have gas prices exceeded four dollars a gallon in many states across the country for the first time in history. Prices have not reached the levels they are at now since the 2008 financial crisis smelly havoc on economies around the world.
What caused the price increase?
As a major supplier of natural gas and oil Russia’s invasion of Ukraine has affected the energy markets. Many countries are trying to reduce their dependency on Russia, but they cannot close the gaps as quickly as many would like. Energy exports, including petroleum products and natural gas, are the Lifeblood of the Russian economy. Despite imposing sanctions on Russia, the European Union has not approached natural gas markets over fears Russia might Take revenge and make the block very vulnerable. The US banned the import of Russian Oil and Natural Gas in March in response to the invasion. This was a viable option for the US as it is an energy producer not dependent on Russian resources.
Recently, prices are both clean and dirty oil tankers the big ships that transport gasoline, diesel and crude oil around the world, are on the rise. In order to move around the globe, these ships depend on oil, and as the price of this commodity increases, as well as the service of transporting energy resources. The US Energy Information Administration (EIA) has reported that typically “Tanker prices rise during periods of low oil demand as onshore storage fills up and demand for tankers as a source of flexible floating storage increases.” This phenomenon was observed in 2020, when the Covid-19 pandemic first started. A lot of people stuck at home stopped getting around and the consumption of gasoline, and therefore crude oil in general, went down fairly quickly, leading to a collapse in demand for petroleum products.
That Russian invasion had two major impacts on the diesel market.
The first relates to the price of oil tankers and shipping, but that is not the case unique to diesel. However, in April, the second largest state-owned Russian energy company, RosneftShe announced that she would cut them Diesel exports to zero. In part, the invasion of Ukraine has forced many European countries to increase diesel imports from Russia to the US.
Why aren’t diesel prices cheaper in the US?
In the United States, diesel prices are average $2.36 higher than a year ago. While diesel is usually cheaper than regular petrol in Europe, this is not the case in the US. The EIA explained this price difference by showing that tax advantages, which made gasoline more competitive in the market, helped reduce demand for diesel from the early 2000s. The price of diesel is highly dependent on the price of crude oil, as this cost is about fifty percent of “Diesel fuel prices from 2000 to 2021.”