‘More pain in our future’ as gas prices top $5 per gallon: GasBuddy economist
SIMONE DEL ROSARIO: Over the weekend, the national gas price average hit $5 a gallon for the first time in our country’s history. The price is 15 cents higher than a week ago, 58 cents higher than a month ago and nearly $2 higher than a year ago. To mark this painful milestone, I’m joined by Patrick De Haan, head of petroleum analysis over at GasBuddy. Patrick, I want you to look into your crystal ball if you can. Where does the price of gas go from here?
PATRICK DE HAAN: Well, I think we do have some more pain in our future when it comes to gas prices. So far, Americans just last week saw a record for consumption this year, the highest demand we’ve seen so far this year, and it’s coming amidst higher prices. So until Americans slow down, I don’t think we’re going to see much relief. My concern is that heading into the summer, as more Americans likely are going to hit the road in July and August, we could see any major hurricane or any disruption further cause prices to jump.
SIMONE DEL ROSARIO: So are you seeing the prices changing Americans behaviors at all? Or is demand just continuing to go up because people have been cooped up for two years?
PATRICK DE HAAN: Well, I think there’s truth to both sides of it. We are not seeing record gasoline consumption. That’s probably because the high prices are preventing some level of Americans from hitting the road. Having said that, it’s still rather incredible to be talking about gasoline demand that is going up as prices are going up. So there’s a little bit of truth here. Some would call that demand destruction. That is, demand is not as strong as what it would be if prices were lower. But having said that, obviously people are sick of staying at home for the summer. A lot of that because COVID shut down part of the economy last summer in the summer prior. So against the backdrop of a strong jobs market, low unemployment, I think Americans are emboldened to hit the road this summer, regardless of high prices.
SIMONE DEL ROSARIO: Patrick, is there one situation or one action that you can point to as being the main culprit for these record prices?
PATRICK DE HAAN: Well, if I were to have to single one issue, I’d really have to say it was COVID. Americans abruptly stopped driving in 2019, or excuse me, 2020, enough that caused oil production to go offline, it caused some refineries to shut down. That’s probably the biggest reason for why we’re here. Now, of course, the Russian invasion of Ukraine does not help at all by tightening supply. But without COVID, supply would likely be much higher, OPEC production wouldn’t have fallen, and we’d be in a much better space to absorb what’s happening with Russia and Ukraine.
SIMONE DEL ROSARIO: Well, crude is trading around $120 a barrel right now, it’s been that way for a little bit. Why aren’t we seeing more US production at this point?
PATRICK DE HAAN: Well, a lot of it is due to supply chain issues that have slowed down the ability for consumers, for producers rather to ramp up. And that’s part of the biggest issue. Now we are seeing production go up. It’s up by about a million barrels a day compared to where it was a year ago. But we’re still about a million barrels below pre COVID production and those numbers are improving. But it’s taken quite a bit of time, given all of the supply chain bottlenecks that oil companies along with many other areas of the economy are facing.
SIMONE DEL ROSARIO: Republicans are really putting the blame on the Biden administration here, his clean energy policies, also revoking the permit on the Keystone XL Pipeline. Are these playing into the picture here in the United States and the willingness of oil producers to ramp up production?
PATRICK DE HAAN: Well, I think there is some reluctance by oil producers to ramp up production given the attacks from the Biden administration early in his administration. I do think that is slowing things down, though, I think the blame on the Biden administration today is rather small, I would say much more of it has to do with COVID and balances, Russia’s invasion of Ukraine. But having said that, every day, the President does have the power to reverse some of those policies. And every day over the next several years, we can blame the administration a little bit more because of the benefit of time that he’s had.
SIMONE DEL ROSARIO: So if you were advising the Biden administration, what are some of the things that you would suggest at this point so that we could get prices down?
PATRICK DE HAAN: I certainly would give the oil industry more clarity surrounding a transition. Obviously, the President has talked a lot about transitioning away from fossil fuels and to EVs. But that does not inspire confidence, especially the oil sector, which has been under attack from the Biden administration. So I would provide some clarity on what is to be expected over the next five to 10 to 15 years and that could help oil producers have some confidence behind billions of dollars of investments.
SIMONE DEL ROSARIO: Patrick De Haan of Gas Buddy, thank you so much for your time today.
PATRICK DE HAAN: Thanks for having me.