If you’re hoping for much cheaper gas soon, I’ve got some bad news: prices probably won’t drop much for at least a few months.
The causes of more expensive gas will probably remain with us for a while. After pushing up US prices to over $4 a gallon, the Russian war in Ukraine continues with no clear end in sight. Producers so far seem unwilling or unable to pump enough supplies to fill the gap left by the war.
When I asked if good short-term solutions exist, Tom Kloza, chief of energy analysis at the Oil Price Information Service, replied simply, “No.”
For Americans, the immediate effect is that life is simply going to cost more. We will pay more in the coming weeks or months if we fill our gas tanks or pay the utility bill. The price of many other goods will rise because so many things – food, iPhones, PlayStations, cars – have to be transported at one point or another by a truck, boat or plane that burns fossil fuels.
Higher fuel prices also have broader consequences. A push to drill for more oil and natural gas, or to pursue alternative energy sources more aggressively, could impact climate change (in good or bad ways). An audience angry at the cost of living could protest or vote out the politicians in power. People in the US and other countries helping Ukraine may wonder if their support is worth more expensive gasoline and other goods.
With the retreat of the Covid pandemic, many of us wanted – and expected – some sense of relief after two horrific years. Higher gas prices and broader inflationary trends counter that, as if we were just trading one crisis for another. And as with the pandemic, there is no clear end in sight.
Producers versus low prices
At the start of the pandemic, fuel demand collapsed as people stayed at home. As much of the world reopened, demand returned.
But supply has not kept pace, just as strained supply lines have pushed up food prices and hindered the flow of cars, electronics and other goods. By turning much of the world against a major oil and gas producer in Russia, the war in Ukraine has only exacerbated supply problems.
Some delivery issues are inherent in the design. OPEC Plus, a cartel of oil-producing countries that also includes Russia, has made an effort to keep prices – and therefore profits – as high as possible by limiting supply. The cartel has stuck to its approach.
But it’s not just OPEC. US oil companies have deliberately slowed production after a few recent fracking boom-and-bust cycles left them with oversupply and plummeting prices. “We have the third boom, and these executives don’t want to have the third failure,” Kloza said.
All this leaves few good solutions in the short term. Even if public pressure or a tense market eventually pushes producers to drill more, it could take months for new production to pick up, especially given the tight labor market and supply. And even if US producers ramp up, OPEC Plus could decide to cut back — to keep prices high.
Other possible solutions lawmakers have mentioned or introduced, such as a gas tax vacation or instant cash relief, could exacerbate inflation by putting more money in people’s wallets and keeping demand high without necessarily increasing supply. “We’re not in a position to help households right now because it would cause more inflation,” Jason Furman, an economist at Harvard, told me.
Meanwhile, some experts suggested that the best chance of a rapid decline in gas prices is an outcome no one wants: a new Covid variant or a recession that stalls the economy and demand.
A cascading problem
Gas prices often receive disproportionate attention compared to their actual economic impact, Furman said.
One reason for that: The cost of gas is incredibly transparent, posted on giant placards across the country. The visibility could make rising gas prices a symbol for broader inflation trends.
Rachel Ziemba, an energy expert at the Center for a New American Security, said she fears higher gas prices will create social and political instability. Around the world, inflation has already led to protests and even riots† Higher gas prices in particular have in the past led to: lower presidential approval ratingsas voters blame those responsible for inflation and poor economic conditions.
Some experts worry that higher gas prices will eventually hurt Western resolve against Russia, as Americans and Europeans begin to question whether backing Ukraine is worth the price. Recent polls suggest that the public is willing to make some sacrifices for the war effort, but polls also show growing dissatisfaction with inflation.
So the consequences of rising gas prices are not only for your wallet, but possibly also geopolitical.
War in Ukraine
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The coming week
The US government will release its latest monthly inflation figures on Tuesday. Experts expect prices to have risen by more than 8 percent.
Today’s French presidential election is expected to elevate President Emmanuel Macron and Marine Le Pen to a dramatic two-week runoff.
The NBA playoffs begin on Saturday. The Miami Heat and the Phoenix Suns are the top seeds.
Christian Holy Week begins today with Palm Sunday. The Jewish holiday of Passover begins Friday evening. Be here Times recipes for the occasion†
Sunday’s question: Is the Covid outbreak in Washington the price of normality?
With vaccines widely available, it’s up to individuals to decide whether to attend events like the DC Banquet that probably turned into a super spreader event, dr. Leana Wen argues. dr. Uche Blackstock disagrees, arguing that mandating precautions would have kept those in attendance safer†
Fighting Death: Delia Ephron’s new book combines a medical thriller, a cancer memoir, a love story and a heroic journey.
According to the book: Books are like pheromones: They “unite, divide, attract and repel people,” says critic Margo Jefferson.
SOURCE – www.nytimes.com