Demand fuels higher oil prices; gasoline prices highest since 2014 as a result
NEW ORLEANS (WVUE) - The price tag of a barrel of oil does not happen in a vacuum. Across the country, drivers are paying more for gasoline due to rising crude oil prices.
Oscar Mendez filled up his pickup truck on North Causeway Boulevard.
“It’s probably going to cost me somewhere from $85 to $90 to fill my tank,” said Mendez.
His prediction was right. The amount on the gas pump read $85 when he was done.
“I think it’s ridiculous. I do think that this time last year it probably cost me for the same amount of gas about $45,” said Mendez.
Gail Wesley travels the 22 miles of the Causeway Bridge often and does not like the toll higher gasoline prices are having on her finances.
“I think it’s a shame that they’re raising the prices up and I mean, and it’s kind of hard for us if we need to travel or go somewhere, you know, like I need to go back and forth across that water and that is costing,” said Wesley.
Professor Pierre Conner is Executive Director of Tulane University’s Energy Institute.
“We’re seeing an increase in oil prices, really that’s the worldwide impact of increasing demand and recovering economies in response to some declining production where we saw slowdowns due to the impact of COVID, you know, more than a year and a half ago,” said Conner.
He explained how oil prices influence prices at the gasoline pump.
“Unfortunately, that’s a direct result. So, about half of what you pay at the pump is impacted directly by the price of oil and we’ve seen about a $40 increase in the last year in the oil prices. So for a gallon of gasoline, we’ve seen an increase of about a dollar,” Conner stated.
The American Automobile Association (AAA) says the average cost of a gallon of regular unleaded in Louisiana is $2.99 and nationwide it is $3.27 a gallon.
On the national average of a gallon of gas, AAA says $3.27 is 10 cents more than one month ago, and $1.09 higher than a year ago, and is the highest price since October 2014.
Aside from demand, another factor is OPEC’s decision regarding oil production.
“OPEC sure learned their lesson when they opened the taps right into the teeth of the downturn in demand from the beginning of COVID, so what you’re seeing is a very measured approach to slowly increase production and bring that into balance,” said Conner.
He was asked about the connection between gasoline prices and what consumers pay for food and other items.
“Well, that’s a big issue right now with this global supply chain disruption that we’re seeing, and energy overall is going up across the board,” Conner stated.
Some drivers say if gasoline prices keep going up they will be forced to cut back on driving.
“Sure, I sure will, I probably won’t be going anywhere, and I go like back and forth over this water, you know, to work and something is going to come short somewhere, you know,” said Wesley.
Mendez said the same and talked about the impact on his business.
“Definitely so and it affects everything, you know, I have a small business and if I’m paying more for gas then I have to pass that charge on the consumer, I mean it’s just and we’re also seeing a lot of surcharges on a lot of products that we’re buying, so that’s all part of what we’re seeing here at the pumps,” said Mendez.
Conner expects the oil industry to respond to higher prices with additional investments.
“One of the things they say in the oil industry is the solution to higher prices is higher prices and what we’ll see is additional investment and activity increases, rig count going up by a hundred rigs by year-end and that will start to tamper down some of those supply imbalances,” Mendez said.
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