DALAS (AP) – There is little evidence that gasoline prices, which reached a record $ 5 a gallon on Saturday, will soon fall.
Rising pump prices are key drivers of the highest inflation Americans have seen in 40 years.
It seems that everyone has a favorite villain because of the high cost of filling.
Some blame President Joe Biden. Others say it’s because Russian President Vladimir Putin recklessly invaded Ukraine. It is not difficult to find people, including Democrats in Congress, who accuse oil companies of raising prices.
As with many things in life, the answer is complex.
WHAT IS HAPPENING?
Gasoline prices have been rising since April 2020, when the initial shock of the pandemic brought prices below $ 1.80 a gallon, according to government figures. They reached $ 3 in May 2021 and topped $ 4 this March.
On Saturday, the national average per gallon was just over $ 5, a record, according to the AAA autoclub, which has been tracking prices for years. The average price jumped 18 cents in the previous week and was $ 1.92 higher than last year.
State averages range from $ 6.43 a gallon in California to $ 4.52 in Mississippi.
WHY IS THIS HAPPENING?
Several factors come together to raise gasoline prices.
Global oil prices have been rising – unevenly but sharply overall – since December. The price of international crude oil has doubled during this time, with the US standard rising almost as much, closing Friday at over $ 120 a barrel.
Russia’s invasion of Ukraine and the ensuing sanctions by the United States and its allies have contributed to the rise. Russia is a leading oil producer.
The United States is the world’s largest oil producer, but the US capacity to convert oil to gasoline has fallen by 900,000 barrels of oil per day since the end of 2019, according to the Department of Energy.
Closer supplies of oil and petrol are hitting as energy consumption rises due to the economic recovery.
Finally, Americans tend to drive more, starting around Remembrance 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 increase overnight.
If nothing else, global oil supplies will become tougher as sanctions against Russia are imposed. European Union 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 so that the United States would not subsidize Russia’s war in Ukraine. “Protecting freedom will cost money,” he said.
The United States could ask Saudi Arabia, Venezuela or Iran to help reduce weight loss for Russia’s expected decline in oil production, but each of these options has its own moral and political calculations.
Republicans have called on Biden to help boost domestic oil production – for example, by allowing more federal and offshore drilling, or revoking his decision to revoke a permit for a pipeline that could carry Canadian oil to refineries on the Persian Gulf.
However, many Democrats and conservationists would howl if Biden took these steps, which he said would undermine efforts to limit climate change. Even if Biden ignores a large faction of his own party, it will be months or years before these measures lead to more gasoline at U.S. gas stations.
In late March, Biden announced a new use of the National Strategic Oil Reserve to cut gasoline prices. Since then, the average price per gallon has jumped 77 cents, analysts say, in part due to a contraction in refining.
WHY DO WE REFINE DOWN?
Some refineries that produce gasoline, jet fuel, diesel and other petroleum products closed in the first year of the pandemic, when demand collapsed. While some are expected to increase capacity next year, others are reluctant to invest in new facilities because the transition to electric vehicles will reduce gasoline demand in the long run.
The owner of one of the country’s largest refineries, Houston, announced in April that it would close the facility by the end of next year.
WHO IS IN PAIN?
Higher energy prices have hit lower-income families hardest. Workers in the retail and fast food industries cannot work from home – they have to travel by car or public transport.
The National Association of Directors’ Energy Associations estimates that 20% of low-income families could spend 38% of their income on energy, including gasoline this year, up from 27% in 2020.
WHEN WILL IT END?
This may depend on the drivers themselves – by driving less, they will reduce demand and put downward pressure on prices.
“There has to be a time when people start to shrink, I just don’t know what the magic point is,” said Patrick De Haan, an analyst for the GasBuddy gas shopping app. “Will it be $ 5?” Will it be $ 6 or $ 7? It’s a million-dollar issue that no one knows about. “
HOW DO DRIVERS DO?
On Saturday morning at a BP station in Brooklyn, New York, computer worker Nick Shafzin accused Putin of the $ 5.45 a gallon he was handing out and said he would make sacrifices to pay the price.
“You’re just reducing some other things – breaks, discretionary things, things that are good to have but 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 production to cover the gas he burns while driving around New York. He admitted that others are not so happy.
“It will be painful for people who do not receive a salary increase immediately,” he said. “I can only imagine families who can’t afford it.”
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Julie Walker of Brooklyn, New York, contributed to this report.
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