About 25 years ago, you could buy gas for about a dollar per gallon. Now, for the first time in history, a gallon of regular gas in the United States costs an average of five dollars per gallon. These higher fuel prices impact the costs of travel and shipping. Soaring fuel prices can impact costs related to the vast majority of goods, services, and economic activity.
Supply and Demand
Gas prices are impacted by the basic concepts of supply and demand. Increases in summer travel and the lift of pandemic restrictions have increased the demand for the available oil supplies. When there is insufficient supply to meet the demand, prices naturally rise.
Global and Local
Gas is a global commodity, and the uncertainty caused by Russia’s invasion has also influenced variability in gas prices. Yet, a recent Forbes article states that gasoline inventories have continued to decline. Also, the capacity of local refineries to convert oil into gasoline can significantly impact the availability of local and regional gasoline inventories.
In March, because of shortages in supply, President Biden announced an unprecedented plan. His intent is to release from the United States emergency oil reserves one million barrels of oil per day. This is the largest-ever release of oil from the Strategic Petroleum Reserve, and will continue for 180 days.
U.S. oil production and refining capacity has not fully recovered from pre-pandemic levels. Oil companies have found soaring profits as gas prices increase, and have been slow to increase production. Some refineries have decided to increase profits by exporting gas to foreign markets where gas prices are even higher than in the U.S. market.
Rising Gas Prices – A Few Things to Consider
With the price of gas rising and predictions that it may continue to rise, individuals may more often consider ways to lower gas consumption and save money at the gas pump. Forbes shares ways to save at the pump. For example, you could use gas apps to find cheaper gas, enroll in gas rewards, and fill up on certain days of the week.
As the effects of inflation eat away at our buying capacity, you may want to consider the free personal finance resources available at 360degrees of Financial Literacy. These are provided by the American Institute of CPAs. This resource offers topics related to setting short-term and long-term financial goals and the basics of money management. You may also consider enrolling in a personal finance course here at WT or reviewing the WT Financial Literacy Video Library.
Dr. Dallin Smith
Assistant Professor of Accounting
