by the end of June

OPEC and the allies announced on April 1 that they'd gradually raise production, which could help stabilize prices.

Though gas prices are going up, mortgage rates remain historically low — meaning if you're a homeowner, one way to offset the rising cost of fuel is by refinancing your home loan. The mortgage data and technology provider Black Knight recently said 13 million homeowners could save an average $283 a month by refinancing.

3. Vaccinations are likely to boost travel

As more Americans are vaccinated and life begins to return to something closer to normal, people are likely to drive and fly more. And that activity will contribute to rising fuel costs.

"As COVID-19 impacts continue to subside with improved mitigation and vaccination efforts, vehicle miles traveled will increase, resulting in more gasoline demand," the Energy Information Administration says in its summer fuels outlook.

A good way to fight higher gas costs is by shopping around for lower prices, because what you pay can vary by up to $1 a gallon within the typical metro area, according to GasBuddy.

Also, you might want to consider replacing your vehicle with a more fuel-efficient model. This tax season, you could turn your tax refund into a new set of wheels.

Earn cash back on what you buy most

Maximize your spending and earn up to 6% cash back on groceries, streaming, gas, and more. Whether it’s everyday purchases or splurges, this card puts money back in your pocket.

Learn more

4. Stimulus checks have pumped up spending

Since President Joe Biden signed his $1.9 trillion COVID relief package two months ago, Americans have been receiving a third round of stimulus checks, for up to $1,400 each. The aid was expected to help lift gas prices by prompting consumers to get out and shop.

Goldman Sachs has estimated that $2 trillion in economic stimulus spending over 2021 and 2022 could pump up U.S. oil demand by roughly 200,000 barrels a day. If supplies don't keep up, that higher demand will mean higher fuel prices.

With gasoline already more expensive, another way to balance out those higher costs is by spending less on other purchases.

You might download a free browser add-on that will point you in the direction of lower prices and other savings every time you shop online.

5. The pandemic closed a bunch of refineries

Plummeting fuel sales triggered by COVID had the oil and gas industry reeling last year. By late 2020 there were more than a dozen refinery closures that reduced U.S. production by more than 1 billion barrels per day.

"It's possible some capacity could come back online in the 2022-2023 timeframe, but by and large, we think these closure announcements will mostly prove permanent," Raymond James analyst Justin Jenkins said about the refinery shutdowns in a December report.

U.S. oil and gas producers lost tens of thousands of jobs last year, and laid-off workers were left scrambling to make ends meet.

Many struggling Americans have been leaning on credit cards more than usual, to get by during the pandemic. If that's you, a lower-interest debt consolidation loan can cut the amount you pay in interest charges each month — and help you afford the higher prices at the pump.

6. Summer gas blends cost more

Gasoline that costs over $3 a gallon may be the norm once people start heading out on their summer road trips. Both AAA and GasBuddy had predicted $3-a-gallon gas even before the Colonial Pipeline hack.

In early April, GasBuddy's Patrick De Haan warned we could see "a run at a national average of $3 per gallon in the months ahead."

The forecasts factored in the transition to pricier summertime blends of gasoline. Higher-grade gasoline is used in summer months to reduce emissions that cause smog; those blends can cost up to 15 cents more per gallon, according to the service station trade group NACS.

Looking for ways to save on the cost of driving will be a smart strategy — but, then again, it's always a wise practice. For example, regular comparison shopping for car insurance can save you as much as $1,100 a year, various studies have found.