June 26, 2022

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Several factors converge to push gas prices higher

Several factors converge to push gas prices higher

DALLAS (AFP) – There is little evidence that gasoline prices, which hit a record high of $5 a gallon on Saturday, will drop anytime soon.

High prices at the pumps are the main driver of the highest inflation rates Americans have seen In 40 years.

Everyone seems to have a favorite villain due to the high cost of filling.

Some blame President Joe Biden. Others say it is because Russian President Vladimir Putin recklessly invaded Ukraine. It’s not hard to find people, including Democrats in Congress, who accuse the oil companies of price gouging.

As with many things in life, the answer is complex.

What is happening?

Gasoline prices have risen since April 2020, when the initial shock of the pandemic drove prices below $1.80 a gallon, according to government figures. They hit $3 in May 2021 and crossed $4 in March.

On Saturday, the national average gallon rose just above $5, It is a record according to the AAA Automobile Club, which has tracked prices for years. The average price jumped 18 cents in the previous week, and was $1.92 higher than this time last year.

State averages ranged from $6.43 a gallon in California to $4.52 in Mississippi.

Why does this happen?

Several factors combine to raise gasoline prices.

Global oil prices have risen — unevenly, but sharply overall — since December. The price of international crude nearly doubled in that time, with the US benchmark up roughly the same amount, to close on Friday at more than $120 a barrel.

The Russian invasion of Ukraine and the resulting sanctions by the United States and its allies contributed to the rise. Russia is one of the largest oil producers.

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United State The largest oil producer in the worldBut the ability of the United States to convert oil into gasoline is down 900,000 barrels of oil per day Since the end of 2019, according to the Ministry of Energy.

Oil and gasoline supplies are hit with increased energy consumption due to the economic recovery.

Finally, Americans typically drive more starting on Memorial Day, which increases gasoline demand.

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.

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If anything, the global oil supply will only get tougher with sanctions imposed on Russia. European Union leaders have pledged to ban most Russian oil By the end of this year.

The United States has already imposed a ban Even as Biden acknowledged it would affect American consumers. He said the ban was necessary so that the United States did not support Russia’s war in Ukraine. He declared that “the defense of freedom will come at a price.”

The United States could ask Saudi Arabia, Venezuela, or Iran to help offset the slowdown in the expected decline in Russian oil production, but each of these options carries its own moral and political calculus..

Republicans have called on Biden to help increase domestic oil production — for example, by allowing drilling in more federal and offshore lands, or to reverse his decision to revoke a pipeline permit. It can transport Canadian oil to Gulf Coast refineries.

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However, many Democrats and environmental advocates may howl if Biden takes these steps, which they say will undermine efforts to curb climate change. Even if Biden ignores a large faction of his party, it will be months or years before these actions lead to more gasoline at American service stations.

At the end of March, Biden announced another exploitation of the country’s Strategic Petroleum Reserve to lower gasoline prices. The average gallon price has jumped 77 cents since then, which analysts say is partly due to refining pressures.

Why is the United States retreating from refining?

Some refineries that produce gasoline, jet fuel, diesel and other petroleum products closed during the first year of the epidemic when demand collapsed. While a few are expected to boost capacity in the next year or so, others are reluctant to invest in new facilities because the transition to electric vehicles will reduce long-term gasoline demand.

The owner of one of the country’s largest refineries, in Houston, announced in April that he would close attachment by the end of next year.

Who is hurting?

The impact of higher energy prices on low-income families the most. Workers in the retail and fast food industry cannot work from home – they must commute by car or public transportation.

The National Association of Energy Aid Managers estimates that 20% of lower-income families could 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 motorists themselves – by driving less, they will reduce demand and put downward pressure on prices.

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“There has to be a point where people start cutting back, I don’t know what the magic point is,” said Patrick de Haan, an analyst at gas shopping app GasBuddy. “Will it be $5? Will it be $6 or $7? That is the million dollar question that no one knows.”

How do drivers respond?

On Saturday morning at BP’s station in Brooklyn, New York, computer worker Nick Chavzin blamed Putin’s $5.45 per gallon payment and said he would make sacrifices to pay the price.

“I just cut back on some of the other things — vacations, discretionary things, things that are good to have but you don’t need,” he said. “The gas you need.”

At the same station, George Chen said he would have to raise the prices he charges his customers for film productions to cover the gas he burns while driving to New York City. Admit that others are not so lucky.

“It will be painful for people who do not get their salary increases right away,” he said. “I can only imagine families who couldn’t afford it.”

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Julie Walker in Brooklyn, New York, contributed to this report.