Why Are Gas Prices Rising?
Gas prices are on the rise, but what keeps making them increase. Take a look to find out what’s behind these sky-high prices.
Written by Hannah DeWitt
Reviewed by Kathleen Flear
Gas prices
in the U.S. have hit a seven-year high, and Americans are now feeling the pain at the gas pump. However, due to constrained supply triggered by OPEC decisions and lower U.S. production,
don't expect a price drop
from rising prices anytime soon. But why do prices keep increasing? Jerry
has everything you need to know.Why are gas prices increasing?
While it is estimated that an average driver consumes at least 570 gallons of gasoline a year, It is very normal for Americans to feel the pinch at the gas pump.
But why is this happening? What could be triggering the new swing in prices? The COVID-19 pandemic could be one cause of the triggered surge in prices. As the U.S. faced increased cases in a new wave of COVID-19, the economy has been stuck in something of a standstill.
That triggered a 14.5% drop in demand for gas, where an average driver consumed about 534 gallons in 2020 compared to 624 gallons per driver in 2019.
According to
Pew Research Center
, the volatility of gas usage would mean a sudden drop or surge in prices. That is evident in 2020 when the pandemic caused major lockdowns that saw gas prices sink by 27%.There has been a fluctuation in supply and demand. As stated earlier, the pandemic triggered a decline in demand, making oil producers cut their production. That has led to a significant decrease in drilling, with about 70% of the U.S. mines shutting down in 2020.
About 5% of America's refining companies closed down in 2020 due to low demand for refined oil during major lockdowns.
The ongoing conflict in oil-producing countries like Libya and Kazakhstan has led to a significant rise in oil prices. America has no command in the ongoing war in both countries and therefore expects a steady increase in gas prices.
Hurricane Ida that hit the Gulf Coast back in August is another cause of the gas price surge. The storm is anticipated to cause a pile-up and a multitude of supply chain problems.
This amplifies the struggling supply chain exasperated by the pandemic, causing delays and shortages of shipping containers. In addition, the surge might hit harder as some two major ports remain closed.
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The current state of gas prices
As per the
U.S. Energy Information Administration
(EIA), a week ago on 01/24/22, regular gasoline went for $3.323 per gallon while today's prices are at $3.368, showing an increase of $0.045 per gallon. In California, prices went a dollar high for the average gallon price, making it $4.423. Even worse, some different states recorded a price high of $5. Currently, Mississippi has recorded the lowest prices of $2.85 per gallon.
Meanwhile, as America's economy opened up, a delay in OPEC restoring its production saw crude oil prices double to as high as $84 per barrel. The shutdown of most large refineries during the pandemic period might have also tightened the supply, creating new high demand.
MORE: Oil Companies Seeing Record Profits Amid Global Turmoil
Expected price spike by Memorial Day
CNBC
states that gasoline prices are yet to hit the highest throughout the Memorial Day weekend and summer. In a comparison made by AAA, the cost of unleaded gas goes for $3.04 per gallon, which is 16 cents more than last year's $1.08 per gallon. It is expected that more Americans will travel during the Memorial weekend, with about a 60% increase as compared to 2020, where lockdowns minimized movements.
Early January, gas prices went high while major parts of the southeast U.S. went deeper into their pockets after a colonial pipeline went off for about a week due to ransomware attacks. The southeast U.S. will experience supply strain during Memorial Day, causing a hike in prices for most stations.
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