Page 49 - Nigeriaone mag 2 edition en

Gas prices soar to record highs

Gas prices soar to record highs, illustrative image

Gas prices have increased significantly since the beginning of the year, which has greatly impacted
consumers. During the past few weeks, prices have reached record levels at gas stations all over the US. The
average gas price has never been this high. AAA reports that the national average price is $4,59 per gallon.
That’s about a quarter higher than the previous all-time high of $4,33 reached on March 11, and a 50-cent
jump from just a month earlier. According to a report by JPMorgan, the nationwide average fuel price could
surpass $6.20 in August. As for now, only California has crossed the $6 threshold with an average price of
$6.06. JP Morgan analysts predicted another 37 percent increase in gasoline prices. In fact, fuel
reformulations done by gas companies in the summer to prevent excess evaporation caused by high
temperatures can cost around seven to ten cents more per gallon.
Some people may wonder why this commodity is currently so expensive. Indeed, natural gas price is directly
linked to crude oil prices, which is the raw material from which it is refined. Some experts attribute the
present situation to high crude oil prices, which have reached $110 a barrel. Others believe that the current
gas spike is linked to global events: Russia/Ukraine conflict, and China's Covid lockdown. The current
sanctions on Russia related to the invasion of Ukraine and the subsequent ban on Russian oil imports have
contributed significantly to the spike in oil prices. While the US does not import much crude from Russia, the
price of oil is global, and any shift in the market affects prices all over the world. Crude prices spiked last
week after the European Union proposed cutting off Russian oil supplies. West Texas Intermediate, one of the
main benchmarks, rocketed past $110 a barrel. The inflated fuel prices are, however, not solely due to these
global events. During the global health crisis of Covid-19, consumers' demand for gas plunged, forcing oil
producers to curtail production.
Currently, the oil demand is approaching pre-pandemic levels and OPEC failed to reach its target of a 1,4
million barrels a day production increase. Supply and demand will inevitably remain imbalanced for a while,
regardless of whether this conflict between Russia/Ukraine is resolved. In a memo on 5/24/22, Natasha
Kaneva, head of commodities research at JP Morgan, said refineries typically boost production in spring in
anticipation of higher summer demand. But gasoline inventories have fallen to their lowest seasonal level
since 2019.

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