This past year, gas prices skyrocketed and left so many Americans unsure how to afford the most recent increase in prices. However, to fully understand if they are going to decrease or not, we first have to delve into why gas prices were so high this year in the first place.
Why Did Gas Prices Go Up This Year?
According to financial analysts, this year, the national average of regular, unleaded gas sat at a high of $5.01 per gallon. Compared to last year, 2021, the price of one gallon of gasoline increased by 63%. As of 2021, the national average was $3.04 per gallon. But why?
Decreased Demand for Oil | The Effects of COVID-19
Many factors influence gasoline prices. First and foremost, one cause of these high prices is the oil demand. During the COVID-19 pandemic, the oil market fluctuated often. Yet, the effects of the pandemic began affecting global trade, and the need for oil decreased, as people who were usually on the roads were at home, and this caused crude oil prices to plunge.
In 2020, oil could be attained for incredibly cheap, which led to large companies and major oil exporting countries slashing their production to compensate for the cut in demand. Now that we are getting further and further from 2020 and 2021, the need for oil is increasing again. Yet, oil production is a strenuous and time-consuming process, so oil producers are still graduating and restoring their exports. All in all, gas prices are up as a result.
The United States is Attempting to Decrease Oil Usage
When Joe Biden, The President of the United States, came into office, he sought to decrease the use of fossil fuels. With that in mind, certain states and companies are working on cutting their carbon emissions by 2030, with the ultimate goal of carbon neutrality by 2050.
To achieve these goals, OPEC has attempted to cut back the number of land companies can utilize to draw oil from. On the other hand, with his carbon-neutral goals in mind, President Biden refuted the Keystone XL Pipeline, which would have moved more than 800,000 barrels of Canadian crude oil daily to U.S. refineries. But with its only means of transportation being railways, crossing oil over the border has become increasingly expensive. Therefore, these policy decisions have a negative impact on gas prices, as the demand for crude oil is increasing and supply is low.
Russia’s War on Ukraine
The war raging in Ukraine has many negative externalities, including social, political, geographical, and monetary repercussions. With that in mind, another impact of Russia’s war on Ukraine is higher gas prices. After the invasion began months ago, Western countries implemented sanctions that have made it increasingly difficult for Russian oil companies to complete transactions, primarily via Western Banks. According to statisticians, Russia was one of the leading oil producers in the past, ranking third globally as of 2022. Therefore, due to the intensity of the conflict, there are gaps in the supply of oil, and at the same time, the global oil demand is increasing again. And what is the result of these changes? Higher gas prices.
Now that you know some of the causes of high gas prices, it is time to delve into what gas prices will look like for the rest of the year.
Gas Prices Across The Country | Is It Getting Better?
According to financial analysts, gas prices are estimated to continue dropping throughout the year. As the summer has now passed and the winter weather is returning, the cost of gas is forecasted to continue to decrease. As of August, the average gas gallon price totaled about $4. Whereas in September, it was $3.75. Although prices shot up again in October, averaging at about $3.80, the price spike was nothing compared to the increased cost Americans dealt with in the past six months.
According to AAA and The U.S. Energy Information Administration (EIA), retail gasoline prices should average $3.60 in the fourth fiscal quarter of the year. Depending on the state you live in, the cost of gas could even drop below $3.00! Also, AAA stated that people across the country are working to mitigate a global recession, which has a direct positive impact on crude oil prices and gas prices, as they are both rapidly dropping.
Here is What It Is Going to Look Like For Californians
Like all the other states in the U.S., California has suffered from increasing gas prices this year. However, due to its already higher-than-average gas prices, California gas prices lead the country at record highs. The statewide average reached a jarring $6.49 per gallon in 2022.
With this in mind, we are here to tell you not to worry – Californians will experience relief too. According to Bloomberg, gas prices in San Francisco and LA were the lowest they had been in over a month as of October. These factors are a vital sign that gas prices will soon fall across the state and, better yet, across the country.
Another reason why California is in good hands is it will be less affected by OPEC+’s slashing of oil production. Although the organization decreased oil production by two million barrels per day, it is only the equivalent of a 1% cut in supply, which will then have a modest and minimal impact on the gas price in California. This is also due to California’s long-term clean energy policies, while they will also benefit from increased production of Singaporian gas, which will make restoring supply easy for California.
Relief Is On The Way
After a wild year of increasing gas prices, issues with the supply and demand of oil, and global political disputes, gas prices are finally on their way down again. With crude oil production rising and importation rates increasing again, gas prices will soon be feasible. Check out our blog for more information on the auto industry and auto news updates regarding California. Here at Sticker Quicker, we have all the updates and information you need, plus more!