Gas prices climbed again today. Here's why U.S. gas prices are at a record and why they'll likely stay high for a long time.
Russia's invasion of Ukraine is a major reason that US drivers are paying record prices for gasoline. But it's not the only reason.
Very little of that went to the United States. Europe got 60% of the oil and 20% went to China in 2021. But oil is priced on global commodity markets, so the loss of Russian oil affects oil prices around the globe, no matter where it is used. On Tuesday the United States announced a formal ban on all Russian energy imports. The UK government said it, too, will phase out Russian oil imports by the end of 2022 and explore ways of ending natural gas imports.
Less oil and gasoline from other sourcesWhen pandemic-related stay-at-home orders around the world crushed demand for oil in the spring of 2020, oil plunged, briefly trading at negative prices. OPEC and its allies, including Russia, agreed to slash production as a way to support prices. Even when demand returned sooner than expected, they kept production targets low.
"They can't find people, and can't find equipment," McNally added."It's not like they're available at a premium price. They're just not available." State and federal environmental rules are prompting some refineries to switch from oil to lower carbon renewable fuels. And some companies are closing older refineries rather than invest the money it would cost to retool to keep them operating, especially with massive new refineries set to open overseas in Asia, the Middle East and Africa in 2023.
"Jobs numbers have been pretty impressive and a lot of [workers] will be driving to work somewhere," said Tom Kloza, global head of energy analysis for the Oil Price Information Service."There's also going to be more people not working remotely than there were last year or even last month. I don't know how to put a number on that, but that is certain to add to demand."
Tight supplies and strong demand were likely to push prices above $4 even without the current disruption caused by the war.
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