Will Gas Prices Stay High?
You're not alone if you feel like you have to take out a small loan to afford these high gas prices these days. Yes, we all miss the low gas prices from the 2020 quarantine period when we had nowhere to go. The agony at the pump is really starting to strain our budgets now that prices are higher than they've been in years. (In March, the average price of a gallon of gas surpassed the previous all-time high set in 2008.)
Let's take a look at the big question on everyone's mind these days:
Why Are Gas Prices So High?
You got it right if you guessed a combination of inflation and the Russia-Ukraine conflict.
Let's start with inflation.
For months, the astronomically high inflation rate (7.9% over the preceding 12 months, the highest in 40 years) has been a major factor in driving up gas costs. However, the conflict between Russia and Ukraine has added even more fuel to the fire.
If you didn't know, the cost of crude oil, from which gas is refined, is closely tied to the price of gas. A $10 increase in the price of a barrel of crude adds about a quarter to the cost of a gallon of gasoline at the pump. (Yup)
Despite the fact that the United States does not buy much oil from Russia, the country accounts for 30% of Europe's petroleum imports. They are a major producer of energy, including natural gas and crude oil, and all of these factors will influence how much fuel costs for you and me. Oil is traded on a global scale, and any price fluctuations have an impact all over the world. This is because they're not able to get that energy out of the country because of the Black Sea, a lot of the cargo containers that go in and out and take those monies out of that area.
Insurance companies are basically saying, 'Hey, we don't want to cover you anymore. So Mr. or Mrs. Captain, you're going in there with no insurance.' And those are not decisions that anyone wants to make from a business perspective which is certainly clamping down on the supply.
The US is still importing Russian oil as of this blog, and that may change which would then drive prices higher, but the biggest thing you need to understand is gas prices are going to stay higher, longer.
And that's something we will have to address, very soon.