US oil prices climbed above $90 a barrel on Thursday for the first time in 10 months, threatening to push gasoline prices even higher and heat up inflation across the economy.
High oil prices have already created an unusual situation where gasoline is getting more expensive even after the summer driving season has ended. Despite demand easing, gas prices are just pennies away from their highest level of the year.
The national average for regular gasoline rose to $3.86 a gallon on Thursday, according to AAA. That’s six cents higher than a week ago and 16 cents higher than the same day last year.
The latest oil market rally has been driven by concerns about supply.
First, Saudi Arabia and Russia surprised the market last week by extending their aggressive supply cuts through the end of the year.
“If all that supply in Libya were taken off the market for an extended period of time, that would force prices even higher,” said Andy Lipow, president of consulting firm Lipow Oil Associates.
Libya, a key supplier to Europe, produces about 1 million barrels of oil per day, according to OPEC. Most of that crude is of the same light, sweet variety found in Texas, New Mexico and elsewhere in the United States.
“If you lose that supply in Europe, it raises the prices over there and attracts even more barrels from the US to fill the gap,” Lipow said.
US crude traded as high as $90.26 a barrel Thursday morning, up 2% on the day. That’s the highest intraday price since November 8, 2022 and also represents a 34% jump since mid-June.
Brent crude, the world benchmark, climbed 2% to a fresh 10-month high of $93.68 a barrel on Thursday.
The recent jump in energy prices is undoing some of the progress made by central banks in the fight against inflation.
There are now a dozen US states averaging $4 a gallon or higher for regular gasoline, including Colorado, North Dakota and California, according to AAA.