5 Factors That Are Concurring for Rising Prices – NBC 7 South Florida

DALLAS, Texas — There is little evidence that gas prices, which hit a record $5 a gallon on Saturday, will drop anytime soon.

Rising prices at gas stations are a key factor in the highest inflation Americans have seen in 40 years.

Some blame President Joe Biden. Others say it’s because Russian President Vladimir Putin recklessly invaded Ukraine. It’s not hard to find people, including Democrats in Congress, who accuse oil companies of price gouging.

As with many things in life, the answer is complicated.

WHAT’S GOING ON?

Gasoline prices have been rising since April 2020, when the initial shock of the pandemic caused prices to fall below $1.80 a gallon, according to government figures. They hit $3 in May 2021 and topped $4 in March.

On Saturday, the national average for a gallon was just over $5, a record, according to the AAA car club, which has tracked prices for years. The median price was up 18 cents the previous week and was $1.92 higher than this time last year.

State averages ranged from $6.43 per gallon in California to $4.52 in Mississippi.

WHY IS THIS HAPPENING?

Several factors are coming together to drive gasoline prices higher.

  • World oil prices have been rising, unevenly but generally sharply, since December. The price of international crude oil has almost doubled in that time, with the US benchmark index rising almost as much, closing on Friday at more than $120 a barrel.
  • The Russian invasion of Ukraine and the resulting sanctions by the United States and its allies have contributed to the increase. Russia is a leading producer of oil.
  • The United States is the world’s largest oil producer, but US capacity to convert oil to gasoline has dropped by 900,000 barrels of oil per day since the end of 2019, according to the Energy Department.
  • Tighter supplies of oil and gasoline are taking a toll as energy consumption rises due to the economic recovery.
  • Finally, Americans tend to drive more after Memorial Day, which increases the demand for gasoline.

This is the highest increase since 1981, with a sharp rise in gasoline and food prices.

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 anything, global oil supply will shrink as sanctions against Russia are put in place. European Union leaders have promised to ban most Russian oil by the end of this year.

The United States has already imposed a ban even as Biden acknowledged it would affect American consumers. He said the ban was necessary so that the United States would not subsidize Russia’s war in Ukraine. “Defending freedom is going to cost,” he declared.

The US could ask Saudi Arabia, Venezuela or Iran to help offset the expected drop in Russian oil production, but each of those options carries its own moral and political calculations.

Republicans have called on Biden to help increase domestic oil production, for example by allowing drilling on more federal land and offshore, or by reversing his decision to revoke a permit for a pipeline that could transport Canadian oil to refineries. of the Gulf Coast.

Yet many Democrats and environmentalists would howl if Biden took such steps, which they say would undermine efforts to limit climate change. Even if Biden were to ignore a large faction of his own party, it would be months or years before such measures could lead to more gasoline in America’s gas stations.

In late March, Biden announced another use of the nation’s Strategic Petroleum Reserve to drive down gasoline prices. The average price per gallon has risen 77 cents since then, which analysts say is due in part to a refining squeeze.

The owner of a gas station in Amherst, Massachusetts, is so fed up with rising prices that he has stopped selling gasoline.

WHY IS US REFINING DOWN?

Some refineries that produce gasoline, jet fuel, diesel and other petroleum products closed during the first year of the pandemic, as demand collapsed. While some are expected to increase capacity in the coming 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 nation’s largest refineries, in Houston, announced in April that it will close the facility by the end of next year.

WHO ARE THE MOST AFFECTED?

Higher energy prices hit low-income families hardest. Workers in the retail and fast food industry cannot work from home, they must travel by car or public transportation.

The National Association of Energy Assistance Directors estimates that the lowest-income 20% of families could be spending 38% of their income on energy, including gasoline, this year, up from 27% in 2020.

WHEN WILL IT END?

It could depend on motorists themselves: by driving less, they would reduce demand and put downward pressure on prices.

“There has to be some point where people start cutting back, I just don’t know what the magic point is,” said Patrick De Haan, an analyst at gas-buying app GasBuddy. “Will it be $5? Will it be $6 or $7? That is the million dollar question that no one knows.

The pockets of millions of families continue to be affected by the high prices in supermarkets and at gas stations. The question of many is until when? To see more from Telemundo, visit https://www.nbc.com/networks/telemundo

HOW DO DRIVERS DEAL WITH IT?

On Saturday morning at a BP station in Brooklyn, New York, computer scientist Nick Schaffzin blamed Putin for the $5.45 a gallon he was spending and said he would make sacrifices to pay the price.

“You just cut out some other things: vacations, discretionary things, things that are nice to have but don’t need,” he said. “Gasoline you need.”

At the same station, George Chen said he will have to raise the prices he charges his clients for film production to cover the gas he burns driving around New York City. He acknowledged that others are not so lucky.

“It’s going to be painful for people who don’t get pay raises right away,” he said. “I can only imagine the families who can’t afford it.”

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