Gas Prices in the U.S. Top $4.50 a Gallon—the Highest Since Summer 2022

According to the American Automobile Association, the average retail price of regular gasoline reached $4.54 a gallon on Tuesday—only about 50 cents below the record high of $5.01 set in June 2022. On a seasonal basis, prices have already become the highest ever recorded for this time of year.

Donald Trump has repeatedly promised that fuel costs would fall after the war with Iran ends. But the longer prices remain elevated, the greater the political risk for the Republican Party ahead of the midterm elections in November. Rising gasoline prices are also creating problems for California governor Gavin Newsom, who is seen as a likely presidential candidate in 2028.

The most expensive gasoline is in California, where prices have topped $6 a gallon. Prices are also rising rapidly in the Midwest, with some states already approaching $5. Expensive fuel is increasing the economic strain on consumers, fuelling inflation, and worsening consumer sentiment.

After the United States and Iran announced a halt in hostilities in April, prices eased slightly, but they never fell back below the $4-a-gallon mark first breached in mid-March. Since the war began, fuel prices have risen by more than $1.50. Markets are now closely watching for any sign of progress in negotiations after Trump spoke of “great progress” in resolving the conflict.

According to GasBuddy head of petroleum analysis Patrick De Haan, the $5-a-gallon level usually becomes a moment of “shock and awe”, after which demand begins to fall. At the same time, he noted that US fuel consumption remains high for now.

US gasoline inventories are currently at their lowest level for this time of year since 2014. Morgan Stanley expects stocks to decline further over the summer, which could lead to historically low seasonal levels. Gasoline futures, which had hovered around $3 a gallon for most of the conflict, jumped sharply in the final week of April to their highest level since June 2022.