Why Fuel Is So Expensive
Gas prices have reached record highs in the United States. In fact, they’ve been climbing for more than a year, and they can now reach $6 a gallon in some locations. Those costs can add up to a real financial burden for millions of Americans.
One of the largest factors that’s pushing up the price of gas is the cost of crude oil. Crude oil is a natural resource used to make fuels like diesel and gasoline. When it’s not in supply, prices will jump. A barrel of West Texas Intermediate crude traded in the negative territory for a few weeks in early June, which is a good example of the old “supply and demand” problem.
Another factor is the rise in the number of people traveling. This slowed down during the pandemic, but has since picked up again. As a result, many businesses have reopened, so more fuel is being consumed.
While it’s difficult to predict what the price of fuel will be in the future, analysts expect it will continue to be high, as the cost of oil increases and refining capacity is squeezed. Refining companies are squeezing out more and more diesel in order to keep up with demand.
The average fuel price in the United States is currently $3.22, but some parts of the country are paying as much as $4.08. Gasoline, diesel and jet fuel all have a lot of competition on the international market. Traders and retailers are quick to raise their prices to match the increase in demand. They also are at the mercy of exchange rates.
However, the most important driver of higher fuel prices is the stress placed on the global supply chain. Oil and gas producers are trying to boost production, but the resulting boost in prices is taking a toll. Many of the major suppliers have tightened their supply. Meanwhile, the Russian oil ban has pushed the price of oil higher. Several US leaders have announced plans to impose sanctions against Russia, which will cut oil imports by a full 1.5 million barrels a day.
Some consumers are already cutting back on driving. Others are looking to save money by buying a smarter vehicle. Nevertheless, the question remains: when will gas and fuel prices finally fall?
The fuel and frugality aficionado might be surprised to find that the price of a gallon of gas is still below the peak of its 2008 predecessor. According to the RAC, the “most pronounced” increase in price has been in the past two months. Although the average price of a barrel of Brent Crude was similar to the price in 2014, it’s been on a steep climb for the last few months.
It’s not clear what will ultimately spur a change in prices, but the recent fuel duty cut was meant to give motorists a bit of respite from the soaring costs of living. Unfortunately, many fuel retailers and manufacturers are not passing on the savings to customers.
