Houston — As Russia’s invasion of Ukraine begins this Memorial Day weekend, as the summer travel season begins, drivers will need to fire more to fill their cars.
The price of regular gasoline in California has already risen to over $ 6 per gallon, making it virtually impossible to find gasoline under $ 4 elsewhere. Nationally, prices rose nearly 50 cents per gallon last month.
The war in Ukraine is the most direct cause of price spikes as global refiners, tanker companies and traders avoid Russia’s exports and drive up to 3 million barrels of oil per day out of the market. Energy traders have also raised oil prices in the hope that the Western government will impose stricter sanctions on Russia and its energy industry.
But another reason for the high price is, nevertheless, that the driver hasn’t done much to significantly reduce the amount of gasoline burned. Analysts said people seem to have a strong desire to hit the road as the United States recovers from the worst Covid-19 pandemic.
“Solving the problem means less people need to drive,” said Tom Croza, Global Head of Energy Analysis for Oil Price Information Services. “But people say:’Sorry, I’m blocked. I’m going on vacation this summer.”
According to AAA, the national average price for a gallon of regular gasoline on Friday was $ 4.60, up from $ 3.04 a year ago. Airfares, which usually fluctuate according to the price of jet fuel, are rising even more rapidly.
One of the reasons for the rise in prices is low domestic and global fuel inventories. Approximately 3 percent of US refinery capacity went offline during a pandemic where oil companies closed old unprofitable plants as demand shrank. Other refineries around the world have also been closed.
The price of gasoline is mainly determined by the price of oil, which is set in the global market. Analysts are divided on what will happen next, mainly because international politics has become so unpredictable. Russia’s withdrawal from Ukraine will soon lower prices, as will the relaxation of western sanctions on Iran and Venezuela. Russian escalation does the opposite.
Many experts believed that energy prices would rise even more than they had. However, China has imposed strict blockades on Shanghai and other regions to stop the spread of the colonavirus, significantly reducing energy demand in the world’s largest fuel importers.
Changes in China’s policies could cause prices to skyrocket. However, prices could fall as producers in the United States, Canada, South America and the Middle East begin to increase production.
In recent years, Russia’s production, which accounts for about 10% of the world’s oil supply, is expected to decline further.
However, the country was able to find new buyers of that energy in China and India. This means that Middle Eastern countries are selling less oil to Europe and therefore more oil to Europe.
According to a recent report by Citi analysts, expectations for a significant decline in Russia’s production are “exaggerated.” Analysts said Russia’s tanker shipments of up to 900,000 barrels per day could be diverted from Europe or to European countries that cannot switch to other suppliers.
Another report this week by global energy market analysis firm ESAI Energy predicts that summer refinery production will surge in the United States, Europe, the Middle East and India after seasonal maintenance. China is also looking to sell more refined gasoline, diesel and other fuels.
Sarah Emerson, President of ESAI, said:
“There are lots of different puzzle pieces,” Emerson added, explaining why energy prices are so difficult to predict. “The juxtaposition of recovery from a pandemic and the start of a war in Europe complicates it very much.”
Russia-Ukraine War and World Economy
Hurricane, another unpredictable variable that could cause oil and gasoline prices to skyrocket this summer.A powerful storm could knock out refineries and pipelines along the Gulf of Mexico coast, government predictors said “Above normal” hurricane season..
“Towards the end of June, when the real summer begins, you could see some real disgusting demand emerge,” said Mr. Croza, an oil pricing information service. “I’m afraid of July because of increased demand, and I’m afraid of August because of the possibility of a hurricane.”
Oil industry executives often said that high-priced therapies are their very high prices. That’s because consumers are forced to buy less fuel or switch to more fuel-efficient cars. But the driver doesn’t seem to have made any reductions or other major changes, at least yet.
According to energy analysts, there are tentative signs that gasoline demand may level off or fall slightly, at least on weekdays. Gasoline sales fell by more than 2% from the same period last year, according to data from the Energy sector in May. However, the government is measuring the fuel supplied by refiners, traders and blenders rather than retailing it to drivers with pumps. Analysts still expect a surge in gas sales during the summer, but some drivers may change their plans if prices go up much higher.
In a recent survey of 2,210 adults by the American Hotel Androsing Association, 60% said they were more likely to take more vacations this year than last year. However, 82% also said that gasoline prices would have some impact on where they went.
“The pandemic has instilled greater appreciation for travel to most people,” said Chip Rogers, president of the association.
People also find it difficult to switch to a more fuel-efficient car. Sales of electric and hybrid vehicles are increasing, but a shortage of parts has restricted the supply of all new vehicles, and some new electric and hybrid vehicles have a waiting list for several months.
Perhaps the only good thing about the pandemic for consumers was the rapid fall in energy prices when the global economy grew rapidly. However, as oil prices have fallen to levels not seen in decades, international oil companies have cut back on investment.
As demand began to increase last year, oil companies rehired people and scrambled to restart drilling rigs. However, many oil executives are hesitant to invest heavily in new wells because they are afraid that prices will fall before the new wells begin production, leaving large losses and debt. doing. As a result, large energy companies spend much of their soaring profits on dividend payments and share buybacks.