It’s almost a month after Russia invaded Ukraine on February 24, 2022. And one of the most significant impacts is the rising crude oil prices, which led to inflated gas prices. As the world cries over the Russia-Ukraine heartbreaking war, motorists worldwide are also grumbling over the rise of gas prices. Industry experts claim that the gas prices are still increasing due to the invasion of Ukraine from one of the world’s leading oil producers Russia. That said, how do gas prices work and why it’s rising?
Increasing Gas Prices
The country accounts for 11 percent of the total oil produced worldwide, which means many countries depend on Russia for oil. Russia comes as the third-biggest oil producer globally, trailing behind Saudi Arabia and the United States.
Russia exports more or less five million barrels of crude oil every day. Half of this is delivered to European countries such as Italy, the Netherlands, Germany, Lithuania, Romania, Greece, Finland, Poland, and Bulgaria. The United States, while relatively less reliant, is also relying on Russian oil, with about three percent of its oil coming from Russia.
These barrels go through the Druzhbg Pipeline via Belarus. It’s a landlocked Eastern European country that is bordered by Ukraine to the south, Poland to the west, Latvia and Lithuania to the northwest, and Russia to the east. Due to sanctions imposed on Russia, these barrels have been impacted ever since the war started, impeding deliveries.
Relatively, the gas prices increase once crude oil increases as well. West Texas Intermediate is the reference point in the United States for oil prices. Last fall, the price per barrel was recorded between $80 and $90. Now, the price per barrel recorded last Monday is over $130. It is one of the most significant increases in history.
More sanctions imposed on Russia
The United States has imposed sanctions to further impede the Russian economy and protect American families, businesses, and allies. President Joe Biden had immediately implemented these sanctions after Russia’s invasion of Ukraine.
But GasBuddy’s head of petroleum analysis Patrick De Haan said that these sanctions are still gravely impacting gas prices. For instance, the sanctions on banking and shipping industries in Russia are putting oil exports from Russia on hold. And this is one of the reasons why oil and gas prices are skyrocketing.
The AAA (American Automobile Association) considers the Russian-Ukraine war the most significant impact on steep crude oil costs, a huge factor in gas price increases. Also, the increasing demand and decreasing supply serve as the most important factor that impacts pump prices in the United States.
The United States and the United Kingdom aim to target Russia’s main economic artery, oil imports. Both countries are banning Russian gas and oil by the end of 2022. Germany has also put the Nord Stream 2 gas pipeline on hold.
In addition to that, more sanctions from Western countries froze Russian assets in central banks. It prevented the country from using their dollar reserves amounting to $630 billion. Plus, some of the Russian banks were also removed from the financial app Swift. This is used to transfer money across the borders.
On top of that, Russian individuals have also received sanctions, mainly politicians, business leaders, and billionaires. And lastly, Russian President Vladimir Putin’s assets were also frozen in the US, UK, EU, and Canada.
What now?
As gas prices rise, countries reliant on Russia’s oil would have to turn to the United States and the Middleeast for their oil and gas supply. Although the International Energy Agency said that approximately 60 million oil barrels will be released from emergency reserves, AAA said this quantity is still too small compared to the amount of oil Russia supplies to countries worldwide.
