Gas is one of the most essential commodities in the world. And in the U.S we consume gas like its water, after all, what else is going to power our transportation and industries? Unfortunately, the ongoing Ukraine and Russia conflict has hurt the gas industry big time, sending prices for gas and its related products soaring. This is because Russia is one of the largest producers of oil in the world and the conflict brings major crude oil supply fears. More specifically, while Western allies’ sanctions have allowed room for Russia’s oil trade to continue, other global buyers are avoiding Russian products. According to J.P Morgan, 66% of Russian oil is struggling to find buyers – creating supply fears in what was already a tough market before the war.
So how does this affect gasoline? Well since crude oil is used to create the gas we use in cars, the underlying cost of oil accounts for more than 50% of the cost of gasoline. Currently consumers are suffering at the pump with gas prices hitting an average of $4.00, a figure not seen since 2008. To help at least partially alleviate the inflationary issue, the Biden administration has decided to tap into the Strategic Petroleum Reserve. Some have been calling on the administration to pause the federal gas tax.
Despite all this many in the field believe gas prices will continue to rise. In fact, Andy Lipow, president of Lipow Oil Associates has said gas will reach $4.50 a gallon as supply disruptions continues. More specifically he explained: “Oil buyers are reducing their purchases of refined products from Russia causing Russian refineries to shut down. Dockworkers are refusing to unload vessels carrying oil and gas. Insurance rates are skyrocketing causing vessel owners to cancel ship bookings loading in Russia and this is also impacting on the ability of Kazakhstan to sell their oil”. All in all, the situation on oil does not look good, affecting all of us but those lucky EV car owners! What do you think about gas prices? And will this affect your future decision to purchase an electric vehicle?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.