You not only see it, you “feel” it. The price of gasoline you’re paying today is skyrocketing. In fact, it’s more than a dollar per gallon more than it was just a year ago. This week nationally a gallon of regular costs $3.27 and last year the average price was $2.18. You’re feeling it in your wallet every time you fill your tank. But why is that? What’s driving up the cost of driving?
What Does the U.S. Government Say?
President Biden has called for an investigation into the current persistently high gasoline prices. He has suggested that the pandemic has fostered “gasoline profiteering” just as it has in other areas and that might be the reason you are paying the highest price for gasoline in over seven years.
It’s true that normally gas prices at this time of the year should be going down as prices at the pump usually fall following the peak summer driving season. Biden wants an investigation into why they haven’t taken their normal path as summer ended.
Most experts however say there’s little evidence of anything nefarious behind the higher fuel costs. Although gas prices have atypically remained high and are going higher every day, analysts blame other factors. These factors unfortunately are not likely to disappear anytime soon. And because of that, you may be paying more for any and all oil-related items and services.
The Reasons Why the Cost of Driving Is Going Up
1. Supply disruptions
Gasoline isn’t immune to the supply-chain issues that have plagued every conceivable item produced during the worldwide coronavirus pandemic. Storms and hackers have shuttered production and transport of gasoline all during this past summer. If that wasn’t enough, Hurricane Ida temporarily closed off most oil production in the Gulf of Mexico and several big refineries. The hurricane came immediately after a cyberattack took out a major fuel pipeline to the East Coast for nearly a week. All of that makes for a really bad day, week, month, and perhaps year for you, me, and oil.
When you combine the effects of all of the above on gasoline prices and the resultant loss of production and refining capacity that was knocked offline by Hurricane Ida, you must also add in the other shortages. There’s a worldwide shortage of manpower too, specifically tanker drivers.
There is also a long waiting period at the docks on both coasts as ships are lined up waiting to unload—if they can.
2. High demand
You probably guessed reason number two. Americans are driving more than we were one year ago. When that happens like it has, combined with the supply issues, higher demand means higher prices. Prices reflect demand that came back stronger than expected from the pandemic and lower U.S. oil production. The hurricane and hackers only made the situation more complicated.
Tracking now shows Americans are driving at rates nearly 50% above their pre-pandemic level. That’s even higher than the levels were in September.
3. Low production
Gasoline prices are being driven up by U.S. independent producers and OPEC members who are limiting oil production. President Biden has tried urging OPEC members to increase oil output and help ease the price increase as well as prevent any slowing in the U.S. economy’s recovery from the COVID-19 pandemic. But oil prices may increase by 40% this winter, spurring economic crisis.
$100 a Barrel for Oil?
We haven’t seen prices like that in seven years since 2014, but it may be just around the corner and here this winter. If the price continues to escalate, that energy crunch could propel and spur a global economic crisis.
Natural gas prices have already surged to almost double that level in oil equivalent terms, and a spike in demand for diesel could push crude oil into similar territory. With monetary and fiscal policy stretched to the limit and energy costs rising as a share of economic output, higher oil prices can create a worldwide crisis.
Three Keys to Watch Now
The boost in oil prices could be driven by three factors right now. They are increased switching from gas to oil as a result of higher gas prices, a jump in oil consumption because of a very cold winter, and higher aviation cost demands as the U.S. reopens its borders. Right now, all three of these seem to be racing towards this outcome. This prediction doesn’t even include the inflationary potential if just one more severe storm were to strike again this year.
Do These 12 Things to Save on the Cost of Driving Now
- First, make a realistic budget for gasoline and drive only when it’s necessary. Plan your errand trips and drive with a specific route to save gas.
- Drop your speed by 5 MPH when you drive and save 10% on gasoline.
- Lighten your load and remove heavy objects that make a car strain and burn more gas.
- Make sure you car is tuned up, winterized, and tires at proper inflation to be prepared for winter (and every season) at max efficiency.
- Car pool and/or use public transportation whenever you can to save.
- Use Gas Buddy to find the best price on your route to buy gas.
- Use a rewards credit card or loyalty card that saves you on each purchase and awards points you can use to convert to cash and save on gas or other items each time you fill your tank.
- Fill up early in the week. Gas prices tend to be the lowest on Mondays and Tuesdays. Avoid filling your tank on Fridays, Saturdays, or Sundays when gas prices tend to be the most expensive.
- Skip premium gas. Higher-octane gas isn’t necessary or beneficial in most cars so you’re just spending more money when you buy premium. Save 20 to 40 cents per gallon by buying regular. Use regular unless your car’s manufacturer specifically requires premium.
- Don’t idle. Don’t start the car and then leave it running. Make sure you’re ready to go before starting your engine. Idling just wastes gas and causes more air pollution.
- Reduce the use of your heater in winter (or air conditioning in summer). Blasting heat in the winter has an effect on your fuel economy. Dress warm and only use the heat when it’s absolutely necessary and save.
- Check your gas cap. A bad seal or missing cap can allow gas to evaporate from your tank. Besides costing you money, this pollutes the air, too, so replace your gas cap if the rubber seal seems worn or damaged.
Home Heating Costs Will Also Increase
“Global warming” is not a term that simply means that it will just be warmer in winter and even hotter in summer. What it means is that the climate is changing and the temperatures are becoming more extreme because of it. These extremes foster ocean current changes, melting of the ice caps, and much more intense storms. Winter storms increase because of that.
When the winter becomes more intense, you use more oil and gas, and this winter will be a cold one. To warm up, you can expect that prices will increase by 30-40% based on rates that are predicted. That is very expensive coming off increasing prices of last year.
If you paid $100 for gas or oil last January to heat your home and don’t change your environment, expect to pay $130-$140 for that same service!
Experts will tell you to do all kinds of things to your home to make it more energy efficient and you should. But be prepared to do the simplest thing. Bundle up and lower your thermostat this winter and endure a little more of the cold. It may be the only thing you can actually do that’s affordable to be warm when oil and gas prices go through the roof!
Take Another Look at How to Save Money on Gas
The cost of driving may not be something you can drastically change, especially if you have a commute to work. But there are ways to reduce those costs to try to keep it within your budget.
The very first step to saving on gas is to start paying attention to your driving and purchasing habits. If you can do that, you are on your way to lowering your cost of driving.
Are you concerned about the cost of gas and oil? What are you doing to fight off the inflation that it’s causing in your budget? Are you preparing for winter and the cost of keeping warm?