Why Rising Gas Prices are Important

As the Ukrainian conflict unfolds and the Covid-19 pandemic ensues, rising gas prices have become a frequent topic of conversation. The ban on Russian oil exacerbated already increasing gas prices because of supply and demand imbalances after the Covid-19 lockdown ended. Problematically, according to Mike Patton, a senior contributor at Forbes between March 4, 2021 and March 4, 2022, the price of oil has risen 58%, and the retail gas price has risen 24%. Steps have been taken by the government to ease the burden of these rising prices. For example, President Biden has tapped into the nations Strategic Petroleum Reserve with the intention of lowering gas prices. Nonetheless, the cost of gas continues to rise.

Some may wonder why gas prices are discussed more frequently than the rising cost of other goods and services. Generally, gas is something that the majority of American consumers purchase on a regular basis. Because of this, the rapidly increasing price of gas not only means that it costs the average American more to get to work, but that there is also a ripple effect on the larger economy. When consumers have to spend more of their money on gas, they have less money to spend on other goods and services. Other industries, specifically those that sell nonessential goods, lose customers, creating an economic drag. The rise in oil prices and the simultaneous decrease in supply can also lead to stagflation, which is when inflation increases while output decreases.

On the flip side, a select number of industries may experience a boost from the rise in gas prices. Electric cars, a substitute for gas powered vehicles, may seem like a more cost efficient option for many drivers. Unfortunately, the majority of American consumers cannot afford these cars, as they tend to be more expensive upfront. Electric vehicles are, however, more environmentally friendly. In relation to this, a prevalent and unfolding debate in American politics is the balance of action to combat climate change and elevated gas prices.

The climate crisis has fueled wildfires and other natural disasters across the United States, which have cost billions of dollars to address, according to Maegan Vasquez, a White House reporter for CNN. A number of actions have been taken by the president to ease the burden of climate change. Biden has shut down pipelines, rejoined the Paris Accord, and reassessed the construction of mines, highways, and water infrastructure among other measures. These have, however, exacerbated the increase in oil prices. CNN’s senior climate editor Angela Fritz puts it simply, saying that Biden is “stuck between progressive ambition to take meaningful climate action and the reality that the US is still extremely dependent on fossil fuels and people want cheap gas.” President Biden and Americans across the country continue to grapple with the predicament of whether to prioritize oil prices or climate action. For now, it is important to recognize that both pose a serious threat to the health of the US economy.

References

Folger, J. (2022, February 8). How gas prices affect the economy. Investopedia. Retrieved April 23, 2022, from https://www.investopedia.com/financial-edge/0511/how-gas-prices-affect-the-economy.aspx#:~:text=At%20the%20individual%20level%2C%20higher,effect%20on%20the%20broader%20economy.

Palmer, T., & Loo, N. (2022, March 8). Gas prices now highest US motorists have faced. here is what it means. NewsNation. Retrieved April 23, 2022, from https://www.newsnationnow.com/business/your-money/gas-prices-reach-highest-point-us-motorists-have-faced/

Patton, M. (2022, April 14). The real reason behind surging gas prices. Forbes. Retrieved April 23, 2022, from https://www.forbes.com/sites/mikepatton/2022/03/09/the-real-reason-behind-surging-gas-prices/?sh=39a3564026de

Vazquez, M. (2022, April 22). Rising gas prices bring Biden to a political crossroads over climate policy

CNN politics. CNN. Retrieved April 23, 2022, from https://www.cnn.com/2022/04/22/politics/biden-climate-gas-prices/index.html