A6 BAKER CITY HERALD • TUESDAY, JUNE 14, 2022
LOCAL & NATION
Several factors converge to push gas prices higher
BY DAVID KOENIG
Associated Press
DALLAS — There is little
evidence that gasoline prices,
which hit a record $5 a gallon
on Saturday, June 11, will drop
anytime soon.
Rising prices at the pump
are a key driver in the highest
inflation that Americans have
seen in 40 years.
Everyone seems to have a
favorite villain for the high
cost of filling up.
Some blame President Joe
Biden. Others say it’s because
Russian President Vladi-
mir Putin recklessly invaded
Ukraine. It’s not hard to find
people, including Democrats
in Congress, who accuse the
oil companies of price goug-
ing.
As with many things in life,
the answer is complicated.
WHAT IS HAPPENING?
Gasoline prices have been
surging since April 2020,
when the initial shock of the
pandemic drove prices under
$1.80 a gallon, according to
government figures. They hit
$3 in May 2021 and cruised
past $4 this March.
On Saturday, the nation-
wide average for a gallon
ticked just above $5, a re-
cord, according to auto club
AAA, which has tracked
prices for years. The aver-
age price jumped 18 cents in
the previous week, and was
$1.92 higher than this time
last year.
State averages ranged from
$6.43 a gallon in California to
$4.52 in Mississippi.
a big faction of his own party,
it would be months or years
before those measures could
lead to more gasoline at U.S.
service stations.
At the end of March, Biden
announced another tapping
of the nation’s Strategic Petro-
leum Reserve to bring down
gasoline prices. The average
price per gallon has jumped
77 cents since then, which an-
alysts say is partly because of a
refining squeeze.
Baker County’s average price
among Oregon’s lowest
As of June 13, Baker County’s average gas
price of $5.32 per gallon for regular unleaded
was tied with Umatilla County for the second-
lowest among Oregon’s 36 counties.
The lowest average was in Malheur County,
at $5.18.
Baker County was one of seven Oregon counties
with an average price below $5.42.
Oregon’s overall average was $5.53.
Curry County, at the state’s southwest corner,
had the highest average, at $5.72.
Average prices for other counties adjoining
Baker:
• Union: $5.45
• Grant: $5.61
• Wallowa: $5.59
WHY IS THIS HAPPENING?
Several factors are com-
ing together to push gasoline
prices higher.
Global oil prices have been
rising — unevenly, but sharply
overall — since December.
The price of international
crude has roughly doubled in
that time, with the U.S. bench-
mark rising nearly as much,
closing Friday at more than
$120 a barrel.
Russia’s invasion of Ukraine
and the resulting sanctions by
the United States and its allies
have contributed to the rise.
Russia is a leading oil pro-
ducer.
The United States is the
world’s largest oil producer, but
U.S. capacity to turn oil into
gasoline is down 900,000 bar-
rels of oil per day since the end
of 2019, according to the En-
ergy Department.
Samantha O’Conner/Baker City Herald
Gas prices at the Baker City Maverik station on
Monday, June 13, 2022.
Tighter oil and gasoline sup-
plies are hitting as energy con-
sumption rises because of the
economic recovery.
Finally, Americans typically
drive more starting around
Memorial Day, adding to the
demand for gasoline.
WHAT CAN BE DONE TO GET
MORE OIL?
Analysts say there are no
quick fixes; it’s a matter of sup-
ply and demand, and supply
can’t be ramped up overnight.
If anything, the global oil
supply will grow tighter as
sanctions against Russia take
hold. European Union leaders
have vowed to ban most Rus-
sian oil by the end of this year.
The U.S. has already im-
posed a ban even as Biden
acknowledged it would affect
American consumers. He said
the ban was necessary so that
the U.S. does not subsidize
Russia’s war in Ukraine. “De-
fending freedom is going to
cost,” he declared.
The U.S. could ask Saudi
Arabia, Venezuela or Iran to
help pick up the slack for the
expected drop in Russian oil
production, but each of those
options carries its own moral
and political calculations.
Republicans have called
on Biden to help increase do-
mestic oil production — for
example, by allowing drilling
on more federal lands and off-
shore, or reversing his decision
to revoke a permit for a pipe-
line that could carry Canadian
oil to Gulf Coast refineries.
However, many Democrats
and environmentalists would
howl if Biden took those steps,
which they say would under-
cut efforts to limit climate
change. Even if Biden ignored
WHY IS U.S. REFINING DOWN?
Some refineries that pro-
duce gasoline, jet fuel, diesel
and other petroleum products
shut down during the first year
of the pandemic, when de-
mand collapsed. While a few
are expected to boost capacity
in the next year or so, others
are reluctant to invest in new
facilities because the transition
to electric vehicles will reduce
demand for gasoline over the
long run.
The owner of one of the
nation’s largest refineries, in
Houston, announced in April
that it will close the facility by
the end of next year.
WHO IS HURTING?
Higher energy prices hit
lower-income families the
hardest. Workers in retail and
the fast-food industry can’t
work from home — they must
commute by car or public
transportation.
The National Energy Assis-
tance Directors Association
estimates that the 20% of fam-
ilies with the lowest income
could be spending 38% of their
income on energy including
gasoline this year, up from
27% in 2020.
WHEN WILL IT END?
It could be up to motorists
themselves — by driving less,
they would reduce demand
and put downward pressure
on prices.
“There has got to be some
point where people start cut-
ting back, I just don’t know
what the magic point is,” said
Patrick De Haan, an analyst
for the gas-shopping app Gas-
Buddy. “Is it going to be $5? Is
it going to be $6, or $7? That’s
the million-dollar question
that nobody knows.”
HOW ARE DRIVERS COPING?
On Saturday morning, June
11 at a BP station in Brooklyn,
New York, computer worker
Nick Schaffzin blamed Pu-
tin for the $5.45 per gallon he
was shelling out and said he
will make sacrifices to pay the
price.
“You just cut back on some
other things — vacations, dis-
cretionary stuff, stuff that’s nice
to have but you don’t need,” he
said. “Gas you need.”
At the same station, George
Chen said he will have to raise
the prices he charges his cus-
tomers for film production to
cover the gas he burns driving
around New York City. He ac-
knowledged that others aren’t
so fortunate.
“It’s going to be painful for
people who don’t get pay in-
creases right away,” he said. “I
can only imagine the families
who can’t afford it.”
Stock declines signal a bear market; here’s what that means
BY STAN CHOE AND ALEX VEIGA
AP Business Writers
NEW YORK — Wall Street
is opening the week with more
losses, and the S&P 500 has
fallen to a level that market
observers consider to be a
bear market.
Rising interest rates, high in-
flation, the war in Ukraine and
a slowdown in China’s econ-
omy have led investors to re-
consider what they’re willing to
pay for a wide range of stocks,
from high-flying tech compa-
nies to traditional automakers.
Big swings have become com-
monplace and Monday appears
to be no exception.
The last bear market hap-
pened just two years ago, but
this would still be a first for
those investors that got their
start trading on their phones
during the pandemic. Thanks
in large part to extraordinary
actions by the Federal Reserve,
stocks have for years seemed
to go largely in only one di-
rection: up. The “buy the dip”
rallying cry after every mar-
ket slide has grown more faint
after stinging losses and se-
vere plunges in risky assets
like cryptocurrencies. Bitcoin
tumbled another 12% and fell
below $24,000 early Monday.
The price for Bitcoin neared
$68,000 late last year.
Here are some common
questions asked about bear
markets:
WHY IS IT CALLED A
BEAR MARKET?
A bear market is a term
used by Wall Street when an
index like the S&P 500, the
Dow Jones Industrial Average,
or even an individual stock,
has fallen 20% or more from a
recent high for a sustained pe-
riod of time.
Why use a bear to repre-
sent a market slump? Bears
hibernate, so bears represent
a market that’s retreating, said
Sam Stovall, chief investment
strategist at CFRA. In contrast,
Wall Street’s nickname for a
surging stock market is a bull
market, because bulls charge,
Stovall said.
The S&P 500, Wall Street’s
main barometer of health,
slid more than 2.6% in early
trading Monday to 3,800.
That’s nearly 21% below the
high set on Jan. 3. The Nas-
daq is already in a bear mar-
ket, down 31.5% from its peak
of 16,057.44 on Nov. 19. The
Dow Jones Industrial Average
is more than 16% below its
most-recent peak.
The most recent bear mar-
ket for the S&P 500 ran from
February 19, 2020 through
March 23, 2020. The index fell
34% in that one-month pe-
riod. It’s the shortest bear mar-
ket ever.
WHAT’S BOTHERING INVESTORS?
Market enemy No. 1 is in-
terest rates, which are ris-
ing quickly as a result of the
high inflation battering the
economy. Low rates act like
steroids for stocks and other
investments, and Wall Street
is now going through with-
drawal.
The Federal Reserve has
made an aggressive pivot away
from propping up financial
markets and the economy
with record-low rates and is
focused on fighting inflation.
The central bank has already
raised its key short-term in-
terest rate from its record low
near zero, which had encour-
aged investors to move their
money into riskier assets like
stocks or cryptocurrencies to
get better returns.
Last month, the Fed sig-
naled additional rate in-
creases of double the usual
amount are likely in upcom-
ing months. Consumer prices
are at the highest level in four
decades, and rose 8.6% in May
compared with a year ago.
The moves by design will
slow the economy by making
it more expensive to borrow.
The risk is the Fed could cause
a recession if it raises rates too
high or too quickly.
Russia’s war in Ukraine has
also put upward pressure on
inflation by pushing up com-
modities prices. And worries
about China’s economy, the
world’s second largest, have
added to the gloom.
other winners of the pan-
demic were seen as the most
expensive, and those stocks
have been the most punished
as rates have risen. But the
pain is spreading widely, with
retailers signaling a shift in
consumer behavior.
Stocks have declined almost
35% on average when a bear
market coincides with a reces-
sion, compared with a nearly
24% drop when the economy
avoids a recession, according
SO, WE JUST NEED TO AVOID
A RECESSION?
Even if the Fed can pull off
the delicate task of tamping
down inflation without trig-
gering a downturn, higher in-
terest rates still put downward
pressure on stocks.
If customers are paying
more to borrow money, they
can’t buy as much stuff, so less
revenue flows to a company’s
bottom line. Stocks tend to
track profits over time. Higher
rates also make investors less
willing to pay elevated prices
for stocks, which are riskier
than bonds, when bonds are
suddenly paying more in in-
terest thanks to the Fed.
Critics said the overall stock
market came into the year
looking pricey versus history.
Big technology stocks and
to Ryan Detrick, chief market
strategist at LPL Financial.
SO I SHOULD SELL EVERYTHING
NOW, RIGHT?
If you need the money now
or want to lock in the losses,
yes. Otherwise, many advisers
suggest riding through the ups
and downs while remember-
ing the swings are the price
of admission for the stronger
returns that stocks have pro-
vided over the long term.
While dumping stocks
would stop the bleeding, it
would also prevent any poten-
tial gains.
HOW DO WE KNOW WHEN A
BEAR MARKET HAS ENDED?
Generally, investors look for
a 20% gain from a low point
as well as sustained gains over
at least a six-month period. It
took less than three weeks for
stocks to rise 20% from their
low in March 2020.
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