How Rising Oil Prices are Affecting the Economy

Juliana Best, Staff Writer

By now lots of people in America are well aware of the war between Russia and Ukraine, but some people might not know of the cost this war is having on our country. Oil prices have skyrocketed in recent months, causing an increase in the prices of things like food and trucker surcharges. Companies are having to charge more for their services because of the amount they now need to pay for fuel. These dramatic rises in the prices of fundamental items are having and will continue to have a big effect on the economy and regular households all over America. 

In late February and early March of 2022, many countries stopped buying Russian fuel as a way to show support for Ukraine and “punish” Russia for choosing to start such a violent war. The result of this choice is the dramatic rise in oil prices around the globe. The problem is that Russia supplies so much oil to multiple countries, and is the world’s largest exporter in global markets in terms of all oil products. In an article from the World Economic Forum about Russia’s export of petroleum products, author Douglas Broom writes, “for December 2021… Russia’s oil exports were 7.8 million barrels a day”. Cutting off its supply meant that many countries had to find new places to get oil. The United States only got a small percent of its oil from Russia, but now that that is no longer an option for some other countries, one of America’s biggest oil providers has gotten a lot more customers.

While Russia is of the biggest suppliers globally, less than 10% of the oil that the U.S buys is from Russia. This percentage, when compared with England getting 60% of Russia’s exports and China getting 20%, is a very small amount. Lots of focus has now gone to the Organization of the Petroleum Exporting Countries (OPEC), which is one of the US’s biggest suppliers. Oil is old on a global scale, so now that there is a loss of a supplier, the demand for more oil rises, and with it so do the prices. Lots of countries have had rising gas prices as a result. In the US, the average gas price is $4.12. The 2021 average was $3.01 per gallon, which was already the highest average nominal price since 2014. Experts predict that prices could peak at $4.65 by August, though they are expected to go down later in the year. 

Gas prices aren’t the only thing that the high oil prices have affected. Other things like transportation, groceries, and vacations have had to raise prices to keep up. While it’s clear what car owners are facing, people who take public transportation will also face problems. Public transportation companies have had to raise their prices to be able to continue to profit while having to afford gas. In the context of groceries, farmers now have to pay more for oil and to ship their food. In 2021, average prices rose 28%, the largest average price in more than 10 years. Vacation prices are becoming increasingly higher now that fewer COVID cases are appearing. Airfares are increasing because of labor shortages and efforts to cut down on carbon emissions. Airlines are also huge consumers of oil, with over 20% of their annual expenses being spent on fuel. Because of this, domestic flights in the US have gone up 36%. Oil prices have affected so many things that most Americans never considered to be too expensive before, and will continue to affect people until a solution is found.