Gas prices across the United States are skyrocketing and there is no indication that they will be coming down anytime soon. Several states have already breached the $5 per gallon mark, while California blew right through it with an average price of $6.34. According to experts, the most likely end result of high gasoline prices will be “demand destruction.”
Demand destruction, common for energy products, occurs when high prices over a prolonged period of time result in a permanent lower demand for a particular product or good.
According to Peter McNally, the global sector lead for consulting company Third Bridge, that is already happening for gas.
“One could argue that demand destruction for gasoline has already started,” McNally told Yahoo Finance. “Since the start of March, U.S. gasoline consumption is 6% lower than the corresponding period in 2019.”
Andy Lipow, president of consulting firm Lipow Oil Associates, adds that the gas consumption has already dipped two percent compared to the same period in 2021. He expects this trend to continue in the coming months.
“As prices continue to rise, I expect that the demand will continue to fall off compared to 2021,” said Lipow.
While already breaking records, the gas prices are only expected to go up from here. JPMorgan’s experts recently predicted that a gallon would cost more than $6 nationwide by August. This will likely have an impact on the prices of other goods.