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Speculative viewpoint on rising gas prices

(Photo courtesy of David Schaper/NPR) Gasoline prices are near an all time record high.

Sohini Nath
Connector Staff 

In the United States, gasoline is heavily depended on by American citizens. The U.S. Energy Information Administration reports that in 2020, Americans used about 123 billion gallons of gasoline, and that was during a global pandemic when driving was at an all-time low. But ever since the invasion of Ukraine by the Russian government and its leader President Vladmir Putin, gas prices in the country have been at an all-time high, to an almost untenable extent in the view of the American public. NPR reports that gas prices have gone so high, they have set a new national record, because the average price topped 4.17$.

So why has this happened? Most people believe that it is simply because of the invasion of Ukraine and while it is absolutely a factor, it is not the only factor that has taken the country to this point.

As professor of economics at UMass Lowell Anne Rhoads noted in an interview, “Gas prices were going up even before the invasion…. As the pandemic became less intense, people started to drive again, all that requires more energy.”

Because of the pandemic, Professor Rhoads also noted that when demand for gasoline went down due to reduced driving and other energy needs, major oil producers such as OPEC (Organization of the Petroleum Exporting Countries) cut back on supply, which meant higher prices after an initial low, because if production of the gasoline was halted, the rapid beginning of people driving again meant production had to catch up to the sudden demand.

There were also other events that meant supply cutoffs before the invasion, like the events of Hurricane Ida. But even with other factors, I believe the invasion of Ukraine has mostly been responsible for the dramatic rise in prices. The US sanction on Russian oil has had a very heavy effect on this, as Russia is a major supplier of oil.

Professor Rhoads said that the signs were there before, but if the invasion didn’t happen, then prices wouldn’t have gone up as quickly as they did in the last month. The sanctions have not just affected the U.S.- Europe has been heavily affected by high prices too, as Russia is a major supplier to the rest of the continent.

So, what can the United States government do about this? Frankly, not much. Many Americans believe that President Joe Biden either is entirely responsible for the U.S. economy and its regulation, but that is simply not true.

As Professor Rhoads notes, “The president does not have a lot to do with inflation. He can tinker around the edges and that might shave a few cents off gas, but he cannot control the oil industry.” The professor also said that the only government body with some power would be the Federal Reserve, not the President. “When it comes to reducing inflation, that tends to be more the responsibly of the Federal Reserve and they could do something like raise interest rates” she said. “Otherwise, the government cannot do much.”

 

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