Houston — Drivers will have to do more to refill their cars as the summer travel season kicks off over Memorial Day weekend as Russia’s invasion of Ukraine continues.
Regular California gasoline has already gone up to over $6 a gallon, and it’s virtually impossible to find gasoline for less than $4 anywhere else. Nationwide, prices rose about 50 cents a gallon last month.
The Ukraine war is the most powerful reason for rising oil prices, as global refiners, tankers and traders shun Russian exports, pulling up to 3 million barrels a day of oil from the market. Energy traders also opposed oil prices, expecting the Western government to impose stronger sanctions on Russia and the energy industry.
But another reason for the price increase is that despite this, drivers have done little to burn less gasoline. Analysts say people seem to have a strong desire to get out on the road as the US recovers from the worst of the COVID-19 pandemic.
“Troubleshooting means people have to drive less,” said Tom Kluza, global head of energy analysis at Oil Price Information Service. But people say. sorry. I was closed. I am going on vacation this summer. “
The national average price of a gallon of gasoline on Friday was $4.60, up from $3.04 a year ago, according to the AAA. The price of planes, which usually rises and falls with the price of jet fuel, rose faster.
One of the reasons for the price increase is a decrease in national and global fuel stocks. Nearly 3% of U.S. refining capacity was shut down during the pandemic as oil companies shut down old and unprofitable factories as demand dwindled. Other refineries around the world have also closed.
The price of gasoline is largely determined by the price of oil, which is determined by the global market. Analysts disagree about what will happen next. Mostly because international politics have become unpredictable. Russia’s withdrawal from Ukraine would lead to immediate price declines, similar to the easing of Western sanctions on Iran and Venezuela. Escalation in Russia would be the other way around.
Many experts believed that energy prices would rise even further. However, to contain the spread of the coronavirus, China has imposed strong lockdowns in Shanghai and other areas, dramatically reducing energy demand in the world’s largest fuel importer.
Changes in Chinese policy could lead to higher prices. However, prices could fall as producers in the US, Canada, South America and the Middle East begin to ramp up production.
Production in Russia, which accounts for about 10% of the world’s oil supply in recent years, is expected to decline.
However, it was able to find new energy buyers in China and India. This means that Middle Eastern countries are now selling more oil to Europe because they sell less to Asia.
According to a recent report by Citi Analyst, expectations of a significant drop in Russian production are “overblown”. Analysts said Russian vessels of up to 900,000 barrels per day could be diverted from Europe to European countries that could not be diverted to other suppliers by tankers, analysts said.
Another report from ESAI Energy, a global energy market analyst this week, predicted that summer refinery output will increase in the US, Europe, the Middle East and India after seasonal maintenance. China is also working to sell more gasoline, diesel and other refined fuels.
“This increase in supply will ease the summer price hikes for pumps,” said Sarah Emerson, president of ESAI.
“There are many different pieces of the puzzle,” Emerson explains why it is difficult to predict energy prices. “Recovering from an epidemic and starting a war in Europe are juxtaposed and very complex.”
Russia-Ukraine War and the World Economy
long-distance struggle. Russia’s invasion of Ukraine had ripple effects around the world and exacerbated stock market problems. The conflict caused massive gas price hikes and product shortages, and forced Europe to reconsider its dependence on Russian energy sources.
Slowing global growth. The aftermath of the war has hampered major economies’ efforts to recover from the pandemic, creating new uncertainties and weakening economic confidence around the world. In the United States, inflation-adjusted GDP fell 0.4% in the first quarter of 2022.
high energy prices. Oil and gas prices, which have already risen as a result of the pandemic, have continued to rise since the conflict began. The escalating conflict has also caused countries in Europe and other countries to reconsider their dependence on Russian energy and look for alternative energy sources.
The Russian economy is facing a recession. While pro-Ukrainian states continue to impose sanctions in response to the Kremlin’s aggression, the Russian economy has avoided a massive collapse for the time being thanks to capital controls and rate hikes. However, the governor of the Russian Central Bank has warned that the country is likely to face a serious economic downturn as stockpiles of imports and parts decline.
high trade barriers. Ukraine’s invasion also sparked a wave of protectionism as the government erected new barriers to halt exports as the government struggled to secure goods for its citizens amid shortages and rising prices. However, restrictions increase the cost of the product and are difficult to obtain.
Food supplies are under pressure. The war has raised food prices in East Africa, which is heavily dependent on Russian and Ukraine exports of wheat, soybeans and barley and is already suffering from severe drought. Amid shrinking supplies, supermarkets around the world are starting to ask customers to limit their purchase of sunflower oil, with Ukraine being the largest exporter.
Non-metal prices are rising. The price of palladium used in automobile and cell phone exhaust systems has risen amid concerns that Russia, the world’s largest exporter of metals, could be cut off from the global market. The price of nickel, another major Russian export, also rose.
Another unpredictable variable that could drive up oil and gasoline prices this summer is hurricanes. Powerful storms could destroy refineries and pipelines along the Gulf Coast, and government forecasters are predicting a “higher-than-usual” hurricane season.
Mr. Oil Price Information Service “We will see stifled demand manifest itself towards the end of June, when the real summer begins,” Kloza said. “I’m afraid of July because of increased demand, and I’m afraid of August because of the possibility of a hurricane,” he said.
Oil industry executives have often said that a high price can be cured by a price that is too high. This is because it is forcing consumers to buy less fuel or switch to more fuel-efficient cars. But the drivers don’t seem to shrink or make any other big changes. At least not yet.
There are early signs that gasoline demand could stagnate or slightly lower, at least during the week, according to energy analysts. Data from the Department of Energy for May showed that gasoline sales were down more than 2% over the same period last year. However, the government measures the fuel supplied by refineries, dealers and mixers, rather than retail sales from pumps to drivers. Analysts still expect gas sales to surge during the summer, but some drivers may change their plans if prices rise too much.
In a recent survey of 2,210 adults by the American Hotel and Lodging Association, 60% said they would take more vacations this year than last year. However, 82% said gasoline prices will affect their destinations to some extent.
Association President Chip Rogers said, “The pandemic has instilled a greater appreciation for travel in most people, and this is reflected in Americans’ plans to travel this summer.
People have also found it difficult to switch to a more fuel-efficient car. Sales of electric and hybrid vehicles are growing, but a shortage of parts limits the supply of all new cars, and some electric and hybrid models have long waiting lists.
Perhaps the only good thing about the pandemic for consumers is that energy prices have fallen sharply as the global economy has been shaken. But as oil prices fall to levels not seen in decades, international oil companies have curtailed their investments.
As demand started to rise last year, oil companies have rehired their workforce and restarted drilling rigs. However, many oil executives have been reluctant to invest large sums of money in new wells because they fear that prices will drop before they begin production, causing huge losses and debt. As a result, large energy companies use most of their soaring profits to pay dividends and buy back their stock.