- We’ve enjoyed low gasoline and oil prices lately, but that may not last long.
- Energy prices could rise this winter, making heating your home or filling your car more expensive.
- Among other things, the cost of energy will depend on how things shape up with Europe’s energy crisis.
One of the few things to cheer for in Tuesday’s consumer inflation report was a drop in gasoline and oil prices, but it’s too early to claim victory just yet.
Many, including Treasury Secretary Janet Yellen, warn of potential price spikes that could send shudders through Americans this winter as they watch their heating bills or pump gasoline.
Yellen said in an interview with CNN on Sunday, “This winter, the EU will stop buying Russian oil for the most part and, in addition, they will ban the provision of services that help Russia send oil by tanker.” enables.” “It is possible that oil prices may rise.”
But there are other factors that can make this winter more expensive. President Joe Biden’s one million barrels per day oil release from the country’s emergency stockpile is set to expire in October, Europe’s energy crisis is expected to hit hardest during the cold months, and the biggest oil-producing countries could cut production. , other analysts noted.
Biden’s inflation move:Is Biden to blame for the fall in inflation? Premature presidential victory lap, experts say
Inflation here to stay?: Higher prices leave experts wondering when we’ll see relief
Which fuel will cost more?
Analysts say there is room for an increase in both oil and natural gas prices, which consumers will feel at the pump and at home.
Oil is about half the price of a gallon of gasoline, while diesel fuel for vehicles such as heating oil for trucks and homes is distilled from oil. Most of the US residential and commercial oil consumption occurs in the New England and mid-Atlantic regions.
About half of American households use natural gas to heat homes and water. Natural gas is also often used to make electricity, which is why electricity prices have risen 15.8 percent in the 12 months since August. As Europe struggles to fill its natural gas inventory before winter, natural gas prices have hit a 14-year high.
High natural gas prices have prompted some switching to burning oil or coal for electricity.
Solar Panel Options:Here’s the Basics of How Solar Panels Work
How do heat pumps work?:What to know about installation, extreme cold
How much more can Americans pay for in their homes this winter?
The National Energy Assistance Directors Association (NEADA) said the average cost of home heating is expected to rise 17.2% from last winter to $1,202, the second consecutive year of key price increases and the highest price in more than a decade.
Already, more than 20 million households, or nearly one in six American households, are behind on their utility bills, it said.
NAEADA executive Mark Wolfe said, “The rise in household energy costs this winter will leave millions of low-income households with no choice but to fall behind on their energy bills and make the difficult decision between paying for food, medicine and rent. ” the director.
For 2022, NEADA is increasing the cost of utility services to $3,803 reflecting higher prices for natural gas, heating oil and propane, and this summer’s heat waves raising air conditioning costs from $450 to nearly $600. Granted, on average, last summer.
Smart Savings:These smart home products can make a big difference in your energy and insurance bills
Inflation still highFalling gas prices aren’t enough to help offset higher costs of housing, food, child care
But haven’t the prices of petrol and oil come down?
Yes, oil and gasoline prices fell sharply on lower demand as drivers cut back on pump prices earlier this summer, raising prospects for a recession around the world, and China on its no-COVID. Continues to lock down areas while adhering to the policy.
The Bureau of Labor Statistics said in its Consumer Price Index report on Tuesday that the gasoline index dropped 10.6% in July to August. AAA said Monday it reflects a steady decline in the national average for a gallon of regular unleaded gasoline this summer to $3.71 this week, a rate not seen since early March and mostly due to lower oil prices. is on his heels. Oil prices are down about a third from their June peak, which pushed gas prices above $5 a gallon.
But as they fell, natural gas prices kept climbing as Russia cut its supplies to Europe, creating frenzied global demand.
Pump Relief:Gas prices have dropped over 30 days. Where is gas cheapest and most expensive?
End of Brutal Summer:Crude oil prices are falling. Here’s what this could mean for gas prices at the pump.
Why can prices rise now?
First, Biden’s daily release from the Strategic Petroleum Reserves (SPR) expires next month if the administration doesn’t expand it, which eliminates a supply source. In addition, SPR has fallen to its lowest level since October 1984, US Department of Energy data show, and those barrels will eventually have to be replaced, ousting future supplies.
More importantly, on December 5, the Group of Seven industrialized nations of Japan, the US, Britain, Canada, Germany, France and Italy plan to limit Russian oil prices.
“If they do, Russia says it’s cutting everything — oil and natural gas exports — off,” said Joe Brusuelas, chief economist at RSM US LLP. If that happens, “oil prices will re-establish the high they set in June and cause the average price of regular gas to rise above the current $3.70 per gallon.”
And likely, natural gas prices will rise again.
Capacity issues:Gas prices rise to record high again, but the driver is refineries, not oil prices
Persistent Inflation:Are we caught in the high inflation? Stubbornly high prices leave experts wondering when we’ll see relief
How does the price range on Russian oil work?
By not buying Russian oil above a certain price, the G7 countries would limit Russia’s oil revenues to finance its war in Ukraine.
Enforcing the cap would depend heavily on denying London-brokered shipping insurance, which covers about 95% of the world’s tanker fleet, and finance for cargo priced above the cap.
The limit avoids an outright embargo on Russian oil, which could have increased world oil prices as Russia is the world’s largest exporter of oil to global markets and the second largest crude exporter after Saudi Arabia. The caps ensure that Russian oil can continue to flow but still deplete Russia’s coffers.
In response, Moscow warned that it would stop selling oil and natural gas to countries imposing price caps on Russian energy exports. Analysts say this will lead to supply cuts and higher prices of both the fuels.
Environment Control:Remote, stealth commands tamper with temperature in Portland-area homes—all to save energy
Reshaping the Mind:‘Shaking up our way of thinking’: Europe saving energy in anticipation of Russian gas shutdown; Senate backs NATO expansion: Ukraine update
Can’t OPEC+ produce more oil?
The Organization of the Petroleum Exporting Countries (OPEC) and 10 other major non-OPEC oil-exporting nations (collectively called OPEC+) may agree to increase oil production but have been reluctant to do so.
Following a collapse in oil prices in March 2020 when economies closed to slow the spread of COVID-19, OPEC+ has been cautious in increasing output for fear of burning out again. Earlier this month, the group stunned the markets and slashed the production target by about 100,000 barrels per day from October. This was seen as a symbolic move by The Telegraph that it is eyeing oil prices and will not hesitate to act if it senses that oil prices are falling too fast or too much.
Some also question whether OPEC+ can produce even more oil. The group has regularly failed to meet its own production quotas due to capacity constraints in some countries.
Pump more, please:Biden is pressuring Saudi Arabia to increase oil production. Experts say the state is unlikely to agree
Whipsawed:Understanding the Gas Price Rollercoaster
Who will be hurt the most?
Europeans, because they depend on Russian natural gas. Russia has already closed two major pipelines to Europe. This has pushed prices up by 300 per cent over the previous year to the highest level since 2008.
But Americans are feeling the pain, too. The US has sent record liquefied natural gas (LNG) exports to Europe to help boost supplies ahead of winter. But now, as prices climb, the US finds its reserves depleted.
“We appreciate that the Biden administration is working with European allies to expand fuel exports to Europe,” six New England governors wrote in a letter to Energy Secretary Jennifer Granholm in July. “A similar effort should be made for New England,” the only US region that imports LNG because it does not have access to US LNG.
East Coast distillates, which also include diesel, and gasoline inventories, are near record seasonal lows.
Shocking Oil:Americans rationed gas during WWII and the oil shocks of the 1970s. Will this happen in ‘Putin’s War’?
tax oil:Millions of people live near Superfund sites. An oil industry tax in the climate bill could pay to clean up those
Why can’t America just stockpile fuel?
Analysts say Granholm has asked major producers to export less fuel to Europe and other countries, but that is unlikely to help as energy markets are global. Analysts say slowing exports in areas requiring oil or gas will push up prices there and everywhere.
Instead, analysts say the administration needs to deal with supplies.
“If we had the Marcellus pipeline to Pennsylvania, this wouldn’t have been an issue,” said David Revcastle, analyst and professor of economics at the University of New Haven. Former New York Governor Andrew Cuomo blocked a pipeline between the lush natural gas Marcellus Shale and New England.
Corporate Greed:Critics say corporate greed is making inflation worse, citing record profits despite rising costs
Fracking and Pipeline:Trump keeps talking about fracking in Pennsylvania: Here’s what we know about this hot campaign issue
Chevron chief executive Mike Wirth has criticized the government for crushing incentives for companies to produce more oil with unexpected taxes and calls for an end to fossil fuels in the coming years.
“We will pay for it,” Revcastle said, noting that there is no short-term solution. “Maybe this will be a teachable moment.”
Medora Lee is a money, markets and personal finance reporter at USA Today. You can reach him at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.