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'We have to be prepared for this,' economist warns as Virginia sets new record for gas prices

Russia Ukraine War US States
Russia Ukraine War US States
Posted at 4:41 PM, Mar 09, 2022
and last updated 2022-03-10 07:42:07-05

RICHMOND, Va. -- Virginia set another record for gas prices as the average price of fuel topped $4.18 a gallon Wednesday, according AAA Mid-Atlantic.

"That's up eight cents overnight. 59 cents in the past week, 87 cents higher than it was a month ago," Morgan Dean with AAA Mid-Atlantic said.

Dean said that while the Russia-Ukraine conflict is a driving factor, including the President's decision Tuesday to ban Russian energy imports, other factors include a demand that was already increasing as economies climbed out of the pandemic and market uncertainty.

"Investors get concerned that there could be shortages or there may not be enough supply out there and they start to push that price up by buying," Dean said.

Additionally, experts said rising fuel prices will impact the costs of other goods as transportation costs increase and are passed onto consumers.

"I liken it to a virus entering the economic bloodstream, it will end up affecting almost every organ in the body, at least in the short term," Dr. Joy Bhadury, the dean of Radford University's Davis College of Business Economics said.

COMPLETE COVERAGE: Use Gas Tracker to find cheapest gas prices in Central Virginia

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A customer pumps gasoline into his car.

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And upcoming factors could drive prices even higher as gas stations switch to the more expensive summer blend and people head out for spring break or the summer.

Bhadury said gas prices could reach an average of $5 a gallon.

"I do not want to sound alarmist," Bhadury said. "But at least in the short term, we have to be prepared for this."

Bhadury also said that as inflation has risen by the largest amount in decades, he is also concerned about medium to long-term impacts on economic recovery.

As for what can be done to reverse this, experts said increasing the amount of crude on the market by releasing strategic reserves, something dozens of countries have committed or allowing Iranian or Venezuelan oil back into the fold.

But whatever steps are taken, it will take time to impact the market and bring prices down.

"We are in for a pretty unpredictable future probably at least for one year, or two years," said Bhadury. "Hopefully, we'll find a new equilibrium that will be better off than where we will be during the intermediate period of turbulence."

RELATED: Planning the future of US energy and independence

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