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$4 a Gallon – The New York Times


If you’re hoping for much cheaper gas soon, I have some bad news: Prices probably won’t drop much for at least a couple of months.

The causes that make gas more expensive will most likely be with us for a while. After pushing up US prices over $4 a gallonRussia’s war in Ukraine continues without a definite end. Manufacturers so far seem unwilling or unable to pump enough supply to fill the void left by the war.

When I asked if any good short-term solutions existed, Tom Kloza, global head of energy analysis at the Oil Price Information Service, gave a simple answer: “No.”

For Americans, the immediate consequence is that simple living will cost more. We’ll pay more when we fill up our gas tanks or pay our energy bills over the next few weeks or months. The prices of many other goods will go up, because so many things — food, iPhones, PlayStations, cars — have to be transported at one point or another by truck, boat, or fossil-fueled airplane. .

Higher fuel prices also have bigger consequences. The push to extract more oil and natural gas, or the more aggressive pursuit of alternative energy sources, can affect climate change (in a good or bad way). The public angry about the cost of living may protest or vote against the ruling politicians. People in the US and other countries that support Ukraine may begin to wonder if their support is worth the gas and other more expensive goods.

With the Covid pandemic receding, many of us want – and expect – some sense of relief after two bad years. Higher gas prices, and broader inflation trends, back that up, as if we were just trading off one crisis for another. And as with the pandemic, there is no clear outcome in sight.

When the pandemic broke out, the demand for fuel dropped as people stayed at home. After much of the world reopened, demand returned.

However, supply has not kept up, just as tight supply has raised food prices and weakened the flow of cars, electronics and other goods. By turning much of the world against a major oil and gas producer in Russia, the war in Ukraine has only made supply problems worse.

Some delivery issues are by design. OPEC Plus, a consortium of oil-producing countries, including Russia, has managed to keep prices – and therefore profits – as high as possible by limiting supply. The Cartel has maintained its approach.

But it’s not just OPEC. U.S. oil companies have deliberately slowed production after several recent boom and bust cycles left them with oversupply and plummeting prices. “We’re having a third boom, and these executives don’t want a third bankruptcy,” Kloza said.

All of that leaves little to no good short-term solutions. Even if public pressure or a tense market eventually pushes producers to drill more, new production could take months to return, especially due to labor and supply shortages. . And even if US producers ramp up, OPEC Plus may decide to cut – to keep prices high.

Other potential solutions that lawmakers have mentioned or enacted, like reducing gas taxes or reducing direct cash, could worsen inflation by putting more money in people’s pockets and holding it. for high demand without necessarily increasing supply. Jason Furman, an economist at Harvard, told me: “We can’t afford to help households right now because it would cause more inflation.

Meanwhile, some experts say the best chance for a quick drop in gas prices is the outcome no one wants: a new Covid variant or a recession that takes a toll on the economy and demand.

Gas prices tend to get disproportionate attention compared to their actual economic impact, Furman said.

One reason for that: Gas prices are extremely transparent, posted on giant signs across the country. Visibility could make rising gas prices a symbol of broader inflationary trends.

Rachel Ziemba, an energy expert at the Center for a New American Security, said she was concerned that higher gas prices would cause social and political unrest. Around the world, inflation has driven Demonstration and even riots. In particular, historically higher gas prices have resulted in lower presidential approval ratingwhen voters blamed those in charge for inflation and bad economic conditions.

Some experts fear that higher gas prices will eventually hurt the West’s resolve against Russia, if Americans and Europeans begin to question whether supporting Ukraine is worth the cost. pay or not. Recent polls show the public is willing to make some sacrifices for the war effort, but polls also show growing discontent over inflation.

So the consequences of rising gas prices will not only affect your wallet, but can also affect geopolitics.


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