WITH RISING TENSIONS COME RISING COSTS
WHAT IN THE WORLD IS GOING ON
December 7, 2022
As I filled up my car this week, I noticed that the price per gallon went up 10 cents. I was shocked considering the fact that gas prices have just started to come back down after Russia’s invasion of Ukraine. I wondered to myself, “Why is it more expensive again?” I ended up buying the gas anyway because I need my car to go to work and school. I am not the only person feeling the pain at the pump, though. Lower-income families often struggle when prices go up like this, especially because they need to buy gas in order to get to work. Electric vehicles aren’t an option either due to their high cost and lack of accessibility.
You might be wondering, “Why exactly are the prices going back up once again?” The rise in gas prices comes as a result of dramatically decreased oil production on the global market. When less gas is produced, the demand rises, and consequently, so do prices. Saudi Arabia and other countries in the OPEC+ group voted to slash oil production by 2 million barrels per day. OPEC+ is a group of twenty three oil-exporting countries, and their purpose is to decide how much oil to produce and distribute.
The decision to do such a thing was unexpected for a few reasons. To start: because of the war in Ukraine, oil and fuel inventories in most countries remain at an all time low. The cut in production will only starve these countries and their inventories, and it will fall back on the buyers. Additionally, OPEC+’s mission is to provide an adequate pricing environment for both consumers and producers. However, this decision will only benefit the producers. While they make more money from these rising costs, consumers lose more money.
The United States strongly condemned the decision to cut oil production. President Joe Biden said that “there will be consequences” and Congress, when back in session, may try to impose such consequences. Senator Bob Menendez, the chairman of the Senate Foreign Relations Committee, issued a statement calling for a freeze on arms sales to Saudi Arabia, and accused the kingdom of supporting Russia.
Historically, the U.S. and Saudi Arabia have had strong relations. According to the Department of State, “The United States and Saudi Arabia have a common interest in preserving the stability, security, and prosperity of the Gulf region and consult closely on a wide range of regional and global issues.” Saudi Arabia is the second largest trade partner and the largest foreign military sales customer of the U.S. with sales reaching over $100 billion. Now, there is a dramatic downturn in the relationship between the two countries, which will likely have widespread effects. With Saudi Arabia being the United States’ third largest oil importer, gas prices will rise as long as these tensions worsen.
Luckily for us, President Biden has a plan in place to help mitigate the rising costs. On Oct. 19, the president announced that he is authorizing the release of 15 million barrels of oil from the country’s Strategic Petroleum Reserve, which will make the total number of barrels released this year come in at 180 million. He is doing this for two reasons. First, he wants to offset the damage from the oil production cuts. Second, he wants to get ahead of a partial European Union embargo on Russian oil, which will be taking effect on Dec. 5.