Rising gasoline prices hit the U.S. hard(2)

2022-03-23 08:36:55China Daily Editor : Li Yan ECNS App Download

Forecast lowered

Economists are concerned that rising energy prices may worsen overall inflation. Coupled with the intensifying geopolitical crisis, this could slow the economic rebound in the US.

Goldman Sachs has lowered its forecast for annual US economic growth, citing higher oil prices. It said that there is a risk the US will enter a recession in the next 12 months.

Peter McCrory, an economist at JPMorgan Chase, told The Washington Post, "The rise in energy prices will weigh on US economic growth, but overall, we are still looking for above-trend growth for the year."

Patrick De Haan, head of petroleum analysis at GasBuddy, expects gasoline prices to continue falling. He said in a tweet that demand for the fuel across the US last week through Thursday was up by 1.4 percent and was at its highest point since mid-December.

Gasoline prices are directly linked to global supply and demand, which De Haan said have changed due to the COVID-19 pandemic and the Russia-Ukraine conflict.

When demand for gasoline and oil plunged at the start of the pandemic, oil producers cut production, which reduced supplies. But as the global economy recovers from the pandemic, production continues to lag.

Prices for gasoline in the US have risen steadily for nearly two years. As the economy recovers from the pandemic and people resume driving, demand for the fuel is rising.

Against the backdrop of steadily rising prices, the US imposed a ban on Russian oil and other energy imports this month. Although the US imports less than 10 percent of its oil and gas from Russia, domestic prices are still affected by the sanctions.

According to experts, this is because the surge in gas prices is due to the larger global oil market, and the US sanctions are making it difficult for Russian oil to flow to the world market.

Bosses summoned

US President Joe Biden has called on oil companies to reduce gasoline prices, stating that the cost at the pumps should reflect the recent fall in the cost of oil per barrel.

The top executives at six oil companies have been called to appear at a hearing of the House Energy and Commerce Committee next month in connection with rising gasoline prices due to the conflict in Ukraine.

Frank Pallone, chairman of the committee, said oil companies are currently seeing record profits and have kept supplies low and prices high.

Senate Majority Leader Chuck Schumer accused large oil and gasoline companies of possible price gouging after crude oil prices fell. He also called for major oil company executives to be summoned to give testimony to Congress.

Republican lawmakers are blaming Biden's policies for higher gasoline prices. They point to the administration's decision last year to cancel the Keystone XL pipeline, which was to have transported oil from Alberta, Canada, to US refineries, and to Biden's executive order to pause oil and gas drilling on federal land in January last year.

However, experts said the US is producing more oil now than it was in 2020. For the week to March 4, it was producing 11.6 million barrels per day, compared with a daily average of 11.3 million barrels two years ago, according to the Energy Information Administration.

On Friday, the Biden administration said it would resume plans for oil and gas development on federal land following a court ruling last week that temporarily restored a measure designed to factor the cost of global warming into federal decision-making.

Lawmakers in Congress have proposed ways to lower gasoline prices, including temporarily waiving an 18-cent-per-gallon federal tax on the fuel. A growing number of states are also considering whether to temporarily waive local gasoline levies.

On Thursday, legislators in California proposed a different form of relief-introducing a bill to provide $400 tax rebates to defray costs.

Some experts suggest that gasoline prices will remain high for weeks, if not months. De Haan said in a tweet that if oil prices remain below $100 a barrel for a while, drivers may eventually see some relief at the pumps, with prices falling below $4 a gallon.

Gasoline prices are expected to fall eventually, but a significant reduction is not expected soon.

Meanwhile, according to intelligence company Rystad Energy, if most countries decide to shun Russian oil, the price could reach $240 per barrel. Short of a global ban on Russian oil, the company expects prices to top out at between $120 and $160.

Bjornar Tonhaugen, head of oil markets at Rystad Energy, said the impact will be felt most in poor countries with economies based on agriculture. If the conflict in Ukraine persists, the risk of recession will grow by the minute, he added.

To help ease the supply crunch, the International Energy Agency, or IEA, said the world could quickly ease global oil demand by 2.7 million barrels a day by reducing air and road travel.

The agency, which is based in Paris, urged countries to adopt such measures in time for the annual peak demand season in July and August.

In a report released on Friday, the IEA said "practical actions by governments and citizens" could significantly reduce oil demand, make fuel cheaper for consumers, shrink Russia's hydrocarbon revenue, and boost efforts to reduce greenhouse gas emissions.

The agency proposed a 10-point plan, including reducing highway speed limits, working from home for up to three days a week, encouraging the adoption of electric vehicles, and making it cheaper to use public transportation.


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