There’s no doubting that gas prices are at an all-time high, making fuel economy a priority for all of us. However, you may run into posts, articles, or comments discussing the gas shortage causing the prices to increase. However, there’s a bit of important info regarding that. There is no gas shortage.
The U.S. has plenty of gasoline, but oil is extremely expensive at the moment
According to Cars.com, the driving force behind the cost of gas is not a fuel shortage like many assume. Instead, the inflated prices come from the cost of oil. Andrew Gross, a spokesman for AAA, outlined the details to Cars.com in an email.
“The U.S. has plenty of gasoline. However, the price is high because oil is the main ingredient, and it’s costly right now. For every $4.94 you pay for a gallon of gas, oil accounts for $3. Federal and state taxes are about 50 cents,” wrote Gross.
The price of crude oil always reflects the price of gasoline. That’s why gasoline prices dipped to the lowest levels in decades in 2020. Amidst the global shutdown during the height of the Covid-19 pandemic, the price of a barrel of crude oil actually went negative, according to Investopedia. The massive decrease in oil and fuel consumption due to quarantines led to an oil surplus and low gas prices.
However, we’re now experiencing the opposite. A sudden surge in demand for oil and fuel with the relaxation of pandemic restrictions combined with petroleum refineries slowly ramping production back up caused an initial shock. As a result, the market has lost about 1 million barrels of daily petroleum-refining capacity since early 2020
Now, oil embargos on Russia reflect a worldwide reduction of 3 million barrels of crude oil daily. This is why the entire world is seeing all-time high fuel prices, not just the U.S.
When will gas prices go back down?
It’s hard to say when we might expect to see gas prices back down to around three dollars per gallon. At the moment, the Energy Information Administration predicts that gas prices will stay inflated through 2023.
The EIA estimates that prices will continue to stay inflated because of the unknown effects of sanctions on Russian oil. Furthermore, the longer the conflict between Russia and Ukraine continues, the longer this situation will continue.
Despite all this, EIA does predict that gas prices will drop for the summer. However, it isn’t expecting any sort of substantial reduction. Cars reports that they expect to see a national average of $4.27 per gallon in the near future. That’s better than it has been but still isn’t phenomenal.
While there is no gas shortage, there is a shortage of diesel. This comes on the heels of the shutdown of a major petroleum refinery in Philadelphia following an explosion in late 2019. The diesel shortage has an effect on everyone, not just diesel vehicle owners. Cargo ships, trucks, and a multitude of other supply-chain vehicles use diesel. So, a shortage could spell disaster.
Overall, the best course of action is to strap in and get used to these gas prices for a while. If you’re looking for a new car, you should definitely consider something fuel-efficient. In that case, click below to see a handful of cars that get more than 50 mpg!