Home Service Oil Company
Home Service Oil Company

Why Are Gas Prices Rising?

June 16, 2022

Gas prices in the United States have reached record highs. As of mid-June, gasoline prices hit an average of $5.01 a gallon for the first time in U.S. history.

While rising gas prices are a pain at the pump, they also hurt consumers across the board. Higher gas prices translate to higher transportation costs, causing everything from food, construction material, and more to increase in price.

So, why is 2022 wrought with climbing gas prices? Keep reading to find out!

Rebounding From COVID-19

One of the first things we can blame for the higher gas prices is the COVID-19 pandemic. In 2020, everyone was locked down and going nowhere, causing oil prices to plummet below zero.

Crude oil stores filled up while traders in oil futures scrambled to unload their positions in crude oil. This led to some paying buyers to take future oil deliveries off their hands.

While the negative prices didn’t last long, oil prices stayed cheap for most of 2020. The apparent response to the lack of demand was for energy companies and significant oil-exporting countries in OPEC to cut back on production.

Today, the U.S. oil demand is about the same as it was pre-COVID. However, oil production is still slow-moving, taking considerable time to restart.

The Biden Administration

While the Biden administration has demanded that oil producers start tapping into unused wells and drilling new ones, they are hesitant to do so. Why? Because oil prices have crashed twice in the past eight years and many executives believe another is inevitable.

Even though the price of oil is at an all-time high, oil executives are afraid that prices will tank over the life of the wells they are being pressured to use.

The Biden administration is also pushing the conversion to electric cars and clean energy. While this is making the environmentalists happy, it’s leaving oil executives hesitant to invest more money into oil production when they could not be earning profits from these oil wells in ten years.

The War on Ukraine

Russia is the world's second-largest oil exporter, falling just behind the United States.  Approximately every one in 10 oil barrels comes from Russia.

Before the war, about half of Russia’s exports went to Europe; as of last year, about eight percent of U.S. crude oil imports came from Russia.

Since Russia invaded Ukraine in February, the European Union, United States, and other major economies have placed heavy sanctions on the country, causing Russia to sell less oil. Unfortunately, these sanctions have reduced the global supply of crude oil, resulting in extreme price jumps for the precious resource.

What Can We Do?

Analysts suggest that the energy market could be fundamentally reworked. Over time, we can change the flow of crude oil production, thus relying less on Russia for their product. Not only would this hopefully reduce oil costs and gas prices, but it would also effectively reduce Russia’s current leverage over Europe. However, until more supply becomes available or demand for oil falls, prices at the pump will most likely remain high.

Home Service Oil  

In these uncertain times, wouldn’t you feel more comfortable having bulk fuel delivery to guarantee your fleet, farm equipment, and more will be filled up on time and at a fixed rate? Your answer should be yes!

At Home Service Oil, we provide high-quality fuel and more to ensure your business runs as smoothly as possible.

Visit our website today to see all the services and products we provide!