Ever since the pandemic at the beginning of 2020 started, gas prices have been an ongoing problem affecting many U.S citizens. Adding onto the economic pressure that the pandemic has already inflicted, gas prices have made it harder to transport, and suppliers are taking this opportunity to exploit consumers. In order to understand the sharp increases in gas prices, understanding the times when the price increased is important. Additionally, an expert in Economics and its correlation to gas prices, Mrs.Derigo, IB Economics Professor, has crucial information on this problem and aided this process in finding out more information on this topic. Economics plays a huge role in everyday life, and it is important to understand if America wants this problem to be mitigated as fast as possible.
At the beginning of 2020, “U.S. regular retail gasoline prices averaged $2.17 per gallon in 2020, 17% lower than in 2019 and the lowest annual average since 2016.” Although, this would skyrocket gas prices only a year later when the world started opening up again. There was now a great demand for gas, driving up unstable prices. Currently, the national average cost of gas is $4.67. The average cost of gas has increased 96% in the last year, from when it was $2.16. Now that there is a brief understanding of gas prices, IB Economics Instructor, Mrs. Derigo, has more information to say on the topic from a specialist’s perspective.
Since it has been known to specialists that the pandemic skyrocketed the instability and versatility of the gas market, we want to know how it played a role. “ First of all, when the pandemic hit, demand fell to ridiculously low levels. Oil refineries had to stop production because they ran out of places to store it! Then when the effect of vaccines became evident and people’s confidence returned, the demand for gas skyrocketed, quickly using up the reserves and out of caution, and because the virus seemed to keep spiking, oil refineries were wary of overproducing. So a shortage developed.” The state of the pandemic clearly shifted the demand for gas up and down, which also affected the quantity of gas that suppliers wanted to produce. Generally, as the price of a product increases, suppliers will want to make more and consumers will demand less and vice versa. This may potentially explain why the changes are so aggressive.
“The oil market is world-wide. Oil products are sold to the highest bidder and the price, give or take state and local taxes on end products, is the same for most. So when the world supply of oil is affected, so do the prices and relatively quickly.” This shows that the volatility of gas is interconnected with a lot of other factors within the economy and is not an independent variable in terms of its rapid change.
Even though this volatile market is pretty well understood, its solution to returning to a steady gas price is not too understood. “It may stabilize occasionally, but the world oil market is not likely to change, so volatility may in fact, become the new norm.” Gas companies could continue to take advantage of this opportunity, while continuing to affect millions of Americans on a daily basis. There are many problems that come with this change, but many also argue the opposite. However, this increase in gas prices also seems to have a lot of positive impact from an ecocentric perspective. Gas is a huge contributor to global warming emissions. 41% of global transportation emissions are from cars. One gallon of gasoline in a car produces 19 pounds of carbon dioxide when combusted. Cars and trucks account for about 1/5 of all emissions in the US. Higher gasoline prices encourage more physical activity, and reduce air pollution, showing that there are both economic and environmental benefits/drawbacks.
Joe Biden, the 46th United States of America President, has recognized this problem and has proposed a plan to at least mitigate its increase. “You should be using these record-breaking profits to increase production and refining,” Biden said during a speech at the White House. “Invest in America for the American people. Bring down the price you charge at the pump to reflect what you pay for the product.” This reflects Mr. Biden’s response to how suppliers are increasing their quantity supplied and prices to increase their revenues. Mr.Biden has received a very mixed response from this plan, as the state of economics is solely based around capitalism, making this statement pretty idealistic but not too realistic.
High gas prices are something that may become the new norm, as Ms.Derigo stated, so the best thing to do is to adapt to this current situation. Use this opportunity as one to explore other means of transportation and learn more about the economic drive of this issue.