Gas prices have now reached their highest levels since October 2014. According to the American Automobile Association, the country’s average price for a gallon of regular gas is $3.274 as of October 11.
Even more bad news, prices will continue to go up as the energy crisis worsens.
Gas Prices Are Now Sky-High, and There Are no Signs They’re Going Down Soon
The world’s demand for energy is now back to pre-pandemic levels. However, supply has yet to return to the same levels. From a low of negative $40 per barrel, US oil prices are now above $80.
West Texas Intermediate gained 1.5% to close Monday at $80.52. The last time prices broke the $80 barrier was seven years ago.
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As a result of spiraling oil prices, gas is closely following suit. Traditionally, October is one of the months that gas prices cool down. However, the current energy crisis is causing the opposite effect.
The AAA reported that as of October 11, the average price of gasoline in the USA is $3.27. This comes between a high of $4.44 in California and a low of $2.90 in Texas.
Gas prices were up by 7 cents compared to last week. Compared to April 2020 where a gallon averaged $1.77, gas prices are now nearly double.
Why Are Gas Prices So High Right Now?
The world’s energy crisis continues with higher than expected increases in natural gas and an incoming cold season. In Europe, natural gas is trading at the equivalent of $230 per barrel in oil terms.
This is higher by 130% since September and eight times higher compared to last year. For East Asia, the numbers are slightly lower but still represent a potential sticker shock for consumers.
Natural gas is trading at $204 per barrel in oil terms. While prices remain much lower in the United States, they did shoot up to their highest rates in 13 years.
The reason for spiking natural gas prices is the depleted stocks of European producers due to an extra-long winter earlier this year. In addition, rising demand as many manufacturers began reopening is impeding restocking efforts.
While governments are trying their best to absorb the impact, many acknowledge that they won’t be able to prevent the rise of home energy bills. Natural gas prices are spiking even higher than oil in Europe and Asia.
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Many power plants are now thinking about what was unthinkable before. They might resort to using a less expensive source of energy: crude oil.
OPEC Keeping Supply Low As Demand Goes Up
Even as many countries reopen their economies and drive demand for fuel, supplies are still lagging behind. At the same time, US oil production remains hampered by a combination of Hurricane Ida and COVID-19 surges.
In addition, both US oil producers and OPEC remain wary of increasing oil production. They are afraid of flooding the market again and losing out if demand dries up due to new outbreaks.
For now, energy companies would rather keep prices high and reward shareholders than increase production. This is why despite calls from the White House and other oil-hungry countries like India, OPEC is taking its time. For now, they seem content to let oil prices stay on the high-demand side.
Gas Prices Will Continue To Go Up
Unfortunately, gas prices will only keep rising, at least until the rest of the year. On Monday, Citigroup predicted that Brent oil will hit $85 a barrel for the fourth quarter. Brent, the world benchmark for oil, is currently at $83.82.
The bank cited “price contagion this winter” and the expected switching of power plants away from sky-high natural gas to oil. In addition, Citi believes that very cold and long winter in Europe could cause the quotient to run out of energy stocks by February.
As a result, demand for oil will continue. For the US, this means high gas prices will only get higher. Even worse, it will further hurt the current inflation woes the country is experiencing.
Expect tighter budgets for American households and a continuation in the drop of President Joe Biden’s administration’s popularity.
Watch the NBC News video reporting that gas prices are on the rise nationwide:
How do you deal with higher gas prices? Do you curb your consumption to fit your budget? Or, do you adjust your budget accordingly?
Let us know what you think about the rising prices of oil and gas. Share your comments below.