It is the United States that is ranked number one in the consumption of gasoline than any other country in the world. The sudden rise in costs at the pump has been a growing concern of most Americans recently. Gasoline prices have increased at an alarming rate in the past year from $2.11 to $3.40 surging by 61% over a span of 12 months.
What Constitutes the Price of Gasoline?
There are many components that go into the pricing of gasoline but crude oil accounts for more than half of the cost, as per the U.S. Energy Department. The other components involve blending ethanol and other additives as well as the distribution and marketing cost, for which the consumers pay. Moreover, the federal gasoline tax is 18cents and the average tax and fees each state imposes are 30 cents which vary as per regulations.
Why do Gas Prices Go Up?
With the pandemic showing some moderation in the past few months, Americans are back on the road. This in turn has spiked the demand for gasoline, also trouble in the energy market overseas due to the pandemic disruption has played an important role in hiking the price of gasoline.
There has also been a supply constraint of gasoline in the US market since the shutdown of a large swath of the US’s oil drilling and refining capacity in the Gulf of Mexico in late August due to Hurricane Ida. The Energy Information Administration noted a slide down of 40% in the inventory of crude oil at the main crude oil depot in Oklahoma from the start of the year.
The energy market around the world is in a crunch hence the overseas market is also not helping much on the supply front. OPEC and other major oil exporters have agreed to moderately increase their production to ease the rising prices.
How to Counter the Surging Fuel Prices?
The US Administration had put forth a request to the oil-producing nations to pump up their production of crude oil to ease the price hike. However, the request to OPEC for releasing barrels from their strategic reserves has faced a lower approval rating. They are on with their current plan of gradually casting off production restrictions that were devised due to the pandemic.
Forecasters believe that the rising prices are for a brief period considering the domestic oil production is being ramped up. With OPEC planning to eventually increase production for the global fuel market, the prices might moderate down. Moreover, the insurgence of the new coronavirus variant might dampen the demand for gasoline, reducing prices.
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