Last Updated on March 18, 2023 by Amber Heard
If you’ve been asking yourself: “Why did gas prices go up?” you’ve probably wondered about the relationship between oil and gasoline prices. After all, supply and demand are two fundamental factors that affect prices. But did you know that a recent conflict in the Middle East has also been linked to an increase in gasoline prices? That’s because the Russian invasion of Ukraine has led to a significant increase in the price of oil.
You may be asking yourself, “Why did gas prices go up?” If so, you’re not alone. The oil and gas industries are also suffering as a result of the ongoing Russia-Ukraine conflict. But the government’s policies have not been the reason for the spike in prices. Some governors are calling for suspension of gas taxes to divert money away from road projects. Meanwhile, the White House is releasing oil from its Strategic Petroleum Reserve and relaxing emissions rules. Even Republicans have called for more domestic oil production to curb the price spike.
One of the main reasons for the recent increase in gas prices is the high cost of producing crude oil. Although the demand for oil in the U.S. is relatively low, the demand for oil around the world is growing. In 2009, U.S. oil production declined by almost 20 million barrels a day. Now, US oil producers have partially recovered from the drop in output during the recession. And OPEC is slowly restoring its exports. This mismatch between supply and demand helped push prices higher in 2021 and 2022.
Demand for gasoline
The recent spike in gas prices can be attributed to many factors. The ongoing war in Ukraine and Russian invasion of Ukraine are two of the major causes. Meanwhile, other factors are at play as well, like the demand for fuel. While the United States has been suffering from a shortage of fuel for the past year, the world has been facing a variety of supply problems. The price of crude oil has increased by about 25 percent in the past year, and many commodity traders are worried that the rise in oil will cause gasoline prices to go up again in 2020.
Last year, when the United States was hit by the cholera pandemic, demand for gas dropped by nearly 50%. During that time, the average driver cut their driving time in half. Ultimately, this resulted in a steep decline in gas prices. As the economy recovered, demand increased. During this time, vaccines for the disease also made Americans feel safe about shopping and traveling. As the prices of gas started to climb again, the average cost per gallon was increased by nearly 45 cents.
Supply and demand
The two biggest factors driving the price of gas are the rising cost of crude oil and the pandemic influenza that hit the United States two years ago. This caused the oil markets to become distorted and shut down. In the months following the outbreak, the benchmark West Texas Intermediate crude oil price dropped to zero. The price of crude oil is expected to continue to rise as the summer approaches. The recent ransomware attack on the Colonial Pipeline, one of the major fuel suppliers on the East Coast, is also expected to drive gas prices higher.
In the last two years, total domestic gasoline inventories have increased by 2.6 trillion barrels to 221.6 trillion barrels. However, American consumers still use approximately eight million barrels of gasoline per day, a decrease from the nine million barrels used at the end of June 2021. It is therefore expected that gasoline prices will continue to rise until they reach an equilibrium. However, the oil supply and demand imbalance is likely to persist into the next decade.
Russia’s invasion of Ukraine
The recent conflict in Ukraine has reverberated throughout the world, with the effect on gas prices being the latest to be felt. As stock markets have swung and crude prices have soared, many households are wondering how the conflict will impact their finances. Not only has the price of gas already increased, but it’s likely that food and smartphone prices will also skyrocket. With supplies of raw materials in short supply, inflation is expected to rise. Since Russia is a major producer of oil, the conflict could cause a global supply crisis and raise consumer prices.
While the Russian armed forces’ recent invasion of Ukraine has contributed to the rise in gasoline prices, the price hike began before the conflict reached international news headlines. In fact, two-thirds of the spike occurred before the Ukrainian conflict even made the headlines. Several experts say the spike in gas prices is the result of economic recovery from the recent pandemic, but this statement needs clarification or more information.
New Jersey’s gas tax
Residents of New Jersey will begin paying a higher gas tax on November 1st. Starting this month, gas tax rates will increase from 14.5 cents per gallon to 37.5 cents. The change is part of a larger tax deal that Christie struck with both the Democratic and Republican leadership in the state legislature. However, two Republican state senators have filed legislation to overturn the deal. Although the gas tax hike is the most immediate effect, it is just one part of the broader tax deal.
In recent years, the state has had relatively low gas prices. However, the price of gasoline in New Jersey has risen dramatically due to the conflict in Ukraine, rising demand, and low supply. The average price of regular unleaded in New Jersey is $3.90, up 20 cents from last week. This has caused the average gas price in the state to rise by a half cent in six days. However, the reason for the soaring prices of gas isn’t directly related to the New Jersey gas tax adjustment, but rather, the higher price of crude oil. The price of a barrel of oil has reached a three-year high.