While higher gas prices are hurting consumers, one expert says what’s behind these changes is really disappointing.
WASHINGTON — During the great recession of 2008, gasoline prices rose to $4.00 per gallon. In 2014, gasoline went up to $3.60. Today, gasoline costs the average American more than $4.20 per gallon, according to AAA.
It is normal for gas prices to fluctuate. It’s called supply and demand. If demand exceeds supply, prices rise. If supply exceeds demand, prices fall.
In the spring of 2020, the COVID-19 pandemic led to widespread lockdowns. the Pew Research Center reported that due to those closures and surges in cases across the country, people were driving less and demand for gasoline was very low.
The pandemic even caused prices to fall below the dollar in several states. As things got back to normal, people started driving more and demand and price went up again.
In recent weeks, consumers have seen gasoline prices soar across the United States. Since California has the highest gas in the country at over $6, we asked an expert to explain what’s going on at the pump.
RELATED: Los Angeles gas prices top $6 for the first time
trey cowan from the Institute of Energy Economics and Financial Analysis says there are many factors that drive gas prices, including weather, driving patterns and risk scenarios.
For example, Colonial Pipeline fell victim to a ransomware attack in May 2021, causing the system to shut down for several days. This was a big problem because the Colonial Pipeline carries gasoline, diesel, and jet fuel from Texas to New Jersey. The attack caused a huge disruption across the country that pushed the national average to $2.96, according to AAA.
Aside from those factors, there is one specific situation that can totally exacerbate gasoline prices: war.
“What you start to see is that war tends to create, in the short term, a supply disruption and that’s what we’ve seen and feared,” Cowan explained.
On February 24, Russia invaded Ukraine and started an all-out war. Since their invasion, lives have been lost, economies have collapsed, and gas prices around the world have been on a roller coaster ride. A month later, the UN reports that nearly 3.4 million people have fled Ukraine, according to The Associated Press.
RELATED: 3 Questions About Russia’s Invasion Of Ukraine Answered
Weeks after the invasion, President Joe Biden Announced a ban on all imports of Russian oil, gas and energy. Cowan said this move has a bigger effect on the West Coast from a regional standpoint, but overall, Biden’s decision won’t have much of an impact in the United States.
“In general, for the US economy, 700,000 barrels of call it 19 or 20 million is not a big deal. And so we definitely punished Russia’s economy more than we did ourselves,” Cowan said.
While the US only relies on a fraction of Russian gas, there are other elements at play. A report from US Bureau of Labor Statistics found that the consumer price index increased 7.9% in the last 12 months, reaching the highest level of inflation since 1982.
Cowan said that if consumers spend more money at the pump, it will have a ripple effect on the economy, forcing consumers to change their spending habits, which means less money will be spent in other industries. He also said it’s not known how long consumers can expect the current trend at the pump to continue.
Things could change if OPEC nations dramatically increase its production, but Cowan warned this could go on for a long time if there is more violence in the Middle East and barrels contract rather than expand in any of the OPEC nations.
Gas prices are out of control, there’s no denying that, but Cowan said the reason behind the significant change in gas prices far outweighs the effects on the pocketbooks of American consumers.
“Whether it’s for oil or weed or whatever the reason behind a country invading a neighboring country like this, the inhumanity of it all is really disappointing. The fact that it changes gas prices is a bummer, but what’s behind these gas price changes is really disappointing,” she added.