Why are gas prices high?

Anthony Acevedo

Gas seems to be going up lately, hitting $3.00 per gallon. What could be causing it? 

The price for gas seems to have risen since President Biden’s Executive Order that ended the Keystone XL pipeline and some people have come to the conclusion that he was responsible for the high gas prices. Surprisingly enough, that’s not the case. The Cancellation of the Keystone XL Pipeline wouldn’t have affected the gas prices. Mark Finley, who works at the Center for Energy Studies at Rice University, says, “Revoking [The Keystone XL Pipeline] does nothing to today’s balance” (Jacobson). Most of the crude oil being transported through the pipeline would’ve been exported to other countries, rather than being used in the US, and it wasn’t in operation. But there is still an explanation as to why prices have gone up. People need gas. 

Ever since the pandemic’s effect on the economy, the shutdown of businesses, and people being quarantined, the demand for oil fell as the supply grew. Oil companies had a surplus of oil while people stayed home, which caused these companies to stop drilling and locate new oil sources. This was all back during March and April, when gas cost about $1.94-$1.96 and the starting point of quarantine. Now, a year later with a vaccine available, coupled with a recovering economy, people are starting to drive more compared to last year. This causes an increase in demand, which oil companies, mainly OPEC, were not prepared for. OPEC, Organization of the Petroleum Exporting Countries, had shut down their production due to the large supply of oil, and low demand for it. In early March, OPEC had a meeting discussing the issue and how to resolve it. 

There are other factors that play into the rise of gas prices such as the seasons, the value of the dollar, and environmentalists. Oil prices have seasonal fluctuations, with spring and summer being high demand and autumn and winter being low demand. Money expert Clark Howard explains that, “We’re going to feel a pain at the pump for a number of months. And sometime in the summer, historically July 4th is the point at which prices top and prices fall.” (Johnson). Gas will be expensive, but will fall in a couple of months. The value of the dollar also plays as a factor in gas prices. In 2002 through 2008, the value of the dollar went down by 26% (Federal Reserve Bank of St. Louis) which caused the gas prices to rise from $1.15 to a high of $4.11. But is the value of the dollar going down currently? Yes it actually is. The buying power of the dollar is dropping so that $1 can barely get you anything in today’s economy. That’s a whole different story, though. Environmentalists have also affected the production of gas, to a certain degree. They want to find alternative fuels that wouldn’t harm the environment in a way of a fuel’s output and it’s way of obtaining it. These groups want to do away with fossil fuels and use the alternative option, which is electricity. 

The best solution to solve this is to just simply drive less, keep tires properly inflated, and take good care of the car’s engine. Another way to reduce the price is the increased use of electric cars, which would create a lower demand for oil. However, the US, according to the balance, consumes about 20% of the world’s oil. But it is not guaranteed that this solution would work. Overall, oil production would soon increase, recover from their shortage, and prices would then fall sometime in the future, possibly in July.