Trevor Filseth
economy, Americas
The end of the pandemic is supposedly nearing. Roughly half of Americans are fully vaccinated against the coronavirus; more than half of them have received at least one shot of the two-dose vaccines. While the vaccine is not perfectly effective, and there remains a danger from mutated variants of the virus, vaccinated Americans who contract it are far less likely to require emergency medical care. With this peace of mind, vaccinated Americans have begun to return to their pre-pandemic habits in increasing numbers—and one part of this has been a resumption of car travel.
Supply and demand have responded accordingly, and as more Americans resume regular travel, gas prices are slated to soar. The American Automobile Association has reported that gas prices are expected to increase 10 to 20 cents per gallon, increasing the average price across the country to $3.25.
Other estimates are similar; GasBuddy has reported that the average is $3.12 per gallon, an increase of 3 cents over a one-week period. The boost was fueled in part by Fourth of July celebrations, which have historically involved travel as family members drive to meet with one another. “Millions of Americans flooded the roads for the long weekend, guzzling down gasoline at a clip not seen in years,” according to GasBuddy’s petroleum analyst, Patrick De Haan. “In the process, we could have set new all-time records for consumption.”
Geopolitical factors have also influenced the resurgence of high prices. The Organization of Petroleum Exporting Countries (OPEC), an international oil cartel controlling roughly 40 percent of the world’s supply, has experienced tension between Saudi Arabia and the United Arab Emirates, two of its largest producers. As a result of these tensions, an OPEC meeting, scheduled to take place this week, was canceled.
OPEC member states coordinate their production levels, helping to keep prices stable; as they edge upward, OPEC will adjust its production targets higher, keeping the price intact. Without OPEC’s consensus, however, current supply remains largely unchanged, meaning that increased demand without increased supply will drive higher prices.
Supply shocks are also likely to occur when weather events, such as hurricanes, affect coastal production facilities along the Gulf of Mexico. Human activity can play a role, too; gas prices temporarily shot up along the eastern seaboard in early May after the Colonial Pipeline was hacked, although they quickly returned to normal once the ransom was paid. A portion of the ransom money was later recovered, although the perpetrators of the cyberattack remain at large.
Trevor Filseth is a current and foreign affairs writer for the National Interest.
Image: Reuters.
