Fuel prices, like most other things, have become completely ridiculous. In the United States, the average price of a gallon of gasoline has surpassed $4.00 for the first time in a decade. What is probably most alarming is how quickly it happened. Many Americans could still find fuel for under $2.00 a gallon as of April 2020, meaning prices in the United States have effectively doubled in two years. Meanwhile, European nations, more used to high fuel bills, have been ringing the warning bells (particularly around diesel) for months.
Despite the problem that existed long before Russia invaded Ukraine, the war has become the de facto explanation among politicians for having to switch to less fancy dog food and off-brand sodas to fuel the truck. This is also influencing the government’s response to handling the current fuel crisis, which looks set to get worse before it gets better. But before we dive into what’s being done (or not done) about it, let’s take a look at how we got here.
Beginning in late 2014, US fuel prices began trending lower, managing to remain well below the dreaded $4.00 per gallon mark. The next five years represented a period when drivers could reliably count on gas stations to offer regular gasoline at prices commensurate with the large cars that Americans tended to prefer. Diesel prices tended to be even more stable, albeit slightly higher.
Then 2020 happened.
First, the global response to COVID-19 forced prices down. When everyone was suddenly told to stay home, demand collapsed and prices fell even further. While I’ve never experienced it personally, there have been months when central US states could find 87 octane for $1.50 a gallon. The situation got so bad that oil prices actually turned negative as companies ran out of storage for the black gold that kept pouring out of the ground.
But the tide turned in November 2020. Prices quickly started trending higher and continued to do so for the next few months. This was initially attributed to the market expecting the US election to drastically affect oil futures. But demand has also started to return after companies spent most of the year minimizing production. Supply chains were also in shambles and inflation became a relevant factor for most commodities. Unfortunately, by 2021, the situation seems to have only gotten worse. Similar to cars, oil production remained suppressed throughout 2021 due to supply issues.
But the year began with President Joe Biden issuing an executive order to halt construction of the Keystone XL pipeline that would have connected Alberta to Texas, with offshoots that would connect Saskatchewan and Manitoba to Illinois. It was actually his very first official act.
I’ve heard all sorts of arguments as to why this was done. Some have said it simply fits in with the Biden administration’s aggressive electric vehicle agenda, using high fuel prices to discourage people from buying gas- or diesel-dependent cars. Others claimed it was done to protect protected lands from pollution. I’ve even heard arguments that greater reliance on foreign oil would get the United States more involved in geopolitics, which would have been a crazy conspiracy if things hadn’t turned out differently.
In June 2021, US Secretary of State Antony Blinken said the Nord Stream 2 pipeline (connecting Russia to Germany) needed to be completed. The following month, the US urged Ukraine not to criticize a forthcoming deal with Germany over the project. Joe Biden and Chancellor (now retired) Angela Merkel then reached a conclusive agreement that the US could impose sanctions if Russia uses Nord Stream as a “political weapon”, ostensibly to ensure Poland and Ukraine are never cut off from Russian fuel supplies should tension arise.
Apparently things didn’t go quite as expected since last month Russia simply chose to invade Ukraine. This has pushed prices further higher, which Moscow appeared to have wanted in 2020, with the American Automobile Association (AAA) estimating a nearly 40 cent rise in the price of gasoline between last week and today.
However, the White House prepared us for increased fuel prices long before that. Kamala Harris even hinted that it is our patriotic duty to endure rising prices given the situation in Ukraine before Vladimir Putin sends troops to the country.
“If America stands for principles and for all the things we hold dear, sometimes we have to present ourselves in a way that might incur some costs,” Harris said at the time. “In this situation, that can relate to energy costs.”
Energy costs had already skyrocketed, meaning the situation with Russia would only exacerbate an existing problem. Western sanctions against Moscow will also play an important role, although only Canada has formally banned oil imports from Russia. Since oil prices are speculative, pretty much everyone assumes that war means higher prices. We are already seeing an analysis running with historical precedent. For example, GasBuddy estimates that the Los Angeles area could see regular gasoline above $6.00 a gallon in early May and this could continue for the rest of 2022.
That’s really bad news if you happen to be driving and probably hoping something is done about it. Well, there was an influx of increasingly irrelevant celebrities imploring Americans to endure higher prices to aid the war effort — even though the US wasn’t technically engaged in a traditional war. However, this has led to more arguments than usual across the internet, with a few rational ideas thrown into the conversation. Among them was Tesla CEO Elon Musk’s repeated suggestion that the world should pump more oil to address the realities of a massive energy crisis looming.
“I hate to say this, but we need to increase the amount of oil [and] Gas leaks immediately. Extraordinary times call for extraordinary measures.” he said on March 4. “Of course, this would negatively impact Tesla, but sustainable energy solutions simply cannot respond immediately to offset Russian oil [and] gas exports.”
Reports have also surfaced that Washington has sent secret envoys to Venezuela to undermine Russia’s ties with the country and gain access to some of its sweet crude oil. Initially, this was achieved through the use of American lobbyists and international oil executives as mediators, in what already seems like a conflict of interest. But it is now being claimed that there is a bipartisan alliance trying to court President Nicolas Maduro and recalibrate global alliances ahead of a possible US ban on Russian oil.
Except it doesn’t really go with the messaging. While I’m the first to call Putin an oligarch and invading Ukraine totally unacceptable, Maduro doesn’t seem like a good guy either. After winning a highly questionable election in 2013, he was accused of using the oil industry and the military for political ends. Since then he has faced numerous criticisms of despotism, drug trafficking and rampant human rights abuses. In 2018, Amnesty International accused the Maduro government of committing some of the worst human rights abuses in Venezuelan history – citing thousands of extrajudicial trials that have seen citizens jailed for expressing political opposition to the military killing of civilians and depriving poorer people of food in areas of the country even when people were already starving. By 2020, the US Department of Justice charged Maduro with drug trafficking and drug terrorism, and the State Department offered a $15 million reward for information that will help “bring him to justice.” A few months later, the Venezuelan accused the US and its Drug Enforcement Administration (DEA) of orchestrating a coup after it emerged that several US special forces members were part of a coalition of dissidents attempting a coup.
So we went from trying (allegedly) to violently remove this guy from power to assuming that working with Maduro would be cheap to buy fuel from the Russians in a little over two years.
Personally, I see no point in trading one dictator for another when the United States is capable of becoming fully energy independent. While abandoning oil imports entirely would likely have a negative impact on world trade, there is nothing stopping the country from producing/exporting enough oil to not be dependent on essential oils if things go sideways. That was even a reality a few years ago. But we don’t have to go that far. All the US really has to do to cover hypothetical oil deficits involving Russia is increase its own production. That currently accounts for only about 3.5 percent of the whole. As a by-product we would see more stable oil prices and a range of domestic jobs.
But something tells me this isn’t about that. None of the decisions being made by world leaders seem to care too much about how they will affect citizenship. Instead, much of it appears to be a quest for power or political influence — which bodes well for anyone visiting the pump. With government telling citizens to brace for high prices, 2022 is unlikely to give us a break. We can blame geopolitical turmoil, environmentalism, bad leadership, COVID lockdowns, and anything else we wish we had. However, without a tangible, sensible solution to the problem, it’s not going to make a difference, and I don’t see many decision makers offering these.
[Image: Michael Vi/Shutterstock]
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