A10 THE BULLETIN • MONDAY, MARCH 21, 2022
PINCHED PUMP
AT
THE
By Charles Apple | THE SPOKESMAN-REVIEW
That enormous bite out of your wallet fuel prices have been taking lately most likely isn’t
growing quite as quickly as it had been. But that respite might not last for long — not with
warmer weather and increased demand from summer vacation season right around the corner.
There’s an awful lot of partisan bluster about who or what might
be at fault for the recent spike in gas prices. What’s the real story?
Why did gas prices spike so rapidly?
PEAK SO FAR:
March 11 $4.33
The quick answer: It’s supply and demand. The demand for gasoline
shot up more quickly than suppliers of that gas could satisfy.
Demand for the past couple of years has been low:
Some folks were stuck in pandemic-related
work outages, others were working from
home, and others still chose to exit the
work force. Two years ago in April,
the national average price of a
gallon of gas had dropped to
$1.77.
July 2008
$4.06
Per gallon
$5
$4
March 2022
$4.00
$3
Projected
$2
December 2008
February 2016
$1.69
April 2020
$1.76
$1.84
$1
All data is from the U.S. Energy Information Administration
Now, with more people headed
back to work, demand is going
back up. And that’s pushed up
the price of the source material
for all that gasoline: Crude oil.
Every $10 increase in the price
of a barrel of crude oil adds 24
cents to the price you pay for
each gallon at the pump, says
the Washington Post.
And that price can change
overnight: Most gas stations
have enough storage capacity
for only two or three days’
worth of gas. The price they
pay can change a lot over those
two or three days.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
The price of crude oil is especially volatile
With demand not just in the U.S. but also worldwide
down sharply during the pandemic, the price of
crude tanked — um, so to speak — as well.
PEAK SO FAR:
March 6 $130.50
July 2008
Per barrel
$125
That blip became more
apparent Monday when
worldwide prices of crude oil
dropped 8%, to $99.76 a barrel.
$100
Experts said the selloff was due
to several reasons:
$127.77
March 2022
But as the world awakened from its shutdown,
demand shot up more quickly than suppliers could
pump, refine and deliver gasoline. The price of
crude topped $130 a barrel less than two weeks
ago — that’s the highest it’s been in 14 years.
$110.50
■ An increase in Iranian oil
exports.
$50
■ Another COVID-related
lockdown — and, therefore a
reduction of demand — in China.
Projected
April 2011
Yes, the war in Ukraine and subsequent
boycotts of Russian oil added to that.
But, as experts have been saying,
that was just a temporary blip in
the bigger picture.
$75
$113.02
$25
December 2008
February 2016
April 2020
$35.59
$26.66
$16.74
Experts still expect demand to
increase as the weather
improves. CNN reports we can
expect to see gas at around
$4.50 a gallon this summer.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Oil production is slowly ramping back up
Most of the oil Americans use is produced
in the United States. And the U.S. produc-
es more oil than Amercians use. Before
the pandemic, the U.S. had become the
world’s leading oil producer — as well as
the world’s largest oil consumer.
12.5 M
Barrels produced
per day
But oil producers curtailed production
during the lull in demand. And it’s not
like turning on a spigot — oil must be
shipped to refineries and then
processed to turn it into something
your car or truck can drink.
10 M
7.5 M
April 2015
November
2019
9.66 M
12.97 M
January
1998
6.54 M
November
2021
11.77 M
5 M
May 2020
September
2005
4.21 M
September
2008
9.71 M
2.5 M
3.97 M
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
■ It’s become apparent
European customers are going
to continue buying Russian oil.
In the meantime, the Biden
administration is taking steps to
try to speed up the recovery
process: It is asking oil suppliers
in the Middle East and Venezu-
ela to increase production, in
hopes of bringing down prices
worldwide — which would ease
pump prices in the U.S.
It’s doing the same here as well:
At an energy conference last
week, Energy Secretary
Jennifer Granholm pleaded with
domestic oil companies to
increase production.
Oil companies, of course, are
working on it: They’d like to sell
as much gas as they can, while
the price is still high.
Would the Keystone XL
pipeline have helped?
Are U.S. oil companies
being too greedy?
Can oil companies
produce more gas?
So what can be done
to ease our pain?
That’s nothing but political blather.
The thing to remember: Private-sector
corporations answer to their sharehold-
ers and investors first. By definition,
their mission is to maximize profits and
maximize return on investments by
those shareholders and investors.
The Biden administration is encouraging
oil producers to increase production
again, but oil companies may be
reluctant to do that. After all, what Biden
wants — lower gas prices — is the
opposite of what oil companies want.
Several states are considering rolling
back their local gas taxes — that
might drop gas prices a few cents.
■ Even when complete, the expansion
would have increased the worldwide
supply of oil less than 1%.
So yes: Oil companies are seeing some
amazing profits in the slow bounceback
from pandemic shutdowns. And they’re
using those profits to pay dividends to
stockholders and to prop up stock
prices with stock buybacks.
The oil industry ramped up production
a decade ago only to see the price of
domestic crude fall from $93 in 2014 to
$39 a barrel by 2020.
■ The type of oil that was to move in the
project isn’t used to make gas anyway.
But is this “greedy”? Or is it simply
capitalism in action?
■ Keystone XL was an expansion of an
existing pipeline from Alberta, Canada, to
the Houston region. So oil already moves
in Keystone proper, if not Keystone XL.
■ Less than 8% of the expansion had
been built. If Biden hadn’t terminated the
project, it still wouldn’t be finished yet.
Sources: U.S. Energy Information Administration, Washington Post, CNN, CBS News, Marketwatch,
Yahoo!Finance, TradingEconomics.com, American Automobile Association, Snopes.com
Baker Hughes reports 663 U.S. oil and
gas rigs operating as of last week.
That’s up from just 402 last year but far
below the 2008 peak of 2,031 rigs.
But most of us will simply have to
sweat this out. Some of you will
remember the angst brought upon us
by the oil crisis in the early 1970s. Or
the spike in oil prices during the great
recession in 2008.
Those crises eventually passed. This
one will too, to some degree.
But the clock is running. One day, we
will indeed exhaust the planet’s
supply of oil.
PHOTO BY GENE J. PUSKAR
/ASSOCIATED PRESS