Gas prices at the pump have already climbed above $4 a gallon in places like Fresno, Calif. But the worst sticker shock is being felt, and paid, by drivers in Hell's Kitchen, the Manhattan neighborhood where a Mobil station on 11th Ave. has raised its cash price to $4.999 per gallon (more for credit), significantly higher than the average for the five boroughs.
According to AAA, the average price in New York City is $3.18 a gallon. Across the Hudson River in New Jersey, the statewide average is $3 after former Gov. Chris Christie saddled the state with a huge gas tax increase when gas prices were still low. The national average is still $2.93 - up 12 cents in the past two weeks, or nearly a penny a day.
Gas prices have been soaring as peak driving season approaches, pushed higher by President Trump's decision to scrap the Iran deal, a decision that's widely expected to remove hundreds of thousands of barrels of Iranian oil from the global market.
On Tuesday, in his latest DoubleLine webcast, Jeffrey Gundlach warned that prices are now high enough to pressure growth: "At what level will oil have a negative effect on the consumer? I'd say right about now," Gundlach said.
While oil's rally has been strong in dollar terms, both Gundlach and Mark Cudmore, an analyst at Bloomberg, pointed out how the strengthening dollar has made the impact of higher oil prices that much more punishing in foreign currency terms.
WTI pushes over $70/barrel even as the dollar continues its rally. Just think how much oil is soaring in other currencies!— Jeffrey Gundlach (@TruthGundlach) May 7, 2018
Meanwhile, rapidly rising oil prices are hurting consumers and businesses with rising costs. As Cudmore explains, oil prices have risen too far, too fast and are rapidly increasing costs for business and consumers globally. Meanwhile, a sharp retracement would hurt speculators who have piled in to the long-oil trade.
With the national average gas price continuing its push toward $3 a barrel, already a quarter of Americans are cutting back on their summer travel plans, according to a recent survey. One New Yorker who spoke with CBS New York said he won't be traveling far this Memorial Day Weekend because of high gas prices.
"Sometimes I go down to Atlantic City, the Jersey Shore, out to Long Island, Jones Beach," he said. "This year I think I’ll stay at Orchard Beach."
And prices at the pump are only going to rise, at least in the very near term, as moves in oil prices filter through to consumers.
According to a AAA forecast, by Memorial Day weekend, the average gas price will be at least 5 cents higher than it was on Monday. Since prices are climbing so rapidly, CBS warned readers to keep an eye out for price gouging, which is defined as prices climbing 10% above their average.
If consumers are looking for somebody to blame, President Trump would make a convenient target, since his decision to pull out of the Iran deal was a near-term catalyst for higher prices. But Iran, of course, isn't the only producer that's struggling. Years of mismanagement and neglect in Venezuela have taken much of the OPEC country's pumping capacity offline. By the Brookings Institute's estimation, the highest gas prices in four years could wipe out nearly half of the stimulative impact from the Trump tax cuts. In other words: First Trump giveth, then he taketh away.
Finally, there is Saudi Arabia, which can easily boost output and slam prices lower as it did in November 2014 when OPEC effectively broke apart as Riyadh scrambled - unsuccessfully - to gain shale market share. Commenting on Saudi output, Petromatrix managing director Olivier Jakob said that "the current White House cannot allow Saudi Arabia to let the prices rise to levels that will hurt Trump politically."
In other words, calls for crude to reach $100 or higher over the summer fail to take into account President Trump’s focus on domestic elections and the role of gasoline prices. Of course, oil was $60 just a few months ago and is now at $80 on its way higher, and so far Trump has yet to make a stink about the surging oil price which, as of this moment, is the biggest hurdle facing America's middle class.