The last time the price of a gallon of gasoline in the United States, adjusted for inflation, had exceeded the barrier of four dollars per gallon was more than 100 years ago (in 1918), when commercial production of crude oil to satisfy the growing demand for automobiles.
The figure, produced by the experts at InflationData.com, speaks about the current moment that the country is experiencing.
This week, the gallon reached 4.29 cents on the dollar, almost double the prices registered just 18 months ago and two cents below the all-time high of 4.31 cents reached just seven days ago. And although the price of a barrel of crude oil plummeted slightly due to fears of the return of the covid in China (from 131 dollars to 106), its value at gas stations in the country still remains unchanged.
This very high cost has also come from the hand of inflation that is around 7.9 percent – the highest in 40 years – and that has everyone thinking about the state of their wallet.
“This is absurd. Until recently she spent about $250 a month tanking the car. Now I spend more than US$500. At home we are doing what we can to save. We go out less, more bicycle and public transport. But nothing is enough. It’s not normal,” Mark Green, a resident of Fairfax, Virginia, told this newspaper, where prices per gallon are already approaching five dollars.
Although there are several reasons that explain the sharp increase, the issue has become a battle between President Joe Biden and the Republicans, with clear electoral implications at the domestic level and others of global and geostrategic scope.
The issue has become an entire battle between President Joe Biden and the Republicans, with clear electoral implications at the domestic level and others of global and geostrategic scope.
The origin of the situation, and most experts agree on this, is in the covid-19 pandemic that broke out in March 2020, the economic crisis caused by the confinement policies and the disruptions in the production and demand chains. Worldwide.
Throughout the first months of the pandemic, with the entire planet confined to their homes, the demand for gasoline and diesel dropped dramatically. To put it in context, the price of a barrel fell to 23 dollars. In response, growers – both in the US and around the world – cut supplies.
According to Patrick Hann, an oil analyst for the firm Gas Buddy, when things started to improve and many of the restrictions were lifted, people returned to the streets but the demand exceeded the supply that existed at the time. Which caused a first shot in prices.
This had a lot to do with the decision of Opec, an alliance of oil producers that supplies 50 percent of the world market, and which chose to keep the supply low to cause an increase in the price of a barrel and recover what was lost. That according to the US Energy Administration (IEA).
Additionally, national production did not grow either, since companies chose to favor paying investors – who were reluctant to put dollars to finance the industry – before expanding their operations and increasing supply.
Analysts also point to another factor associated with the pandemic: To help Americans, Democrats and Republicans in Congress passed massive economic stimulus packages that kept demand for goods afloat despite troubled supply chains. , which contributed to high prices and generated more inflation.
Democrats and Republicans in Congress passed massive economic stimulus packages that kept demand afloat…which contributed to high prices and fueled more inflation.
“US oil production fell dramatically in the last 8 months of Donald Trump’s presidency. Was it his fault? No. Nor is it Biden’s that we are now paying these exorbitant prices. What brought us to our knees was the pandemic,” says Hann.
Last month Russia’s invasion of Ukraine was added to the picture, which was already critical, which triggered the value of crude oil even more. Especially since last week, when Biden announced the suspension of hydrocarbon imports from Moscow. According to the president, at least 20 percent of the extra value that Americans are paying at gas stations is attributable to this conflict, which is why he has begun to refer to the phenomenon as “the Putin increase.”
Abhiram Rajendran, head of market research at Energy Intelligence, says, in fact, that the war in Ukraine ended up being like “pouring gasoline on a bonfire” that was already out of control.
But the Republicans, who pushed for the veto on Russian imports, now blame the president for the high prices of gasoline that are being paid. They rightly note that the increases began long before the invasion. But instead of pointing to the pandemic, they maintain that they are due to the policies that the Democratic president has promoted since he arrived at the White House.
various reports of Washington Post, New York Times and other media maintain that the Republican arguments are false or biased. Although they recognize that Biden’s policies have had some effect, this has been marginal and does not affect the prices being paid today for crude oil, which are set by the international market and tend to be speculative.
According to Rajendran, the underlying reason is that the oil companies are favoring the payment of dividends to investors over new investments in exploitation, whose profits are projected into the future.
Although both sides may have valid points, the truth is that the debate has turned into a political battle with clear electoral leanings.
In November there are legislative elections that will define control of Congress for the next two years. The Republicans, who are in opposition today, know that Biden and the Democrats are in a weak position, since nothing affects the perception of voters more than the state of their wallets.
And although the reasons may be multiple, the electorate tends to punish the rulers of the day even if the causes of inflation and gasoline prices are out of their control.
SERGIO GOMEZ MASERI
Correspondent of THE TIME
Washington
@sergom68
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