The price of gasoline has risen significantly within days, making President Joe Biden warn the oil producers and gas retailers against exploiting the moment to increase the prices for more profits.
Many people are wondering whether they are price gouging Americans illegally at the stations or in the oil fields. Many analysts have defended them by stating that oil companies do not determine their oil price.Read More »
What’s making the prices of gas high?
After the Russian invasion of Ukraine, oil and gas prices have increased at a high rate. The price rise is triggered by the huge consumer demand as the pandemic is easing and global crude supplies are still limited. On Monday, it was reported that West Texas Intermediate, the United States benchmark, closed up about $4 at approximately $120 one barrel, which is up by 30% last month and 85% the last year.
According to AAA, on Monday, unleaded gasoline’s national average price was $4.10 per gallon, and one week ago, it was sold at $3.61. It’s expected that price pumps will increase. On Monday, congress’s top officials agreed that they would ban the importation of Russian oil to the U.S. It would also ban Russia’s permanent regular trade relation status because of the ongoing war in Ukraine.
How high will the prices of gas get?
Devin Gladden, the spokesman of AAA, says that the oil and pump prices will top the previous $4.11 per gallon record and $145 per barrel set in July 2008.
The beef between Biden and the energy industry goes way back. Last year President Biden was heavily criticized for the country’s growing inflation that’s been there for over 40 years. He asked the Federal Trade Commission to find any evidence of anti-consumer behavior that oil and gas companies engage in.
According to a letter to Lina Kahn, the FTC Chair, gasoline prices at pumps are still high despite the decline of costs at the oil and gas companies.
Are gas stations price gouging?
It has not yet been determined whether gas stations are price gouging. But according to Tom Kloza, Oil Price Information Service chief global analyst, gas retailers may not be doing anything illegal. He says that retailers, including convenience stores, grapple with the high wages for employees and multiple other costs. Therefore, they are raising the pump prices so they can maintain a profit margin.
Phil Verleger, a Niskanen Institute senior fellow and industry analyst and economist, says there is nothing like price gouging. There is a lot of competition in the gas industry, and it is not illegal for companies to raise their prices past the other companies to increase the profit margin.
Are there probes investigating price gauging
Gas retailers cannot jointly agree to lift the oil and gas prices at the same time as they would be violating the antitrust laws. Lots of investigations and lawsuits have been brought by consumers, the FTC as well as states attorneys general over the last 30 years. The lawsuits allege these conspiracies in the gasoline industry, but they have all been unsuccessful.
Will the production of oil increase?
Oil producers may attempt to keep the prices high by scaling back production. However, most big companies may increase output to maximize the high prices. The Russian invasion of Ukraine will continue to add pressure and uncertainty on the oil market, and demand may continue to outpace supply.
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