The average price of petrol in the US hit $5 a gallon for the first time in history on Saturday, adding further pressure to decades-high inflation that has become politically costly for the Biden administration.
The new $5 milestone, reported by the AAA motor club, means US petrol prices have risen by more than two-thirds in the past year and have more than doubled since Joe Biden entered office.
Rising energy prices have fuelled a substantial part of the continuing inflation surge, which accelerated once again in May and is now running at the fastest annual pace since December 1981. The latest consumer price index, released on Friday, showed prices up 1 per cent last month alone, or 8.6 per cent compared to the same time last year.
The administration has repeatedly sought to pin the blame on Russian president Vladimir Putin, pointing to the country’s invasion of Ukraine as a main reason for the sharp uptick in crude prices, which have in turn pushed up fuel costs.
International oil benchmark Brent has risen to more than $120 a barrel since Moscow ordered troops into Ukraine — up from lows near $10/b during the depths 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 in order to ease the supply crunch, and has also called on Saudi Arabia and other Opec+ countries to significantly increase supply.
The White House has also blamed US oil companies for their reluctance to drill.
Speaking in Los Angeles on Friday, the president took aim at ExxonMobil, the US’s biggest oil company, saying it had “made more money than God this year”.
US oil company executives say Wall Street investors’ demand that they spend a windfall from high oil prices on dividends, not new production, has held back spending on new supplies.
Biden and other top officials, including Treasury secretary Janet Yellen, have repeatedly said tackling high inflation is the administration’s “number-one priority”, a message they have homed in on as the president’s approval ratings have plumbed record lows.
Republican lawmakers seized on the opportunity to grill Yellen this week in congressional testimonies, forcing her to defend the Biden administration against charges it has stoked price pressures through its spending.
Biden has also encouraged the Federal Reserve to do what it takes to counteract high inflation, emphasising its independence as it proceeds to rapidly raise interest rates. Since March, the US central bank has lifted its benchmark policy rate by 0.75 percentage points and next week is slated to implement yet another half-point rate rise, after delivering the first since 2000 in May.
A string of such increases is now expected through the latter half of 2022 as the Fed aims to “expeditiously” shift its monetary policy to a “neutral” setting that no longer stimulates demand.