Why are gas prices so high? And who is to blame? - Poynter
Are OPEC and Russia to blame?
At the root of the price increases for gasoline, as with so many other products, is the coronavirus pandemic. Since the initial economic wallop from the virus in the spring of 2020, demand for gasoline has risen steadily as business activity has increased. Yet supply hasn’t been able to recover as quickly, thanks to delays in restoring drilling capacity, higher transportation costs, and sluggish production increases.
As a result, prices of crude oil have risen consistently in recent months, though they are still about 40% below their peak levels of July 2008.
(PolitiFact)
These higher prices ultimately show up in the prices Americans pay for refined oil products like gasoline.
“Higher prices at the pump matter,” Finley said. By his calculations, he said, just this year’s increases are costing each American household an additional $1,000.
So how do Russia and OPEC play into this? Together, they account for just over half of global production, so experts agree that they can do the most to increase supply, which would result in lower prices at the pump.
After cutting production aggressively in the early days of the pandemic, the OPEC-led group has been gradually, but not fully, restoring production. Since July, OPEC and Russia have agreed to raise production by 400,000 barrels per day every month, less than the U.S. and other oil importers like China, India, and Japan have been seeking.
OPEC and Russia have “just increased production at a slower, ‘cautious’ pace instead of doing so on the timetable that Biden would like,” said Patrick De Haan, the head of petroleum analysis at GasBuddy.
On Nov. 4, two days after Biden’s press conference, OPEC and Russia met and chose not to accelerate production, foiling Biden and the other importers.
Couldn’t the U.S. increase oil production on its own?
It’s theoretically possible for the U.S. to produce more oil, but it would be politically and practically difficult, experts said.
One obvious obstacle is the pressure Biden is facing from his allies in the environmental movement. Biden campaigned on curbing climate change and promoting electric vehicles, so encouraging more production now would contradict his longstanding position.
Another obstacle is that U.S. producers can’t ramp up production as quickly as OPEC can.
“The reason why the administration is asking OPEC and Russia to increase is because they have spare production capacity as the result of their previous cuts, which can be brought to the market quickly,” Finley said. “Here in the U.S., producers must decide to increase drilling and completing new wells, which could take months to add appreciable volumes.”
For producers, that means making a bet that prices will stay high enough to justify the added investment.
De Haan agreed. “I do not believe the U.S. has a lever to raise production quickly enough, he said. “More like a slow steady growth that should net some notable rise in production in three to six months from now.”
Another factor is that Biden can’t simply flip a switch and boost U.S. production.
“Increasing domestic production isn’t a policy decision. It is a private sector response,” said James H. Stock, a professor of political economy at Harvard University. “In principle, yes, it could ramp up quickly to offset quite a bit of the oil price increase, but that is a decision by private entities.”
And it’s unclear how effective Biden could be at influencing that decision, De Haan said.
“The White House has demonized the sector, enacting executive orders designed to slow growth of oil production, and that’s definitely had a role,” he said.
To make more supply available, a president has the power to release stored oil from the Strategic Petroleum Reserve. But that option is typically reserved for emergencies and short-term supply disruptions that threaten the economy.
Are OPEC and Russia to blame?
At the root of the price increases for gasoline, as with so many other products, is the coronavirus pandemic. Since the initial economic wallop from the virus in the spring of 2020, demand for gasoline has risen steadily as business activity has increased. Yet supply hasn’t been able to recover as quickly, thanks to delays in restoring drilling capacity, higher transportation costs, and sluggish production increases.
As a result, prices of crude oil have risen consistently in recent months, though they are still about 40% below their peak levels of July 2008.
(PolitiFact)
These higher prices ultimately show up in the prices Americans pay for refined oil products like gasoline.
“Higher prices at the pump matter,” Finley said. By his calculations, he said, just this year’s increases are costing each American household an additional $1,000.
So how do Russia and OPEC play into this? Together, they account for just over half of global production, so experts agree that they can do the most to increase supply, which would result in lower prices at the pump.
After cutting production aggressively in the early days of the pandemic, the OPEC-led group has been gradually, but not fully, restoring production. Since July, OPEC and Russia have agreed to raise production by 400,000 barrels per day every month, less than the U.S. and other oil importers like China, India, and Japan have been seeking.
OPEC and Russia have “just increased production at a slower, ‘cautious’ pace instead of doing so on the timetable that Biden would like,” said Patrick De Haan, the head of petroleum analysis at GasBuddy.
On Nov. 4, two days after Biden’s press conference, OPEC and Russia met and chose not to accelerate production, foiling Biden and the other importers.
Couldn’t the U.S. increase oil production on its own?
It’s theoretically possible for the U.S. to produce more oil, but it would be politically and practically difficult, experts said.
One obvious obstacle is the pressure Biden is facing from his allies in the environmental movement. Biden campaigned on curbing climate change and promoting electric vehicles, so encouraging more production now would contradict his longstanding position.
Another obstacle is that U.S. producers can’t ramp up production as quickly as OPEC can.
“The reason why the administration is asking OPEC and Russia to increase is because they have spare production capacity as the result of their previous cuts, which can be brought to the market quickly,” Finley said. “Here in the U.S., producers must decide to increase drilling and completing new wells, which could take months to add appreciable volumes.”
For producers, that means making a bet that prices will stay high enough to justify the added investment.
De Haan agreed. “I do not believe the U.S. has a lever to raise production quickly enough, he said. “More like a slow steady growth that should net some notable rise in production in three to six months from now.”
Another factor is that Biden can’t simply flip a switch and boost U.S. production.
“Increasing domestic production isn’t a policy decision. It is a private sector response,” said James H. Stock, a professor of political economy at Harvard University. “In principle, yes, it could ramp up quickly to offset quite a bit of the oil price increase, but that is a decision by private entities.”
And it’s unclear how effective Biden could be at influencing that decision, De Haan said.
“The White House has demonized the sector, enacting executive orders designed to slow growth of oil production, and that’s definitely had a role,” he said.
To make more supply available, a president has the power to release stored oil from the Strategic Petroleum Reserve. But that option is typically reserved for emergencies and short-term supply disruptions that threaten the economy.
the caddy gets about 17 mpg
exactly what people want to hear right now
I hope so
