Gas prices are high across all of America, and millions of citizens are feeling that impact at home. Few actually know why their gas prices are so high, so I’m here to explain. I’ll cut the chase and pretentious introductions and get to it.
Why gas prices are so high:
It mostly comes down to the price of crude oil, which is up 70% from last year. Crude oil is the main component of gasoline, it is what it’s made out of. Crude oil makes up (nearly) 70% of the pump price of regular gasoline. As a result, when crude oil prices rise, so do gasoline ones.
In general, prices are influenced by the chain of supply and demand. There is still a vast demand for oil, yet there is not enough supply per se. Russia accounted for 10% of crude oil exports, yet, since the start of the Russo-Ukraine War, Russian exports have largely decreased due to sanctions imposed by the West. At the end of May, the EU announced it would ban 90% of Russian oil imports, which has led to further chaos in the crude oil market and pushed prices upward.
Another reason which has led to the rise of oil prices is oil companies themselves. Since the COVID-19 pandemic, many oil producers have been slow to respond to the economic rebound and rising demand. Companies have not fully bounced back from layoffs and decommissioning rigs.
The global oil market is in turmoil, and the U.S. is not immune to that. Janet Yellen, the U.S. Secretary of Treasury emphasized how “given the global nature of these markets, it’s virtually impossible for us to insulate ourselves from shocks like the ones that are occurring in Russia that move global oil prices.”
What can you do about it:
Gas prices are taking a heavy toll on millions of American families. A May Forbes Advisor poll found that the cost of travel, in which gas prices play a major role, affects plans for 54% of vacationers. So what can you do?
- Turn on cruise control — when on highways or interstates, turning on cruise control uses less gas than manually adjusting your speed.
- Charge gas on Mondays — a study by GasBuddy in February 2022 found that gas prices are lower on Mondays.
- Enroll in gas rewards programs — some of your favorite gas stations offer rewards programs. Exxon Mobile offers rewards, with 3 points per gallon on fuel (100 points = 1$ off your gas).
- Drive only when needed — if you can walk, ride with a friend, or use a bicycle to reach a destination, do so.
For how long will gas prices be so high:
Unfortunately for all, gas prices are not expected to reduce dramatically overnight. It might take some time. In April, the U.S. Energy Information Administration’s Short-Term Outlook predicted that oil prices will not fall until the end of this year. Plus, the administration detailed how that estimate was highly “uncertain.”
In other words — we don’t know. Gabe Ortega, a fuel pricing practice leader at PDI software stated how gas prices typically tend to increase during the summer and decrease once it concludes. This is mainly attributed to the fact that individuals have more time to go out. A decrease may come once the summer ends, but Ortega says it will be “minimal.”
Gas prices will continue to be high until the international political landscape changes. Meaning that until the Russo-Ukraine War ends, prices will for the most part remain generally high (efforts to reduce them will have a minimal impact).
One should expect prices to remain at current trends for a couple more months, and then slowly start to decrease once again.
What is being done to reduce gas prices:
The Biden Administration has tried to take action to combat gas prices. Nonetheless, federal policy has little impact on gas prices — that’s just the stark truth. Biden is urging domestic refineries and oil companies to produce more, but that’s just about it.
Some states have also begun to take matters into their own hands. A number of states such as Florida, Maryland, Georgia, and others have eliminated their respective state’s gas taxes. On June 13th, Biden aides confirmed to the House/Senate that the president is “seriously considering” supporting a gas tax pause for a handful of months. Many Republicans (and economists) do not support this (their argument claiming that suspending the tax will be inflationary). Senate Democrats have also now introduced the “Gas Tax Relief Act,” which would provide a temporary exemption of gas taxes through all of 2022. Ten other states have also now begun sending tax rebate checks to counter the rising inflation. Colorado, for instance, plans to send $400 tax rebate checks to its citizens in the coming months. By far, the abundance of action is being taken at the state level, the question is whether it will be enough?
For information on the sources used, feel free to contact the author.