Mysterious Gas Price Hikes

Gas prices rising

With a war raging in Eastern Europe, the common wisdom is that we are all going to pay for sanctions against Russia in the form of higher energy costs. But it’s still a bit confusing that gas prices at the pump have risen so dramatically. A month ago, the typical consumer was paying $3.488 a gallon; today the average cost is $4.325—an increase of roughly 30%. In some places, the increase has been more dramatic; Californians are now paying $5.34 a gallon when they fill their tanks, and there have been reports of people paying $7 a gallon at certain gas stations around the country.

Why should this be confusing? First of all, only about 8% of the petroleum that the U.S. imports comes from from Russia (.67 million barrels a day last year), and the U.S. actually exported about 12 times that amount (8.63 million barrels a day) to other countries around the world—notably Mexico, Canada and China. In most years, our domestic oil production exceeds consumption, which means that the ban on Russian oil should—theoretically, at least, have little impact on the American gas pump.

But perhaps a cutoff in Russian oil is causing a bidding war that is driving up prices everywhere, and we’re feeling the ripple effects. That doesn’t actually seem to be the case. The cost of a barrel of the benchmark ‘Brent Crude’ (which basically means oil on the world markets) peaked at around $130 two weeks ago and has been falling ever since, down to around $106 currently. That’s a decline of almost 20%. Domestically produced oil is actually a bit cheaper.

Of course, oil industry experts are saying there is no evidence that they’re raising prices without any increase in their costs, and we will have to wait for their profit numbers before that evidence becomes available to the general public. In the meantime, all we know is that the recent spike in American gas prices is hard to directly tie to the war in Ukraine.

This article was written for information purposes only and its content should not be construed by any consumer and/or prospective client as rebel Financial’s solicitation to affect, or attempt to affect transactions in securities, or the rendering of personalized investment advice for compensation. No client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from rebel Financial, or from any other investment professional. See our disclosures page for more information.


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