Rising Oil Prices: What are the Impacts?

Photo by Benjamin Massello on Unsplash

U.S. gas prices hit a record high this past week as the national average price for regular gasoline hit $4.173 per gallon, breaking the previous benchmark of $4.114 set in July 2008. The cause of this sharp incline is not a mystery to anyone—geopolitical tensions between Russia and Ukraine have set the market at huge unease.

Previously, the beginning of the pandemic had caused people to hunker down into their homes and the demand for gas decreased dramatically. As a result, oil companies slowed production as a way to prevent bankruptcy. However, with the release of vaccines and places finally starting to open up again, people resumed commuting as a way to recover from being cooped up for so long. Oil companies have been slow to catch up to the sharp spike in gasoline consumption after shutting down sources and laying off personnel; resultantly, increased prices for oil and gasoline ensued. Then as of late, Russia launched an invasion on Ukraine. With the attack, Russia—the second largest oil producer in the world—caused major volatility making oil prices rise as a whole. While only about 3% of the US crude oil comes from Russia, the effects were still felt across the country, thus triggering the new record high.

On March 8th, as a response to the rising prices, President Biden announced a ban on all imports of Russian oil, gas, and energy. He points out that while this decision may not be echoed by European allies, the US is in a special position that enables it to make this decision—as the amount of oil produced domestically is far more than all the European countries combined. This ban was established in part to act on the price changes, but also to affirm the States’ position in the conflict.

Like everyone else in America, food banks—organizations that distribute food to those who have difficulty accessing it—have felt the pinch at the pump. Because they largely rely on gas reliant trucks and vehicles to complete their job, the spiking prices have affected them very harshly in particular. This is especially concerning in urban areas, where higher costs can be seen across the board. Conversely, rural areas, with the longer commute times between stations and the already prominent issue of food insecurity, there is even more difficulty in accessing those communities. 

Food banks are just one of the many organizations and groups of people that are hit hard by the effect of the record high. Unfortunately, a number of Wall Street analysts are predicting $100 per barrel of oil somewhere in the near future. If anything, this is a sign for the Americans to put a little more of their budget into their oil tanks.