Literally Stepping on the Gas (Prices)
Recently, as car drivers are aware, the price for gas has skyrocketed in California. The price reached an astonishing all-time high of $6 per gallon, much to the dismay of Californians trying to live a decent life. To give context, the previous all-time high for gas prices was in 2008 with gas prices reaching $4 per gallon. Thankfully, the gas prices have been slowly decreasing after peaking at $6, albeit very slowly. Unfortunately, as many Americans are aware, the price of gas does not just impact automobiles; the rise in gas prices also leads to a direct increase in the price of living.
Gas and oil are obviously important for cars because most automobiles still run on fossil fuels, but it’s also important for heating buildings and water. Natural gas is also responsible for the generation of electricity in the United States; according to the U.S. Energy Information Administration (EIA), natural gas was responsible for about 40% of America’s electricity generation in 2020. Because of this huge reliance on natural gasoline, the effects of the increase in gas price have been staggering for the U.S. economy. Researchers at Yardeni Research estimate that the average American family will incur $2,000 in additional costs this year.
Many economists and researchers argue about the cause for this recent massive increase. Patrick DeHaan, GasBuddy’s head of petroleum analysis, believes that the increase first began during the COVID-19 pandemic and really bloomed during Ukraine’s conflict with Russia. The pandemic forced Americans to stay indoors, which led to a sharp decline in the demand for petroleum. And because of the laws of supply and demand, countries such as Russia stopped their oil production. As the world began to recover from the pandemic, these same countries were slow to resume production, and the low supply suddenly had to meet a sharp increase in demand again. Some argue however that this had a very temporary effect on the price of oil because it never once reached such a high level as now. The Ukraine-Russia conflict, on the other hand, caused a 20% spike in prices in mere weeks. This was a result of America’s public ban on Russian imports; Russia supplied America with 10% of all its natural oil, and banning those imports had obvious ramifications on the American economy.
Experts warn that the gas price will not drop for months and maybe even years. Inflation is expected to worsen during March and April before improving. Economists urge consumers to seek more conservative methods of transportation and living until the problem is resolved. Hopefully, the oil industry can regain its composure before the price for gasoline somehow rises even higher.
By Nathan Park