With the recent spike in the price of gas, we wonder who or what is to blame. Is it President Biden for canceling the Keystone Pipeline? Is Covid-19 to blame? Or is it the war going on in Ukraine right now? There could be one reason behind it all or each part has to be blamed. Although gas prices go up and down on a regular basis, with all the major issues going on in the world, they have been significantly higher ever since President Biden canceled the Keystone Pipeline. This is where we have seen the rise. Although there will be many different opinions on the real reason behind this spike, let's talk about the facts.
The price of gas changes with supply and demand, that's how it’s always worked. When the supply is higher, then the price goes down. When the demand is higher the price goes up. The day that Joe Biden took office, he made plans to cancel his permit of the keystone pipeline that was under construction when Donald Trump was in office. Which was also during the times that gas prices were consistently lower. This pipeline is owned by a Canadian company called TC Energy Corporation and under the government of Alberta, Canada. The pipeline was in its fourth stage when it was canceled. Starting in Alberta, the pipeline would run through South Dakota, Montana, and end in Steele City, Nebraska. It would have run over 830,000 barrels of crude oil daily which is about 35 million gallons. Biden canceled this pipeline because he believed that it would make climate change worse. “We remain disappointed and frustrated with the circumstances surrounding the Keystone XL project, including the cancellation of the presidential permit for the pipeline’s border crossing,” said Alberta Premier Jason Kenney. They had invested over $1 billion in the project. So was this a contributing factor in the rise of gas prices? Yes, but not as much as you may think. There are plenty of other countries that are experiencing the same rise in gas prices. Gas prices are a global market and with the recent invasion of Ukraine, many countries including the United States are cutting ties with Russia, who has been in the top 3 percent of global oil production over the past 20 years.
Now what about Covid? Remember when gas was around $2 per gallon? This is because people were afraid to travel and the demand wasn’t as high. The pandemic caused a major disruption in supply and demand and low gas prices were probably one of the only good things about the pandemic. Now that we see the pandemic coming to an end, the roads are busy and people don’t want to stay in their houses anymore. Which causes the demand for gas to go up causing the price to go up with it. So yes, the pandemic is sort of to blame but just because it seems to be ending the supply at the moment has gone down. If Russia never invaded Ukraine, then they would still be in the top 3 countries that supply gas globally. When Donald Trump was in office he made his good relationship with Russian President Vladamir Putin well known and believes now that if he was still in office, then Russia would never have invaded Ukraine. The two sides of this argument is that gas is a global market and Joe Biden is clearly not the reasoning behind the rise in the price of gas. However, the relationship between two country's Presidents plays a very important role in the current rise of these prices. Maybe if Trump was still President then Russia would not have invaded Ukraine, but that still remains a what-if question.
Now how long will these gas prices last? Finding other ways to distribute oil is not an easy task. "The Biden administration is suddenly interested in more drilling, not less," said Robert McNally, the president of Rapidan Energy Group. "People are more worried about high oil prices than anything else…"They can't find people, and can't find equipment," McNally said "It's not like they're available at a premium price. They're just not available." Even if the war ends in Ukraine, no country will want to do business with Putin. Therefore making it harder to distribute gas keeping the price at around $4 per gallon. The last time the U.S. saw numbers like these, it was 2008 and the stock market was just about to crash."When the U.S. issues sanctions, that has wide ramifications on the ability of Russia to export oil," he said. "We don't import a lot, but somebody else does and we are making it difficult for Russian oil to flow to the global market, and prices are reacting to that," said energy expert Patrick De Haan. There has also been a decrease in the job market which means more people are getting jobs causing the roads to be more crowded and the demand for gas is higher. De Haan also stated, "To make it implicitly clear, this is the cost of bipartisan sanctions on Russia for their war on Ukraine," According to the U.S. Energy Information Administration, as of March 4, 2022, the U.S. is producing 11.6 million barrels of oil per day. In March of 2020, the U.S. was producing 11.3 million barrels per day. So how are the gas prices higher now if they are producing more oil? “Oil and gas drilling has increased under Biden, but companies in the U.S. are constrained by tight supplies of rigs, trucks, and labor that they need to supply more oil,” according to a CBS news article.
In parts of California, gas has been recorded at over $5 per gallon. Experts are saying that due to inflation possibly not going down until at least the end of April, it could be months before gas prices go back down. Although there could be one reason for the price of gas, it seems there could be many moving parts and longer-lasting prices.
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