It’s a Gas-tastrophe!

The United States and European Union issuing sanctions on Russian energy exports, namely crude oil and natural gas, have caused global energy prices to rise substantially. In the United States, the average American is already facing record highs at the pump.

On Tuesday, the US set a new record for the average cost of a gallon of gasoline. The $4.173 national average overtook the previous high of $4.114 in July of 2008. The prices are not inflation-adjusted.

The ban on Russian oil is unlikely to directly inflate the cost of gasoline in the US. Only 1.1% of total US gas consumption comes via Russian oil. However, the ripple effect on global markets could see gas prices continue to rise.

The price of oil had already been rising for some time due to the ramifications of the coronavirus pandemic. When economies shut down in 2020, demand for oil plummeted. Oil-producing nations responded to the decline in demand by slowing production and shuttering plans to expand their oil production capabilities through new wells and infrastructure.

With the global economy recovering, demand reached near pre-pandemic levels, but supply lagged and caused prices to climb. Russia is the second-largest oil producer in the world and its largest exporter. A limited global supply of oil just got a bit tighter with sanctions aimed at Russia’s globally crucial oil and gas industry.