Gas prices have hit record highs in recent days as reactions to Russia’s assault on Ukraine diminish the availability of crude oil and create a stark imbalance between supply and demand.
The cost per gallon of gasoline in the United States hovered around $4.30 on Wednesday, shattering a record of $4.10 set just before the financial crisis in 2008, according to the price-tracking service GasBuddy. In the first week of March, prices rose by about $0.49 — roughly 14 percent.
Customers filling up their tanks are expressing frustration with the increased cost of commuting to work, dropping off their children at school or driving to visit family members. Amid the fallout from the invasion by Russia, the world’s top oil exporter, the economic pain is unlikely to end soon.
“You don’t often talk about the cost of milk or the price of a gallon of milk or a loaf of bread, but you do talk about the price of a gallon of gas,” said Jack Gillis, executive director of the Consumer Federation of America, an association of consumer advocacy organizations. “It’s something that’s in our face on a regular basis. So it is pretty shocking to consumers.”
A price war between Russia and Saudi Arabia was driving down the price of crude oil, which is refined to make gasoline. Once the pandemic set in and people hunkered down in their homes, demand plummeted and prices declined further. Companies that produce oil drastically decreased production to protect themselves from bankruptcy, said Patrick De Haan, GasBuddy’s head of petroleum analysis.
Midland, Tex., was already reeling from a collapsing oil market. Then came the coronavirus.
As vaccines became available, people resumed commuting and sought a release from cabin fever through travel. After shutting down wells and laying off employees, De Haan said, oil companies have been slow to catch up to the rapid rise in gasoline demand. That caused prices to climb.
“It’s like the doors just opened all at once and everyone went rushing through them,” he said. “Americans started fueling up constantly. After two years of being in lockdown, Americans hit the road.”
Then, as Russia’s attack on Ukraine unfolded, the market began adding a risk assessment to the price of oil, making it spike, said Devin Gladden, a spokesman for auto club AAA and an adviser at the Energy Department during the Obama administration.
The effect was compounded by sanctions banning U.S. banks from transacting with financial institutions in Russia. On Tuesday, the Biden administration took steps toward banning Russian oil imports altogether.
Only about 3 percent of crude oil consumed in the United States comes from Russia. But because Russia is a major producer on the world stage, volatility there makes oil prices rise globally, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, a trade and lobbying group.
“Anytime you have unrest in a large producing region, you put that supply into question and you send the market signals — and markets respond,” Macchiarola said. Other factors have also hampered the supply of oil, he said, including labor shortages and supply chain constraints induced by the pandemic.
After the sudden increase in demand and Russia’s invasion of Ukraine, domestic energy producers are “racing to catch up,” Gladden said.
Have the Biden administration’s domestic oil policies played a role in rising gas prices?
In announcing the ban on Russian oil, President Biden acknowledged there would be costs domestically. But he cast the blame on Russian President Vladimir Putin.
“The decision today is not without cost here at home,” Biden said. “Putin’s war is already hurting American families at the gas pump. Since Putin began his military buildup at Ukrainian borders, just since then, the price of the gas at the pump in America went up 75 cents, and with this action it’s going to go up further. I’m going to do everything I can to minimize Putin’s price hike here at home.”
In Macchiarola’s view, Biden’s policies around domestic oil drilling have contributed to rising gas prices but are not a major driver of the surge. The White House has consistently signaled an interest in decreasing the country’s reliance on fossil fuels in favor of clean energy sources, while the United States remains the world’s top producer of oil and natural gas.
During his first year in office, Biden outpaced the Trump administration in issuing drilling permits on public lands, drawing sharp criticism from environmental advocates. But he also halted new oil and gas leases on federal lands last month, quashed the Keystone XL oil pipeline and proposed new fees for drilling on public lands and waters.
Those moves, Macchiarola said, have discouraged investment in oil supply as demand for gasoline has risen.
“This supply-and-demand imbalance occurred as a result of the pandemic and was exacerbated by the aggression in Russia and Ukraine, but the environment that’s been created by [the Biden administration’s] politics and rhetoric doesn’t help,” Macchiarola said.
Gladden countered that the Keystone XL pipeline would probably not yet be operational, even if it had gone forward. He argued that domestic oil production is more tied to pricing than to policy.
“Before the invasion and during the pandemic, prices were low, and that did not motivate energy producers to go and drill more,” Gladden said. “But now that prices have skyrocketed … they’re ready to go drill because there’s a pricing signal there.”
The White House did not immediately respond to a request for comment Wednesday. But Biden argued Tuesday that loosening environmental regulations to allow more drilling would not lower gas prices.
“Transforming our economy to run on electric vehicles, powered by clean energy, will mean that no one will have to worry about gas prices,” he said on Twitter. “It will mean tyrants like Putin won’t be able to use fossil fuels as a weapon.”
An analysis by our colleague Philip Bump found that domestic gas prices are determined more by international oil prices than by domestic drilling. There was no clear correlation between domestic production and gas prices.
How long will prices be this high?
The trajectory of gas prices isn’t entirely predictable. Even before the White House moved to curtail Russian oil imports, several global energy companies — including Shell, BP and ExxonMobil — had voluntarily agreed to suspend their operations in Russia. Those moves already were restricting oil supply.
As long as Russia continues to fight in Ukraine, Gladden said, gas prices are likely to remain inflated.
“We’re also entering the spring and summer driving season, when gas prices typically increase because of higher demand,” he said. “So we are expecting that this is going to be an expensive summer at the pump for consumers.”
De Haan predicted that the national average could reach $4.50 per gallon.
“I’m betting on this being a longer period of higher prices,” he said.
White House press secretary Jen Psaki said Thursday that the Federal Trade Commission was continuing to watch whether oil companies are price gouging at gas stations — an issue the White House asked the agency to monitor last year. The Biden administration is not “ruling out or ruling in any options” for lowering gas prices, Psaki added.
What can customers do to ease the economic burden?
To state the obvious, the less you drive, the less you’ll spend on gas. That’s easier said than done for most people, but those with access to reliable mass transit or carpooling could consider using those options more often while gas remains relatively expensive. Reducing the clamor for gasoline also narrows the gap between supply and demand, which De Haan said should force prices down.
For everyone else, small behavior changes can make a marginal difference. Staying up to date on engine maintenance, fully inflating your tires and keeping the weight in your car light can slightly decrease the amount of gas you use.
Driving habits also matter, Gillis said. Keeping your foot off the brake while driving can save the equivalent of $1.42 per gallon, he said. Accelerating and decelerating smoothly, driving slowly and turning off the engine instead of idling can also help.
Gas prices are also often a few cents per gallon cheaper for people paying with cash, while some credit cards offer rewards for gas purchases. Mondays are a good day to fill up the tank, according to GasBuddy, which in 2019 found that the average price across 30 states was lowest that day. Fridays and Saturdays were the most expensive.
For drivers, Gillis said he worried the steep price increases could be “very difficult.”
“Our vehicles have become critically important for our jobs, for getting our kids to day care, for so many aspects of our lives, that when the price of gas goes up, it really has an impact on consumers,” he said.
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