Gas Reached a National Average Price of $5 a Gallon, Here's What Can Be Done To Lower It

Fuel Prices at a Shell Gas Station in 2019 7 photos
Photo: ChrisFix on YouTube
June 2022 Fuel Prices in the U.S.2019 Fuel PricesJune 2022 Gas Prices at a Mobil Filling Station from Beverly HillsGas PumpFilling Up with GasGas Station in the Desert
It’s a historical moment. Gas has never been this expensive before. Nobody wanted this kind of premiere, especially as the demand for fuel is brought down by the increased popularity of electric cars. However, traveling and other various industries going back to business as usual are keeping the consumption figures high. OPEC+ still doesn’t want to increase output, but there are some ways out of this madness.
We might end up remembering June 2022 as the month when everything that went wrong in the recent past started to finally unravel, and a major crisis began in the U.S. After two years of chaotically applied measures at the federal level and no international common ground being reached on cooperating for the good of the people, we’re all looking at a very unfriendly economy for the average consumer. Hoping that’s not going to be the case and that fuel prices will find a way to come back down to help tackle inflation, here’s what you should know about this fiasco we’re all paying for.

Furthermore, there are a couple of solutions that might save us from slipping into another recession or, even worse, depression.

Firstly, we must understand why gas is so expensive now in the U.S.

Looking at the facts, we know that fuel prices go hand in hand with the price of crude oil. Supply and demand dictate what their value is because oil is a global commodity. If supply overcomes demand, then we get cheaper gas and vice versa. On top of this, we must also consider the costs of refining, distribution, marketing, taxes, and the markup set by the seller. When all this is added up, we get the final price that we see at the pump.

But why is it so high?

The real reason we have to pay so much for gas now it’s not the cancelation of the KXL pipeline, as some people said on social media. Canada still is America’s biggest client when it comes to importing crude oil, even if the U.S. remains the world’s largest oil producer. Because we buy so many refined oil products (kerosene, gasoline, lubricating oil, etc.) to use in our day-to-day lives or for our businesses, the U.S. is also number one in consumption.

Filling Up with Gas
Photo: Dawn McDonald on Unsplash
So, no matter what many are saying regarding the transition to zero-emission cars, this can’t happen in just a year or two. It takes meticulous planning to avoid a situation like the one we’re currently in.

But let’s continue. During the health crisis, many countries decided to impose harsh restrictions. Movement stopped. Companies tried to remain afloat while switching to remote work, flexible hours, and online meetings. The demand for gas and diesel reached an all-time low. That’s when we heard about oil becoming “worthless.” It was the perfect storm. Russia and Saudi Arabia were competing against each other in the oil markets, and sellers had to eventually pay those few buyers interested in acquiring their excess output. A barrel of crude oil was worth nothing!

Fast forward two years, and now look at where we are. Brent crude futures are at $121.9. Now it’s starting to make sense why we’re paying so much for gas.

But that’s not the whole story.

Enter Russia

Secondly, as the world slowly started to recover from the chaos brought by the health situation, markets were becoming increasingly anxious. Everything seemed normal for a couple of months. That was until Russia decided to invade Ukraine and kickstart a whole new international crisis. The two countries have been in a silent conflict since 2014 but now it’s escalated into a bloody war.

Russia is the world’s third-largest producer of oil. The commodity is being carefully handled by investors and parties involved in selling or refining it. They were the ones that feared a supply chain disruption was imminent. This prompted a hefty rise in oil prices.

Now demand is increasing from month to month, while companies have to deal with fears of not getting enough oil to refineries thanks to a very delicate geopolitical context.

Even if the national average retail price for gasoline increased by 63% in just 12 months and is currently sitting at a bit over $5 a gallon, people in Beverly Hills, for example, pay $7.69 a gallon. There’s a disparity in prices across the U.S. because of taxes, distance from the supply, operating costs, and competition. In Georgia, counties like Murray enjoy a price of $4.32 per gallon. Travel to Illinois, and you’ll pay $5.56 a gallon, according to data provided by AAA.

June 2022 Fuel Prices in the U\.S\.
To better put things into perspective, a gallon of gas will set you back more than $10.72 in Denmark, Europe. The U.S. customers are still fortunate, but who knows for how long.

And – get this – because inflation is wreaking havoc everywhere, it’s also affecting the fuel prices. Gas being expensive forces other businesses to raise their prices accordingly, which in turn makes oil and gas companies keep their high prices in place regardless of what happens in the global commodities market. It’s an unfortunate vicious cycle that’s incredibly hard to get out of without the “help” provided by a crisis where the majority won’t have enough cash to pay for filling up vehicles.

Not having enough truck drivers available is another issue that adds to the fuel price. Having an election coming up in November is also not helping this situation. Politicians might try to use the crisis to their advantage since someone must take the blame for what Americans are feeling right now.

And this impacts everyone, everywhere! Yes, even as an owner of an all-electric vehicle, you’re still paying the gas premium. Trucks, vans, farm tractors, and manufacturing businesses still use fossil fuels to make and bring their products to the market, more specifically – to you.

Fortunately, there are some ways out of this.

The solutions

Thirdly, not getting gas is not an option. The U.S. is part of a global market. Even if Americans start using less gas and the demand decreases, people in China or India might need even more. What this means is that on a global scale, nothing changes. Less demand must happen everywhere if we want to see smaller numbers at the gas station.

One idea would be to temporarily suspend all state and federal taxes that are applicable for gas and diesel. If applied for at least six months (not for only a holiday), this measure would shave off approximately $0.20 from the retail price. If negotiated properly with the biggest national sellers, then we would even get to see a 14% reduction at the pump. But the money collected from you is used to keep roads in driving condition, so politicians might not be so inclined to do this.

Another idea would be for the federal administration to check on what’s going on at oil companies. They’re raking in record profits. A comprehensive nationwide check might ease the pressure put on consumers.

The U.S. could also temporarily ban oil exports, but only after holding talks with OPEC+ and other relevant allies. It would be unwise to act hastily since other countries could do the same.

The Biden administration could also schedule an international release of oil reserves. This would flood the markets and would temporarily lower prices.

The suspension of blending requirements could also help with reducing production costs, but this would hurt the farmers and the environment.

Gas Pump
Photo: Dawn McDonald on Unsplash
Another interesting idea would be to let foreign vessels with less than 75% American crew transport gasoline in U.S. waters.

Drivers can also use cash instead of credit cards. In some areas, you could be charged up to 15 cents more per gallon just because you don’t pay with dollar bills. If you have a credit card with reward points, then it’s also good to make sure you’re getting money back.

Not a pretty picture

But all this doesn’t change the fact that climate change is real. We’re in a real pickle here. On one hand, we can’t give up on fossil fuels suddenly. This must happen gradually.

On the other hand, all-electric cars that do not pollute our air and do not contribute to the greenhouse effect are great for personal transport, off-road adventures, and even the trucking business if – and only if – there’s a charging infrastructure in place. Tesla and now the likes of Rivian or other manufacturers that are working with companies Electrify America are trying to make EV traveling as seamless as possible. Charging times are still nowhere near what it takes to fill up a gas tank, but that’s a compromise we are forced to accept if we don’t want to destroy our planet. Keeping our impact on the global ecosystem at an unsustainable level might get us into other types of crises like forced migration, water, and food scarcity, or uninhabitable places.

In the end, gas prices might not come down any time soon. We’re still looking at a painful 2022 if no action is taken as fast as possible. Experts anticipate another 15%-20% increase until fall comes. Even the U.S. energy secretary admitted, “this summer is going to be rough.”

And buying an EV right now is not an option for people who can’t afford to fill up their gas tanks. Inventories are slim to none, ordering a brand-new car or truck might take more than a year to reach the customer (unless you win the Rivian lottery), and prices keep climbing.

We’ll just have to hope that politicians worldwide will realize the danger we’re all in, and they’ll take the necessary measures before we all slip into the abyss.
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About the author: Florin Amariei
Florin Amariei profile photo

Car shows on TV and his father's Fiat Tempra may have been Florin's early influences, but nowadays he favors different things, like the power of an F-150 Raptor. He'll never be able to ignore the shape of a Ferrari though, especially a yellow one.
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