Russia’s invasion of Ukraine is already producing worldwide ripple effects, including in the global oil markets in which Russia is a major player.
This weekend, the national average price for a gallon of gasoline went above $4 a gallon in the U.S for only the second time ever. The last time this happened was in 2008.
In some parts of the country, $4 would be a substantial discount. Los Angeles County, for example, saw an average of $5 a gallon this week, the first time that milestone was ever reached. At some stations in Los Angeles, premium fuel was selling for $7.25 a gallon this week. Gas in the Philadelphia area hit $4.05 a gallon late last week, an increase of 43 cents in the past month.
So what does this have to do with the Russian invasion of Ukraine?
Well, Russia is the world’s second-largest natural gas supplier, behind the U.S. With many unknowns as the Russian invasion continues and pushback against Russia continues as well, De Haan says there are big concerns over gas supply, which is making prices spike.
“There is the possibility that Russia could disrupt the flow of oil to cause oil prices to go up, or Western countries could put sanctions on Russia’s oil, making it hard for it to make it to the market,” shared De Haan. “So, the risk is that suddenly you’re going to lose or potentially you could lose a big source of crude oil, which obviously would have a profound impact on global supply and demand.”
In addition to the unstable gas supply situation with the Russian invasion, De Haan said we are also entering the time of year that we will see gas prices go up due to the summer-grade fuel. During a normal year, between the beginning of March and Memorial Day, gas prices generally go up anywhere from 25 to 75 cents per gallon, but this year it could increase even more.
“It’s just like motorists can’t get a break right now, it is the perfect storm of the Russia-Ukraine situation, the switch to summer gasoline, demand for gasoline is starting to go up as temperatures warm back up and refineries are starting maintenance season,” said De Haan. “So, unfortunately, a lot of issues kind of all stacked on the side of pushing gas prices up and really no relief in sight any time soon.”
What options does President Biden have to lower gas prices?
Option #1 — Suspend the Federal Gas Tax
That tax is currently 18 cents per gallon.
While some lawmakers have suggested suspending the tax could help, the idea is struggling to take off because of a fear that a decline in the gas tax would mean less money for infrastructure projects.
The new infrastructure spending bill signed into law by Biden late last year relies heavily on revenue from the gas tax.
Option #2 — Allow winter gasoline to be used throughout summer
De Haan says that in most places, the Environmental Protection Agency mandates that a cleaner form of gasoline be sold between June 1 and Sept. 15. That’s because, in warmer months, gasoline has a greater chance of evaporating, causing smog.
“There is (sic) a lot of complications when the nation switches to summer gasoline,” De Haan said.
Biden could enact a waiver to keep the cheaper winter gas flowing.
“Winter gasoline has higher emissions, it is more volatile, but it is cheaper to produce,” De Haan said.
Option #3 — Release more petroleum from the country’s reserve
The president has already done that, but so far, it has had very little impact on what motorists pay at the pump.
Option #4 — Increase domestic energy production
However, such a decision would go against the Biden administration’s efforts to combat climate change and reduce drilling.
There is no easy solution for the president, but it is an issue that motorists and voters want to be solved.