What’s worse: sitting in a car with someone who passes gas, or simply looking at gas prices that are up 60%+ since last year?
Here’s why prices at the pump are so high, and what’s being done to fix it.
First, what goes into the price of gas?
The price of crude oil accounts for 60%. Russia’s war in Ukraine led to a global reduction in crude supply, driving prices higher.
The other 40% comes from refining that oil, distribution, and taxes.
During the pandemic, practically all forms of transit ground to a halt and prices crashed with demand. Demand has recovered, but production hasn’t, further exacerbating prices.
Can’t we just produce more?
It’s possible, but it isn’t cheap. Drilling, refining, and transporting oil requires expensive machinery and talented manpower.
Despite record profits, oil companies are reluctant to invest in increasing outputs because:
- They’re already short-staffed following pandemic layoffs.
- Many machines have been decommissioned.
- There’s a risk in producing too much and sinking prices.
- The world is heading toward greener energy in the long term.
Of course, those reasons don’t sit well with activists and politicians, who have excoriated oil companies for buying back stocks instead of ramping up production.
Did Biden get rid of the gas tax yesterday?
Kinda. He called on Congress to implement a three-month gas tax holiday. Currently, there’s an 18 cent/gallon federal tax on regular gas.
- Biden previously announced the release of 1m barrels of oil per day from US reserves.
But these are temporary Band-Aids for deep industry problems. For now, here’s a funny gas tweet.
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