Pain at the pump: Gas prices are hitting record highs

5/31/22 8:00PM

Inflation is hitting almost everything (except chicken wings, interestingly), but the one item that many track most closely is gasoline.

The bad news is that average gasoline prices in the US have hit a record high in May, at $4.59 per gallon, which is up 52% on this time last year. If you live in California you're probably wishing you were paying $4.59 a gallon — average prices there are close to $6 a gallon.

‍When does this end?

‍Crude oil itself makes up around 60% of the cost of a gallon of gas, with the rest made up of refining, distribution / marketing costs and taxes according to the EIA. Unfortunately crude oil prices are still up at $115 / barrel, way up on $60-80 range they traded at for much of last year. So gas prices aren't likely to budge lower until oil does — and even if oil was suddenly $70 / barrel gas prices would likely take their time to come down thanks to a phenomenon known as "rockets and feathers".

‍Rockets and feathers

‍The "rockets and feathers" analogy refers to the phenomenon that when oil prices rise, gas prices jump like a rocket... but when oil prices subsequently fall, they fall like a feather. Some suggest the downward delay is opportunistic, others argue that gas stations are further along in the supply chain and that there's a delay... either way it could mean high gas prices stick around a little longer.

Max Knoblauch6h

Delta to increase bag fees by $10 on domestic flights this week, following JetBlue and United, as jet fuel surges

As the price of jet fuel surges amid the war in Iran, Delta Air Lines on Tuesday announced that it will hike its checked bag fees by $10 beginning this week.

Checking one bag on a domestic Delta flight will now cost $45, up from $35. A second bag will cost $55, up from $45, and a third will cost $200, up from $150. In a statement to Sherwood News, Delta issued the following announcement:

“For tickets purchased on or after April 8, Delta will increase fees for first and second checked bags by $10 and for a third checked bag by $50 on domestic and select short-haul international routes. These updates are part of Delta’s ongoing review of pricing across its business and reflect the impact of evolving global conditions and industry dynamics. Delta SkyMiles Medallion Members; customers traveling in First Class, Delta Premium Select and Delta One; active-duty military customers; and those with eligible co-branded Delta SkyMiles American Express Cards will continue to receive their allotment of complimentary checked bags.”

The move follows similar hikes by JetBlue and United Airlines last week. More are likely to come: when one major airline adjusts its fees, others tend to follow quickly behind. Delta last raised its bag fees in 2024, along with other major airlines.

Jet fuel prices were $4.69 a gallon on Monday, per the Argus US Jet Fuel Index. That’s up from the low $2 range for much of January.

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Paramount reportedly receives $24 billion from Gulf funds to back its Warner Bros. takeover

Three Middle East sovereign wealth funds have agreed to back Paramount’s takeover of Warner Bros. Discovery to the tune of roughly $24 billion, according to Wall Street Journal reporting.

The company’s triumph over Netflix in the bidding war came thanks in part to financial backing from Oracle cofounder Larry Ellison, billionaire father of Paramount CEO David Ellison.

Saudi Arabia’s PIF, which last year led the $55 billion deal to take Electronic Arts private, will provide about $10 billion in the deal. The Qatar Investment Authority and Abu Dhabi’s L’imad Holding Co. is also involved.

According to the WSJ, the funds will not receive voting rights in the combined Paramount-Warner company. Those working on the deal don’t expect the Gulf funds’ involvement to spark any additional regulatory reviews.

Exclusive | Gulf Funds Agree to Back Paramount’s $81 Billion Takeover of Warner

The company’s triumph over Netflix in the bidding war came thanks in part to financial backing from Oracle cofounder Larry Ellison, billionaire father of Paramount CEO David Ellison.

Hyunsoo Rim

appy birthday

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JetBlue is raising its bag fees as fuel costs squeeze airlines

JetBlue will reportedly hike its bag fees, as the cost of jet fuel continues to climb amid the war in Iran. It’s the latest example of carriers finding ways to push rising costs onto travelers.

Last week, United Airlines CEO Scott Kirby said that if fuel prices remain elevated, fares would need to rise another 20% for his airline to break even this year.

As CNBC reported, when one airline raises fees, others tend to follow.

Earlier this month, JetBlue hiked its first-quarter outlook for operating revenue per seat mile to between 5% and 7%, saying that strong Q1 demand helped “partially offset additional expenses realized from operational disruptions and rising fuel costs.” Now, the carrier appears to be making moves to further boost revenue to offset those costs.

Earlier on Monday, JetBlue rival Alaska Air lowered its Q1 profit forecast. The refining margins for the carrier’s cheapest fuel option — sourced from Singapore and representing about 20% of Alaska’s overall supply — have spiked 400% since February.

JetBlue did not immediately respond to a request for comment.

JetBlue Airways raises bag fees as fuel prices soar