The Washington Post
March 9, 2022
Highlights:
Before the coronavirus pandemic, gas prices were on the decline.
After shutting down wells and laying off employees, De Haan said, oil companies have been slow to catch up to the rapid rise in gasoline demand. That caused prices to climb.
Then, as Russia’s attack on Ukraine unfolded, the market began adding a risk assessment to the price of oil, making it spike, said Devin Gladden, a spokesman for auto club AAA and an adviser at the Energy Department during the Obama administration.
The effect was compounded by sanctions banning U.S. banks from transacting with financial institutions in Russia.
Only about 3 percent of crude oil consumed in the United States comes from Russia. But because Russia is a major producer on the world stage, volatility there makes oil prices rise globally, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, a trade and lobbying group.
In Macchiarola’s view, Biden’s policies around domestic oil drilling have contributed to rising gas prices but are not a major driver of the surge.
During his first year in office, Biden outpaced the Trump administration in issuing drilling permits on public lands, drawing sharp criticism from environmental advocates. But he also halted new oil and gas leases on federal lands last month, quashed the Keystone XL oil pipeline and proposed new fees for drilling on public lands and waters.
“This supply-and-demand imbalance occurred as a result of the pandemic and was exacerbated by the aggression in Russia and Ukraine
Gladden countered that the Keystone XL pipeline would probably not yet be operational, even if it had gone forward. He argued that domestic oil production is more tied to pricing than to policy.
“Before the invasion and during the pandemic, prices were low, and that did not motivate energy producers to go and drill more,” Gladden said. “But now that prices have skyrocketed … they’re ready to go drill because there’s a pricing signal there.”
An analysis by our colleague Philip Bump found that domestic gas prices are determined more by international oil prices than by domestic drilling. There was no clear correlation between domestic production and gas prices.
As long as Russia continues to fight in Ukraine, Gladden said, gas prices are likely to remain inflated.