Intro

Due to many reasons, including the Russian invasion of Ukraine and the subsequent Russian oil sanctions, the US is dealing with a major fuel crisis. Gas prices are now officially the highest ever in the United States and our oil supply has been dramatically reduced. How did this happen? What really caused these high prices? Who is to blame? What can we do about it? These are all difficult and nuanced questions, but by researching and reading about the change in prices we are able to better understand the situation we are currently in.

What factors have led to this shortage of oil?

The global oil shortage has a myriad of causes, but on the forefront of these is the Russian invasion of Ukraine.  On March 8, President Biden signed an executive order that banned importation of “oil, liquefied natural gas, and coal” to the United States in an attempt to deprive Russia of its key source of international trade.  Many other nations have followed suit, and the EU seems to be in line to be next.  In addition to the US oil embargo, Biden went further to sanction Russia, suspending normal trade operations on April 8.

Another factor in the international shortage of oil is supply shortages, mainly stemming from Saudi Arabia.  Just over three weeks ago, a group of Iranian-aligned Houthis (a violent religious political movement) attacked Saudi Arabian oil reserves.  This attack reportedly has not significantly impacted Saudi Arabian oil supplies, but the country has not agreed to export more oil during the current crisis.  John Kiliduff, a partner with Agent Capital, asserted that Saudi Arabia was using this attack as an excuse to not increase oil exports, according to CNBC.

Domestically, the US has had its own problems with oil production, further contributing to the rising prices.  Over the past two years, labor shortages have run through every industry, and oil companies are still feeling these effects.  In a time in which US oil companies would want to increase their production, it has been difficult to find qualified workers to ramp up oil extraction.  Further harming these companies is decreasing investments.  Shareholders are currently refusing to invest more in these oil companies after they lost thousands on price crashes last year, and are demanding that they get their money back before investing more. 

For the global oil shortage to reach the magnitude it has, a perfect storm needed to happen, and that’s exactly what these factors led to.

How has the increased oil prices affected real people over the last few weeks

With President Joe Biden announcing the ban on all imports of Russian oil and gas, fuel prices have significantly spiked in the wake of Russia’s invasion on Ukraine.  Average gas prices rose by 55 cents through the week of March 8, 2022 and have continued to rise to an all-time high of $4.35 per gallon on Long Island and $4.36 in New York City.  New York drivers are unhappy with the rise considering gas prices are rising, however, salaries are not.

New York and some other states mandate that gas stations sell special summer blends of fuel, which have lower vapor pressure, during warmer months, but are more expensive because they are harder to refine.  Pain at the pump has been bearing down for months. The COVID-19 recovery has prompted an unprecedented surge in demand while supply disruptions are still lagging.  Add in annual warmer weather gas price increases, and it is a perfect storm.

Although the U.S. gets less than 5 percent of its oil from Russia, prices are set in the global market and futures traders are reacting to an imbalance in supply and demand.  Russia is only between 5 and 10 percent of supplies globally, but that is a significant shock if supplies stretch to capacity limits.  The Russia oil ban is needed if sanctions are to make a difference.

Long Islanders are feeling the effects of the rising pump prices.  Many have voluntarily begun walking everywhere, driving slower, and driving less in order to conserve gas.

Governor Kathy Hochul said she is evaluating the impact of temporarily suspending the state’s 10-cent fuel tax per gallon, which goes toward road repairs.

“If you can ensure that that money is actually going to end in the pockets of consumers, it has my attention,” said Hochul.

US’ dependence on Middle Eastern countries

Oil is the most important commodity globally, accounting for most of the world’s energy, especially in a country like the United States, where a culture of consumerism is prevalent. The quest for petroleum has led to an inevitable and continued dependence on the fossil fuel-exporting nations of OPEC and has influenced foreign relations in the past.

Between 1880 and 1920, the United States largely dominated the production and consumption of petroleum, especially after the 1908 introduction of the Ford Model T and the 1911 break-up of Standard Oil into several subsidiaries, including Chevron, Exxon, and Mobil. However, fears of oil insecurity soon arose, leading the U.S. government to begin a path of oil diplomacy in which American companies controlled Middle Eastern reserves (as part of the 1928 Red Line Agreement).

By 1932, individual nations, including Iran and Mexico, nationalized their oil industries and removed American influence on them. In response, the U.S. began to engage in closer financial relations with Saudi Arabia and political involvement within Iran; both countries hold huge reserves of oil, which were necessary to meet the demands of the American economy.

A monumental shift in fossil fuel diplomacy occurred in 1960 with the establishment of the Organization of Petroleum-Exporting Countries (OPEC). Arab nations, which are heavily dependent on oil revenue, were frustrated with blind Western price cuts. OPEC’s founding members were Iran, Kuwait, Iraq, Saudi Arabia, and Venezuela, and together, they accounted for roughly 80% of crude exports. Today, OPEC has expanded to 13 member nations. At first, OPEC had little global influence, but over time, the organization functioned as a cartel, setting international prices for barrels of oil.

With OPEC largely a conglomerate of Arab countries, U.S. action in the Middle East, especially concerning Israel, resulted in oil embargoes in 1967 and 1973, the latter which sparked an energy crisis. Later, in 1979, the Iranian Revolution took place, and the American-friendly Shah was replaced with the anti-Western Ayatollah Ruhollah Khomeini. An oil embargo soon followed, and a gas crisis returned to the U.S.

The United States was at the mercy of OPEC for its energy demands and began to investigate the diversification of their energy consumption in the 1980’s. Conservation methods were explored, other fossil fuels, such as natural gas, were prioritized, and alternative energy forms were investigated. Environmental concerns relating to greenhouse gas emissions have also grown and led to concrete plans and goals at Conference of the Parties (COP) meetings (famously in Kyoto in 1997 and Paris in 2016).

Currently, in the face of record high gas prices, the U.S. is diplomatically working to move closer to oil-exporting nations (including Iran, Saudi Arabia, and Venezuela), while simultaneously banning Russian imports (in the wake of its invasion of Ukraine). In addition, American legislative leaders hope to boost domestic fossil fuel production in order to become more energetically independent.

What’s being done now

Biden’s Infrastructure Bill

Alternative Energy

Renewable energies are ones that can be derived from renewable or non-finite natural resources.  Renewable energies are needed as the U.S. dependence on dwindling fossil fuel reserves will only exacerbate the effects of increased energy prices and the detrimental impacts of emissions on the environment.  Though no renewable energy source comes without limitations and flaws, some alternatives exist today that, with further research and funding, can help the U.S. ditch its dependence on fossil fuels. 

The first type of renewable energy that can continue to be developed today is Solar energy.  Today, there are three kinds of solar energy considered renewable and relatively attainable.  There are photovoltaic cells that convert sunlight into electricity through the use of photovoltaic cells, active solar energy, which utilizes thermal energy for the heating of homes and water, and passive solar energy, which is essentially building techniques that harness the sun’s power to lessen the dependence of fossil fuels used to heat homes.  The benefit of solar energy is that the sun’s energy supply is limitless.  However, apparent limitations like the limited amount of materials for creating photovoltaics and weather conditions in certain locations can make this option less realistic.  Additionally, converting your home to this system will cost a substantial amount.  That being said, there are tax incentives as well environmental benefits which make solar-powered homes and buildings a great option over time.  Solar power energy costs less for homeowners over time and releases no harmful greenhouse gasses, which worsen the effects of global climate change. 

Another renewable energy that could be explored further is wind energy.  Wind energy captures the energy of wind through turbines and converts it into electricity.  Similar to photovoltaic plants, there have been efforts across the country to create large-scale wind energy farms.  Like other alternative energy sources, wind energy is renewable, clean, and does not contribute to climate change.  However, there are some limitations as wind farms are usually built-in remote locations and cost enormous sums of money to construct a plant.  Not to mention, some people think wind turbines are aesthetically unpleasing and contribute to noise pollution.  Nevertheless, wind energy is a viable option that can be created on a large scale to benefit the environment and our energy grid.  Independent wind energy farms lessen U.S. dependence on foreign nations for crude oil, coal, and other fossil fuels.  This could reduce the price and instability of energy for average Americans. 

Though these are only two forms of alternative energies, they are some of the most prominent types being explored across the country with the most growth potential.  Other forms of alternative energy like geothermal, biomass conversion, hydroelectric, or hydrogen have limitations that make them less feasible for expansion in certain situations.  Nonetheless, exploring alternative and renewable energy sources could benefit both U.S. energy consumers and the environment by lowering prices and emissions, contributing to global climate change.