Article by Naomi Moryosef ('23)
Remember when gas cost less than three dollars a gallon? Compared to the prices Americans, and especially Californians, have seen over the past couple of months, that price seems inconceivable. But, gas was once that inexpensive! Now, gas prices are rising like sea levels, and it can become quite frustrating to buy a gallon of gas for $5.39 one day and then pay $6.09 per gallon a few days later. It is completely understandable to fume over these preposterous gas prices; however, perhaps a look into the reason for this upward progression will somewhat alter how people approach this troublesome subject.
Let us go back to the infamous year of 2020. While the coronavirus was quickly spreading throughout the world, people were fleeing the streets and, therefore, driving less frequently. For this reason, many oil companies decreased their oil production. When the vaccine became available to the public and the world seemed to start up again, people jumped at the chance to get out of their houses and stretch their legs after that long period of hibernation. So, inevitably, the demand for gas significantly increased, but oil companies were unable to keep up in terms of supply. Nick Vyas, the executive director of the Global Supply Chain Management Institute at the University of Southern California, explained, “When you shut down production, restarting is not as simple as flipping a switch back on.” Hence, gas prices increased.
When demand for gas went down during 2020, the Organization of the Petroleum Exporting Countries (OPEC) decided to decrease oil production. They continued to keep production low even when the demand for oil was rising as the spread of the pandemic began to subside. The United States regulates its own oil production, so it was not required to adhere to OPEC’s decision to continue to keep oil production low. But, oil prices remained high in the United States because American companies decided to focus their time on finding ways to limit future demand for oil to help save the environment. As the American public became increasingly distressed over the rising gas prices, United States companies began to focus more attention on increasing oil production. Finding enough workers and equipment to produce more oil proved difficult for oil companies, however. Also, the executives of these companies chose to focus less on increasing production and more on raising stock prices. Additionally, US oil companies are exporting more oil to Europe because gas prices there far surpass those in America. All of this and more has led to the steady rise of gas prices, including the Russian invasion of Ukraine.
Although Russia contributes a mammoth supply of crude oil to international markets, the United States receives a very small percentage of it. Nevertheless, since crude oil is an energy commodity that has fluctuating costs based on global supply and demand of it, Russian oil exports directly affect the price of oil in the United States. Because of the Russian invasion of Ukraine, the United States declared that it would no longer import Russian energy commodities this past March, and the European Union declared that they would no longer accept Russian oil imports by ship in June. This was a drastic decision as two-thirds of European countries’ oil comes from Russia. Gas prices were not the only commodity affected by the Russian invasion: food prices are also being affected. Almost one-third of the international wheat trade came from Russia and Ukraine, and ever since the war started, the price of wheat in the global commodities market has risen 36 percent. The price of other commodities such as corn, barley, and sunflower oil have also been affected. There is no question that the war in Ukraine has affected the price of gas, as well as other commodities, in the United States.
In the summer, prices began to wane somewhat as a result of attempts to balance gas costs. President Biden’s decision to release millions of barrels of crude oil from the Strategic Petroleum Reserve, the greatest supply of emergency crude oil in the world, is any example of these efforts. But, prices will continue to rise since OPEC is planning to continue to decrease worldwide oil supply. Additionally, during the summer, gas stations shift from selling winter-grade fuel to summer-grade fuel, which is more expensive to produce. That, on top of the fact that more people are on the roads during the summer, contributes to higher gas prices during the season. And, prices continue to stay high in California due the state's concerns about protecting the environment.
Looking at the gas marquees today can be understandably daunting and rage-provoking, but looking past those high numbers to the real reason behind the spikes in gas prices may offer some clarity and even, dare I say, pride. When Russia invaded Ukraine, the skies were filled with blurs of yellow and blue as people hung Ukrainian flags in support of the struggling country. People all over the world donated money and collected clothing and other necessities to help the struggling refugees. The United States’ decision to ban Russian oil imports was just another measure taken to support Ukraine and thwart Russia. Would people rather continue to provide funds to Russia through the purchase of their oil just to have cheaper gas? Looking at it from the perspective of a sympathetic ally to Ukraine, one can see that people are actually helping defeat Russia everyday by paying just a little bit more for gas. Additionally, from an environmental perspective, raising gas prices may push people to switch to electric vehicles, which is investing in the future of the planet. While many middle-class people are unable to afford electric vehicles, higher demand for them may lower their price in the future and make them more accessible to Americans with lower incomes. It is noble and necessary to help Ukraine and save the environment, and paying more for a gallon of gas does both.
Gasoline is a commodity that literally drives the nation. COVID-19, OPEC’s decision to decrease the global oil supply, fears about climate change, and the Russian invasion of Ukraine have all directly affected the price of this staple. Perhaps looking at it as an opportunity to do the world a service as opposed to an unnecessary hardship will diminish feelings of frustration and displeasure over paying such high prices for gas. From this point of view, every gallon and every mile fuels the future of humankind.
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