The average price of regular gas across the country has gone down from a high of $5.02 per gallon to $3.83. Drivers whose prices keep going up and down might wonder, “Who controls gas prices?” The short answer is that gas prices are not set by any person, company, or government.
On October 12, the average price of regular gas across the country was $3.83. This is up five cents from the week before. This was also the first time prices had increased in more than three months. And that was before OPEC+, a group of oil-producing countries from all over the world, said it would start cutting oil production next month.
After going down for three months, gas prices in the United States will likely go up again soon.
After the OPEC+ decision, there will be less gasoline worldwide, which will keep prices high. So even though prices have been going up slowly and steadily over the past week, global oil production cuts could lead to a much faster and more dramatic rise. Last week, prices went up by another three cents because of the news, and it looks like it won’t stop there.
Why Have Gas Prices Increased?
In June of last year, the average gas gallon price went over $5 for the first time. This was because Russia’s invasion of Ukraine sent shockwaves through the oil market around the world.
Regarding oil production, Russia is the third-largest in the world. Even though it only sent a small amount of oil to the U.S., the war threw the oil markets into chaos and sent prices soaring.
Prices started declining in July as demand decreased and more oil came onto the market, partly from the U.S. strategic oil reserves.
Where Did It All Go Wrong?
But this trend may be starting to change. In recent weeks, demand for gas across the country has increased while supply remains uncertain.
Unexpected accidents and maintenance work at refineries around the country have cut into the U.S. oil supply. Last month, a fire and explosion at a BP plant in Ohio killed two workers and shut down the plant for good. The plant could be shut down for months, raising prices in the Midwest.
On the West Coast, a series of planned and unplanned maintenance problems at refineries have made it difficult for Californians to get fuel. In the last few weeks, gas prices have increased from California to Washington State due to maintenance work.
The market has been calmed by slow releases from the U.S. strategic oil reserve, but this can’t go on forever. The amount of oil in reserve dropped from 560 million in April to 416 million, the lowest level since 1984. But the latest news from OPEC+ and other threats to the global oil supply means that the country may have to keep using those strategic reserves.
Why Are Gas Prices Becoming Unaffordable?
The countries in OPEC+, which include Saudi Arabia and Russia, have all agreed to cut oil production by a lot over the next few months. They say oil prices have been going down for several months.
The decision to cut production was made because “the global economy and oil market outlooks are uncertain.”
OPEC’s move is thought to raise gas prices in the United States by 15 to 30 cents per gallon. A gallon of gas has an average price of $3.83 across the country.
Many markets, including the oil market, have been crazy over the past two years. Early on in the pandemic, the price of crude oil was going down. However, it has recently gone over $85 per barrel.
Brent crude oil, the world’s standard, was trading for more than $92.44 per barrel today. Since oil prices are the main factor in gas prices, there has been a big rise in gas prices around the world. There are many reasons for this rise, and some are more important than others.
To keep oil prices high worldwide, the coalition said it would cut the amount of oil it could all produce by 2 million barrels a day starting in November 2022.
Between OPEC+’s announcement and Thursday, Brent crude oil futures were already up more than 3%.
Is This the Only Reason?
One reason is that gasoline demand is getting back to normal. As the number of COVID-19 cases goes down and the number of people vaccinated goes up, people start to travel again.
The price might have gone up because more people are using gasoline.
COVID-19 might also be a factor because it makes it hard to find workers and keep track of supplies. But the main reason is probably that Russia invaded Ukraine and cut off supplies.
Russia sends out a lot of oil to other countries. However, countries worldwide are angry about Russia’s invasion, so many governments are considering stopping the purchase of oil from Russia.
Any market that is volatile causes panic, which drives up prices.
U.S. Government on Rising Gas Prices
Petroleum prices are set by the market forces of supply and demand, not by individual companies. Therefore, the price of crude oil is the biggest factor in how much we pay at the pump.
In next month’s midterm elections, high gas prices could become a political hot potato. As a result, the U.S. government is looking to keep gas prices as low as possible. This is achieved by releasing more supplies from the strategic reserve.
The White House and the Energy Department may also consider banning all U.S. gasoline exports to increase the gasoline supply in the U.S. However, experts have pointed out that this plan could backfire by making global energy markets even more unstable, especially in allied European countries facing a growing energy crisis.
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Sara Sam may not look like your typical car and finance expert, but don’t let that fool you. With over four years of experience in the industry, she knows all the ins and outs of cars, car insurance, and refinancing. You can trust Sara to help you navigate the often-confusing world of automobiles and financing.
