Author: Kelly Carter
In recent months, Americans have seen an increase in energy/fuel prices around the country.
According to the most recent consumer price index (CPI) statistics, oil prices have climbed by more than 75% in the last year. This rise in energy prices is the reason for concern because it affects every part of our everyday lives.
Gas is essential in almost every sector, and its price has climbed by about 44% in the last year. So, when you fill up your gas tank or prepare to heat your residence this fall, you’ll pay significantly more than you did last year. Businesses are also facing similar issues and fighting to combat rising energy expenses.
This article sheds light on the causes of skyrocketing energy prices.
Gas Stations or Big Oil Companies?
Energy prices in the United States are already up 33 percent year over year, according to July consumer price index (CPI) data. While sanctions imposed on Russia since the start of the Ukraine conflict are a significant cause of the rise in energy prices, many Americans accuse gas station owners of price gouging.
Even President Biden seemed to agree. Earlier this summer, Biden sent a tweet to gas station operators urging them to lower the price they charge at the pump to match what they pay for the product.
Amazon CEO Jeff Bezos, on the other hand, called the President’s tweet “straight ahead deception or a fundamental ignorance of basic market principles.”
Bezos is right. Because gas stations have no direct influence over the pricing, it is hard for them to reduce the prices they charge at the pump. Gas stations have such low-profit margins (about 1.4%) that you might not notice the difference if they sold at cost.
President Biden also accused significant oil companies of benefiting from rising gas costs. He said in his tweets that ExxonMobil generates more revenue than expected.” While ExxonMobil has done quite well in the last year, increasing its net income by more than 70% from 2021, statistics reveal that the company’s profits were better ten years ago when gas prices were substantially lower.
The truth is that neither gas stations nor oil companies control oil pricing; the global marketplace does. So, who or what is to blame for the skyrocketing gas prices?
The real reason behind increasing gas prices
Warfare, global crises, and geopolitics are all threats to the price of crude oil. And this is one of the primary reasons why a conflict (Russia-Ukraine conflict) thousands of miles away led WTI crude oil prices to jump to their highest in years.
Following Russia’s invasion of Ukraine, oil prices rose from around $60 per barrel in late 2021 to above $115 per barrel by mid-2022.
Crude oil prices have now fallen to about $90.69 per barrel as of September 2022.
However, European Union (EU) sanctions against Russia appear to be fully implemented in the coming months. Also, because Russia supplies 40% of the EU’s gas and a quarter of its oil, the EU is trying to find an alternative fuel and energy provider for the winter. The demand and urgency of the issue will drive up oil prices worldwide.
Final Thoughts
Neither gas stations nor large oil companies are to blame for the country’s rising energy costs. They are both at the mercy of global markets. The international price of crude oil is subject to global crises, and the situation in Ukraine explains why prices have risen this year. Oil prices have fallen but may increase again in the winter due to additional EU sanctions on Russia.