Several factors converge to push gas prices higher
DALLAS (AP) – There is little indication that gasoline prices, which reached a record high of $ 5 per gallon on Saturday, will fall anytime soon.
Rising pump prices are a key driver of the highest inflation that Americans have seen at 40 years.
Everyone seems to have a favorite villain for the high cost of filling up.
Some blame President Joe Biden. Others say it is because Russian President Vladimir Putin ruthlessly invaded Ukraine. It is not difficult to find people, including Democrats in Congress, who accuse the oil companies of price cuts.
As with many things in life, the answer is complicated.
WHAT̵[ads1]7;S UP?
Gasoline prices have risen since April 2020, when the first shock of the pandemic led to less than $ 1.80 per gallon, according to government figures. They reached $ 3 in May 2021 and exceeded $ 4 in March.
On Saturday, the nationwide average for a gallon just over $ 5 ticked a record, according to car club AAA, which has been following prices for years. The average price jumped 18 cents last week and was $ 1.92 higher than this time last year.
The state average ranged from $ 6.43 per gallon in California to $ 4.52 in Mississippi.
WHY DOES THIS HAPPEN?
Several factors come together to push petrol prices higher.
Global oil prices have risen – unevenly but overall sharply – since December. The price of international crude oil has roughly doubled in that time, with the US benchmark index rising almost as much, ending Friday at more than $ 120 per barrel.
Russia’s invasion of Ukraine and the resulting sanctions from the United States and its allies have contributed to the increase. Russia is a leading oil producer.
The United States is the world’s largest oil producerbut the United States’ capacity to convert oil into gasoline has been reduced by 900,000 barrels of oil per day since the end of 2019, according to the Ministry of Energy.
Tighter oil and petrol supplies are hitting as energy consumption increases due to the economic upswing.
Finally, Americans usually drive more around Memorial Day, which increases the demand for gasoline.
WHAT CAN BE DONE TO GET MORE OIL?
Analysts say there are no quick fixes; it is a matter of supply and demand, and supply cannot be increased overnight.
If anything, global oil supplies will grow tighter as sanctions against Russia take hold. EU leaders have promised to ban most Russian oil by the end of this year.
The United States has already imposed a ban although Biden acknowledged that it would affect American consumers. He said the ban was necessary for the United States not to subsidize Russia’s war in Ukraine. “Defending freedom is going to cost,” he declared.
The United States may ask Saudi Arabia, Venezuela or Iran to help address the expected fall in Russian oil production, but each of these options has its own moral and political implications..
Republicans have asked Biden to help increase domestic oil production – for example, by allowing drilling on more federal land and offshore, or reversing his decision to revoke a pipeline permit which can ship Canadian oil to Gulf Coast refineries.
However, many Democrats and environmentalists would shout if Biden took these steps, which they say will undermine efforts to curb climate change. Although Biden ignored a large faction of his own party, it would take months or years before these measures could lead to more gasoline at US gas stations.
At the end of March, Biden announced a new tapping of the country’s strategic petroleum reserve to bring down petrol prices. The average price per gallon has jumped 77 cents since then, which analysts say is partly due to a refining squeeze.
WHY DO WE FIND OUT?
Some refineries producing gasoline, jet fuel, diesel and other petroleum products were shut down during the first year of the pandemic, when demand collapsed. While a few are expected to increase capacity over the next year or so, others are reluctant to invest in new facilities because the transition to electric vehicles will reduce the demand for gasoline in the long run.
The owner of one of the country’s largest refineries, in Houston, announced in April that they would close the plant by the end of next year.
WHO INJURIES?
Higher energy prices hit families with lower incomes the hardest. Workers in the retail and fast food industries cannot work from home – they have to commute by car or public transport.
The National Energy Assistance Directors Association estimates that the 20% of low-income families can spend 38% of their income on energy including gasoline this year, up from 27% in 2020.
WHEN WILL IT END?
It may be up to the motorists themselves – by driving less, they will reduce demand and push prices down.
“There has to be a point where people are starting to cut back, I just do not know what the magic point is,” said Patrick De Haan, an analyst for gas-gas app GasBuddy. “Is it going to be $ 5? Is it going to be $ 6, or $ 7? That’s the million-dollar question no one knows.”
HOW DOES DRIVERS HAVE IT?
Saturday morning at a BP station in Brooklyn, New York, computer worker Nick Schaffzin blamed Putin for the $ 5.45 per gallon he reached out and said he would sacrifice to pay the price.
“You just cut down on a few other things – vacations, discretionary things, things that are nice to have, but you do not need,” he said. “Gas you need.”
At the same station, George Chen said he would have to raise the prices he demands of his customers for film production to cover the gas he burns while driving around New York City. He acknowledged that others were not so lucky.
“It’s going to be painful for people who do not get pay raises right away,” he said. “I can only imagine the families who can not afford it.”
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Julie Walker of Brooklyn, New York, contributed to this report.
