The Rise of Petroleum Prices

By Kelly Schmitz & Emily Krause

 

It is no question that individuals need to travel by car whether it is to work, school or for leisure. With gas prices continuously rising, travel is becoming increasingly expensive, raising the question of just how expensive traveling will become? Experts state that gas prices will remain between $5-6 for quite some time, but many are questioning if prices have a large possibility to be increased.

The average price of fuel in America has reached a record $4.32 a gallon and, in some places, much higher. Many individuals with modest incomes have side jobs, such as driving for Uber or Lyft, making it nearly impossible to turn their side-gig into something profitable or worthwhile. Those that must commute to work or school are feeling the worst. Julie Krueger stated that driving from her home in Hobart to the University of Wisconsin – Green Bay campus is more costly by the day. “My vehicle already does not get the best gas mileage, so it does not help that the prices are rising. It used to cost $50 to fill my tank. Now it costs almost $80,” Krueger explained.

A fuel-efficient car filling up on gas.

Engineering at the University of Texas, Jonghyeon Jeon, has stated the war between Russia and Ukraine has been the main factor resulting in the steep price increase of petroleum. Jeon went on to touch on that although there has been a steady increase in the price of petroleum, there will be a point where it cannot rise further without potentially collapsing the economy. “Eventually, if petroleum becomes expensive enough, people will not be able to do anything. They will not be able to go to work, school, or even get groceries,” Jeon stated.

Russia’s invasion of Ukraine has fueled the surge in gas prices, including the inflation of many other goods. In America’s history, it has been generations since the United States has seen prices surge this much all at once. Even commodities such as meat are rising in price, forcing families to choose between gas or meat included in their meals.

Hobart resident Jesse Hanson expressed that traveling anywhere is becoming increasingly difficult. “I live almost 20 minutes away from anything that I need. My work and grocery stores are in opposite directions as well, so all of the travel that is required to live is becoming increasingly costly. If I did not have a well-paying job, I would be struggling to make ends meet – no question about it,” he went on.

Many people have voiced that they understand the sudden surge in gas prices and can tolerate them for the time being. However, under the circumstance they remain at this price point, financial situations will begin to crumble.

Current gas prices at a Shell station located in De Pere, WI.

Jeon did give a few tips to be on the lookout for trends, signally a drop in gas prices. Look for the price of crude oil. “When the oil company sells crude oil to a refinery company, they make future contracts. Therefore, the crude oil price is determined considering the expected future effects. It is obvious that the gas price will be high when crude oil is expensive. However, the reflection does not come right away. If you notice that the crude oil price keeps decreasing, the gas price at gas stations will not change right away. However, you could expect that the gas price will decrease,” Jeon explained.

In addition to looking out for crude oil price, Jeon went on to have a final comment on supply and demand, “Gas price is also affected by supply and demand issues. Therefore, it is good for you to look at the economic growth rate of big countries such as the US, China, India, the UK, etc. Those countries consume most of the produced oil and gas. Thus, when their economic growth rate is low or expected to be low, they would consume less oil and gas. When the demand is lower than the supply, the oil price will decrease.”

Overall, there is a light at the end of the tunnel when it comes to an overall increase in the price of petroleum – there is a ceiling. Although many individuals are struggling to fill their tanks, they can rest assured that this significant increase in price will not be a permanent fixture.

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