The steady escalation of international tension about Russia’s potential invasion of Ukraine has driven up the price of gasoline across the U.S. to its highest point in eight years — and the expectation is the price will go even higher before long.
AAA noted in a report today, “The potential invasion of Ukraine by Russia is having a rippling effect on the oil market, which in turn is driving up the price of gasoline in the U.S.
The national average for a gallon of gas has risen to $3.53, four cents more than a week ago, according to AAA.
“Russia is one of the leading oil producers globally, behind only the United States and Saudi Arabia,” said Andrew Gross, AAA spokesperson. “And if they choose to withhold their oil from the global market, such a move would eventually be reflected in higher gas prices for American drivers.”
A Russian attack would be met by severe financial sanctions led by the United States and its allies. Russia will likely retaliate by withholding oil from the world market, which is already tight and struggling to keep up with demand as nations worldwide move on from COVID-related economic slowdowns, Gross noted.
Energy markets unsettled by crisis
As the crisis deepened in recent days, the price of oil on global markets moved closer to $100 per barrel or 10% higher than it was at the end of last week, according to the Financial Times. Gasoline prices at the pump almost always move upward in response to the higher prices for crude oil analysts note.
“The geopolitical impact on oil prices is rarely so vivid or potentially far-reaching. A key signpost will be if,” IHS Markit, one of the world’s leading authorities on energy markets, noted in a recent report.
IHS stated the demand for oil worldwide has exceeded supply since the summer of 2020, while the production capacity of OPEC members has eroded, leaving them unable to meet production targets.
Meanwhile, the German government further unsettled energy markets by announcing it will hold in abeyance any deliveries of natural gas through the Nord Stream 2 pipeline in response to the latest Russian troop movements as part of the Biden administration’s efforts to deter aggression.
Biden warned last week the crisis could lead to higher gasoline prices for Americans even as his administration put more pressure on Saudi Arabia to produce more oil. “I will not pretend this will be painless,” Biden said last week.
Giving consumers a break
The “Rig Count,” which indicates the number of new wells being drilled in the United States, has increased this winter, which could lead to an increase in domestic crude production. But, according to a recent article in The Wall Street some major frackers, who retrieve oil from hard-to-reach underground formations, are content to wait on the sidelines as they watch for the price of crude oil to move even higher.
Meanwhile, the higher prices for gasoline could make even more consumers think about turning to electric vehicles.
But the production of EVs is being slowed by shortages of semiconductors, which would get worse in the wake of an invasion of Ukraine, and the lack of charging infrastructure, which is only beginning to be installed in the U.S.
Other ideas are being floated to make life easier for American’s looking for some relief from not only higher gas prices but rising inflation.
“Rising gas prices are creating a perfect storm for families who are feeling the pinch of increasing household costs,” Democratic Senator Richard Blumenthal tweeted earlier today. “Suspending the federal gas tax will provide some relief to consumers — helping cut the cost of getting to work, school, & health care appointments.”
Other Democratic senators, such as Arizona’s Mark Kelly and Georgia’s Ralph Warnock, have quickly thrown their support behind the idea. However, critics were quick to respond.
“After canceling pipelines, banning drilling on federal lands, and declaring war on energy companies, Democrats suddenly want to repeal the gas tax. Why? Because an election is coming,” tweeted Sen. Tom Cotton (R-Arkansas).