By Lauren Wolters and Pulse Staff
As many University of Findlay students head to the gas station to fill their cars they noticed the peak in gas prices earlier this month. And they are not alone.
The United States witnessed record-breaking gas prices following Russia’s invasion of Ukraine on February 24, 2022. According to USA Today, the average price for a gallon of regular gas broke a record that had been standing for 14 years. In July of 2008, the highest national average was $4.17 per gallon. The highest national average according to AAA was recorded to be $4.33 per gallon on March 11, 2022.
UF Assistant Professor of Economics and Finance, Gregory Arburn explained there are several reasons behind the recent increase.
“[An] almost perfect storm of events lined up,” Arburn said.
According to Arburn, economies are strong both in the United States and around the world. Economies are reopening following the pandemic, which has created a demand for goods that is stronger than the current supply.
Arburn stated that the three highest oil producers in the world are the United States, Saudia Arabia, and Russia. Due to the Russian war on Ukraine the United States has banned the use of Russian energy and other countries are also banning or limiting use of Russian oil. Taking away the production of the world’s third-highest oil producer caused the prices to go up globally and had a domino effect on the United States.
“[The] United States produces nearly 19 million barrels per day. The United States uses nearly 21 million bbl’s per day. So, we need to import some oil every day,” Arburn said.
The United States Energy Information Administration stated on March 8 that “preliminary data for 2021 indicates that U.S. total petroleum production averaged about 16.582 million barrels per day. It also states that the United States consumed an average of about 19.78 million barrels of petroleum per day. This was an increase in consumption of about 1.6 million barrels per day over consumption in 2020. The increase was largely the result of the economy recovering from the coronavirus (COVID-19) pandemic.”
Arburn pointed out that the increased price of gas leads to an increase in the price of almost all goods because the United States transports these goods via semitrucks, trains and planes which all use fuel that is distilled from oil.
“The plastic bottle you drink water from comes from oil,” Arburn said. “The asphalt that goes into road construction comes from oil.”
Arburn explained how the price of oil and the well-being of nations across the world impact the price of goods in the United States.
“The global supply chain is not designed to suddenly lose the third-largest oil producer and it not be a problem [or] to lose the ninth-largest wheat producer (Ukraine),” Arburn said. “Brazil and Argentina (large corn and soybean producers) have been in a drought the last several months. Their production already was down, contributing to elevated corn and soybean prices.”
Arburn explained that these shortages have caused the price of corn, soybeans, and wheat to double in the past year. Restaurants and grocery stores who use these products to make other products are forced to raise their prices as well.
“If corn and soybean prices have doubled, what is happening to the costs to feed cattle, hogs, and chickens?” Arburn said. “[As a result] what is going to happen to the cost of beef, pork, and chicken at restaurants? [It will also] likely more than double.”
The uptick in oil prices has had favorable effects on energy companies stock valuations. The stock value of companies like Marathon, Chevron, Exxon, BP have increased tremendously. Therefore, any Americans who own stock in these energy companies have seen an increase in their finances.
Arburn explained how the increase in oil prices impacts everyone.
“I drive 100 miles round trip to be on campus on any given day,” Arburn said. “I have no choice but to pay the increased cost.”
He advised UF students to conserve gas. He stated that students should buy groceries and do other planned spending at places like Kroger, so they can get fuel points and discounts on gas. Arburn also recommended that students get the gas buddy app, so that they can find the best price of gas near them.
Arburn said that he expects gas prices to remain at the current levels or even increase as instability remains between Russia and its neighboring nations. He added that all the reopening following the pandemic will also lead to an increase in oil use.
“Americans are tired of being cooped up for two years and have every intention of going on vacation this summer,” Arburn said. “[This shows] continued increase in demand outpacing [our] supply.”
Whitehouse.gov fact sheet on the ban on Russian Oil states that “U.S. oil and gas production is approaching record highs, while thousands of drilling permits on federal lands go unused.”