Gas Prices Break Record Again, up 15 Percent in Weekly Growth

High gas prices are displayed at a downtown Chevron station in Los Angeles, Calif., on March 7, 2022. (Mario Tama/Getty Images)

The ongoing conflict between Ukraine and Russia has pushed up energy prices worldwide, with gasoline prices in the United States soaring to an all-time high on March 8. Critics have blamed the Biden administration’s insistence on diverting away from fossil fuels, a main contributor to the price hike.

The average price of regular unleaded gas was $4.17 per gallon on Tuesday according to data from the American Automobile Association (AAA). This is the highest recorded average retail price in history.

At $4.17 per gallon, the price is more than 15 percent higher than a week prior, over 20 percent higher than a month ago, and up by 50 percent compared to the previous year. In some parts of America, gas prices have reached $7 per gallon.

Oil prices are moving up due to sanctions slapped on Russia by the West that has disrupted energy supplies from the country. Russia exports around four to five million barrels per day (bpd) of oil along with two to three million bpd of refined products.

The Biden administration recently announced a ban on Russian oil, coal, and liquefied natural gas on March 8, thereby adding even more upward pressure on oil prices.

“That means Russian oil will no longer be acceptable in U.S. ports and the American people will deal another powerful blow to (Russian President Vladimir) Putin’s war machine,” Biden told reporters at the White House.

Biden is expected to sign an executive order implementing the ban. Last year, the United States had imported roughly 700,000 bpd of crude oil and refined petroleum products from Russia, a fact sheet from the White House stated.

The ban deprives Russia of “billions of dollars in revenues from U.S. drivers and consumers annually,” the fact sheet claimed. Meanwhile, Britain has announced that it will phase out Russian oil and oil products by the end of this year.

After breaking through the July 2008 peak on Monday, Brent crude oil prices were trading at around the $124 per barrel level as of 5:34 p.m. UTC on March 8. Russian Deputy Prime Minister Alexander Novak had earlier warned that oil prices might surge over $300 per barrel if the West cuts off Russian energy supplies.

Bank of America analysts have predicted oil prices to reach $200 per barrel if Russian energy supplies are cut off since this would cause a shortfall of five million bpd of oil in the market.

“If we were in a supply crunch before the Russia invasion, right now we are in a hyper-supply crunch,” Claudio Galimberti, senior vice president of analysis at energy consultant Rystad Energy, said to WSJ. “We are in a price crunch of historical proportions.”

However, oil prices cannot keep rising forever. The surge in oil prices can lead to “significant inflationary pressure” which can eventually result in “demand destruction,” Brigham McCown, founder of energy trade group Alliance for Innovation and Infrastructure, said to Reuters. Though he does not expect the demand destruction to occur overnight, McCown calculates it to happen “clearly within the next couple of months.”

The Biden administration’s energy policy failures are also an important factor in rising gas prices, said Tom Pyle, Chairman of the Institute for Energy Research (IER), in a March 8 testimony (pdf) before the House Energy and Commerce Committee’s subcommittee on energy.

“Wide swaths of the elected government and administrative state have decided that investments in oil and gas must be minimized and eventually eradicated,” Pyle said. After assuming power in January 2021, President Joe Biden had immediately revoked the permit for the Keystone XL pipeline.

Pyle pointed out that, while global oil production went up by 12.1 million bpd between 2010 and 2019, U.S. oil output rose by 9.77 million bpd. This indicates that roughly 81 percent of oil production increase worldwide during this ten-year period was accounted for by America. U.S. production, thus, has had a “moderating influence” on global oil prices during this time.

“Unfortunately, but not surprisingly, in the wake of the 2020 election, President Biden made it clear that he intended to be an energetic advocate against the oil, coal, and natural gas that makes modern life possible. Oil markets, now faced with an existential threat, responded as one might expect. The price of oil went up,” he said.