Even before the situation in Ukraine, we saw trends in rising energy prices and inflation. When the invasion became a reality, it increased the pressure on the global market even more. The regional destabilization created volatility in the global fuel prices, even though worldwide oil production increased during this time. Gas
The high demand has remained consistent over the past months while the availability for certain regions, particularly in Europe, has declined following European and U.S. sanctions on Russia. This has, in part, led to a worldwide increase in gasoline prices despite the global supply only increasing slightly.
The sanctions and the uncertainty following the EU’s ban on oil imports from Russia have scared the global market and pushed prices upward. Crude oil prices have increased to an unprecedented level, which directly affects the fuel prices at the gas station.
In general, gas prices follow the curve of demand/supply, but the strong position of The Organization of the Petroleum Exporting Countries (OPEC) means demand and supply do not entirely dictate the cost at any given time. OPEC can decide on a price and supply internally to keep gas prices stable, such as they did in November 2016 when they cut production to increase the price. In 2020 when governments began shutting down due to COVID-19 and the oil prices fell heavily because of the drop in demand, OPEC also agreed to lower output to support stable prices.
Furthermore, commodities traders trading in oil futures (and other trading activity) can hugely affect the gas prices around the world despite no oil actually changing hands. The problems we are seeing today are partly due to massive volatility when it comes to oil trading, trading volatility that does not reflect the demand and supply around the world.
In recent years, oil prices have fluctuated heavily and it’s in those uncertain markets that commodities traders can affect the oil prices the most, given the unstable market.
See below for states with the most expensive gas right now.
The overall rising costs for fuel, food, and energy have already led to higher prices for both businesses and consumers. Following a higher cost structure for essential supplies, we will continue to see rising prices for almost all goods and services going forward. I believe the prices may take a long time to stabilize and are likely to continue to increase well into 2023. The Federal Reserve has raised the interest rate, and future hikes are expected this year. This will lead to less demand for both companies and consumers.
Author:
Lucas Waldenback, CFO at Zutobi.com with a Master’s Degree in Business Administration, worked within the automotive industry for the past 5 years.