Americans, for many years, got used to low gas prices. While there was always some volatility, especially in summer, winter, and when there were supply disruptions, gas prices started to plunge around 2014, according to a historical chart published by GasBuddy.
The average gas price dropped below $3 in 2014, and stayed below that level for over seven years. During the depths of the pandemic in 2020, the average even dipped below $2. But ever since late 2020, the price has started to climb back up again, with the average price once again over $3. And while gas prices sometimes fall once the autumn season begins, that has not yet happened to any significant degree.
While presidents don’t set gas prices or have much control over the direction they go, CNN reported this week that President Biden is concerned about rising gas prices. The Administration has considered tapping the Strategic Petroleum Reserve, although it has not done so yet, per CNN.
CBS News also reported that the president has called for an investigation into the gas prices, suggesting that “profiteers” are to blame.
“There’s lots of evidence that gas prices should be going down — but they haven’t,” the president said this week. “We’re taking a close look at that.”
Some, including his predecessor, have blamed Biden for the high prices, including such actions as his cancellation of the Keystone XL Pipeline, although that pipeline wasn’t operational or running gasoline at the time of its cancellation.
Helima Croft, head of commodity strategy at RBC Capital Markets, wrote in a note to clients this week of “a growing concern in the White House about a perilous run up in prices that could derail the global recovery,” CNN reported this week.
“Global economic uncertainty and supply chain concerns caused by the lingering COVID-19 pandemic could be playing a role in keeping crude oil prices elevated,” Andrew Gross, AAA’s spokesperson said this week, per USA Today.“But, there may be some relief on the horizon due to the news that OPEC and its allies might ramp up production increases faster than previously agreed.”
Why is this happening? There are a few reasons.
The receding pandemic
The biggest reason that gas prices plunged in 2020 was that with the pandemic, there was very little travel, which caused demand to crash. But as stay-at-home orders were lifted, and life started to get somewhere close to back to normal, cars have returned to the road, and with it demand for gasoline. That demand has pushed prices up.
Much of gasoline price pressure has to do with the global oil markets. Per CNN, the Administration has pushed for OPEC to “unleash the spigots,” in order to bring supply to the market and bring prices down. However, that oil cartel has announced that it would only add supply on a gradual basis.
A series of disasters.
Quite a few external events have happened this year that have affected oil supply. The deep freeze in Texas back in February caused that state’s oil refineries to freeze, and had an effect on pipelines as well. In June, the Colonial Pipeline cyber hack knocked out supply in the Southeast for nearly two weeks. Then, Hurricane Ida had an effect on supply as well, although less than the other disasters.
“In short, I think we are having supply-chain problems,” Jeffery Born, an energy markets expert at Northeastern University, told CBS News. “I’m sure Joe wants prices to come down — you and I do, too. I’d also like to be 20 pounds lighter tomorrow.”
Less supply from independent producers
According to Axios this week, “U.S. independent producers are far more cautious about cranking the spigot open every time prices inch up, thanks to a recent wave of bankruptcies and investors demanding more focus on returns.” The same piece noted that the world’s largest economies have “made transitioning to more renewable power a top priority,” one expert told the site.
It wouldn’t be right to say that gas prices are the cause of inflation; rather, they’re a big part of it. In fact, prices have risen faster for gasoline than for any other major good in the economy. As rising gas prices have helped make everything else more expensive too, since other items need to be transported.
The Senior Citizens League said this week that of all the items that seniors spend money on, gasoline has seen the largest percent price increase, from July 2020 to July 2021, with a 48.3 percent jump. Used cars and trucks were second, followed by home heating oil, natural gas, airline fares, bacon and eggs. The organization has called for a new round of stimulus checks, to help seniors with inflation.
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.