What Makes Gas so Expensive Today?

Daniel Scott, Student Journalist

Nearly everywhere you look today, gas is almost guaranteed to be over 3 dollars. In fact, it makes anything under 3 dollars seem like a bargain. But what is making gas prices so high? Is it just in Beavercreek? Why was gas so cheap just over a year ago?

 

The answers to these questions are more complicated than simply one factor. A lot of people point the finger at our president, who plays merely a small role in gas prices. To begin to understand the national oil market, we need to delve into OPEC. The Organization of the Petroleum Exporting Countries, which is abbreviated as OPEC, was founded in September of 1960 in Baghdad. OPEC is an intergovernmental organization between oil-producing and exporting countries worldwide. The coalition between these oil-producing and exporting countries gives them a larger role in controlling the worldwide oil market, and to who they sell crude oil. 

 

If we backtrack to 2020, gas prices were at dollar figures. The reason behind this ties back to OPEC, Russia, and Saudi Arabia. At the start of the pandemic, OPEC was able to realize the potential effects the virus would have on oil demand worldwide. In March of 2020, OPEC called a meeting between its members and invited other oil-producing and exporting countries to attend. After analyzing data that proved falling oil demand worldwide, a plan was proposed that involved cutting oil production by 1.5 million barrels a day. OPEC specifically called upon Russia to abide by this plan, even though Russia wasn’t a part of OPEC. In an act of defiance, Russia walked out of the meeting and soon began to flood oil markets to compete with Saudi Arabia. Saudi Arabia retaliated by lowering its oil prices. Dubbed the Russia-Saudi Arabia Oil Price War, worldwide oil prices fell to all-time lows. Oil barrels were down to 20 dollars per barrel. The consumer benefitted from lower gas prices as a result.

 

However, the effects of flooding the worldwide oil market were detrimental. Sure, gas prices were lower, but numerous problems came with this. To start, U.S. oil drilling was near stopped. With an excess of oil, new ventures were scrapped. Numerous North American oil drilling companies declared bankruptcy. These issues caused the U.S. stock market to pause for 15 minutes on March 9th, 2020. Breakers tripped to prevent a complete crash and the day was dubbed Black Monday.

 

Now, as we start into 2022, gas prices are still at their all-time highs. As more people realize omicron is much milder than predicted and things continue to move closer to normalcy, the worldwide demand for oil rises. However, after worldwide oil production cuts, bankruptcy, and the scrapping of new ventures, oil production can’t ramp up fast enough for the increased worldwide demand. OPEC has been slow to respond and is exporting less oil than normal. These factors together have pushed oil prices per barrel to over 120 dollars, resulting in consumers paying the price each day. Unfortunately for consumers, there is currently no end in sight for the gas price epidemic.