EnergyPumped Up Gas Prices Leave Drivers Uneasy As Summer Travel Increases

Drivers are seeing the prices they pay at the pump climb — the causes are complicated but can be largely traced to increased travel on the pandemic's downslope.
May 14, 2021
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Gas prices are on the rise and the underlying causes can be summed up by a slight twist on a law of physics — every action has an opposite reaction.

In six months, Texas’ weekly gas price average rose about $0.90 and now sits at $2.64 per gallon. The national average has eclipsed $3 for the first time since 2015.

While Texas has avoided the crippling gas shortage large portions of the Eastern Seaboard are currently suffering due to a cyberattack against a critical pipeline that delivers 45 percent of the region’s fuel, what occurs in other regions still plays a factor, even if indirect, into the price paid here at the pump.

That pipeline’s origin reaches refineries in Houston. So, much of the product consumed by drivers on the East Coast stems from Texas and thus this state is, at least indirectly, affected.

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Shortly after the 2020 election, gas prices began to rise. Like any market, speculation plays a role in its present-day conditions and so the prospective policy implications of a new presidential administration played into the energy sector’s projections — but were far from the only thing driving the increase.

As travel picked up from its pandemic-driven low, demand for commodities like gasoline increased. That, coupled with the market’s adjustment to lower amounts of travel, caused supply to be stressed — and thus, prices increased.

Every action has an opposite reaction.

Last month saw a sharp rise in inflation to a degree that hasn’t been felt since 2008. Consumer prices increased about 4 percent in April compared to the same month last year.

The uptick is attributed to the economy beginning to pick back up as consumption increases — demand has jumped and put upward pressure on price. Travel-related prices especially swelled with airline fees increasing 9 percent and vehicle rentals rose 82 percent, according to the Wall Street Journal.

Gas prices are up 50 percent.

Throughout the pandemic, the Federal Reserve has been artificially keeping interest rates low to encourage consumer spending during the period without it.

Its previous gauge is a return to full employment and a consistent average of 2 percent inflation.

But for the time being, the central bank aims to preserve its near-zero interest rates and to further encourage spending. And the more demand rises, the more leeway vendors have to increase price.

Every action has an opposite reaction.

At the heart of every price rise and fall is one of the most basic economic principles: supply and demand.

“It was a good reckoning,” Railroad Commissioner Jim Wright told The Texan, speaking of the market volatility of a year ago. “It was driven by a drop in demand and forced the market to figure out how to pace demand.”

The global market, the U.S. included, had amassed a petroleum supply glut even before the pandemic grounded next-to-all travel.

About the recent market environment, Wright added, “The price will eventually level off as the market adjusts.”

Texas’ gas prices are surely influenced by the East Coast cyberattack as any market disruption causes — but the consequence it faces is merely a modest price increase rather than a widespread shortage. When scarcity occurs, price naturally compensates. And in periods of severe scarcity, prices can increase substantially.

In theory, this keeps supply in balance with demand so that those who need it most can access whatever resource is in short supply. Put simply, it prevents hoarding of resources.

Every action has an opposite reaction.

Some, like Texas Attorney General Ken Paxton, decry this as “price gouging” and try to punish those deemed to be charging exorbitant prices for commodities. But Wright sees it differently.

“It’s not price gouging, it’s supply and demand — competition and pricing is how you keep the market in check,” he stated.

Economies at any level — whether city, state, national, or global — boil down to thousands, millions, billions, and trillions of individual transactions every day. The result of those transactions — which encompass the costs of production, delivery, and other factors — is reflected in the price the consumer pays at the pump.

About the cyberattack, Wright said that if the region had more pipelines and thus more competition with the one that faltered, the problem would have either been avoided or its consequences mitigated.

“When you have one piece of infrastructure feeding nearly half of the market, you have a problem. Competition is how you keep those things in check.”

Wright’s colleague took a more pointed position.

“Under the last four years of Republican leadership, America became the largest producer of oil and natural gas in the world. This distinction was a boon for the Texas economy, while reducing energy costs to consumers and improving our national security by reducing our reliance on foreign powers in the Middle East and China,” Railroad Commissioner Wayne Christian told The Texan in a statement.

“Over the first few months of the Biden Administration, we have seen an agenda hostile to oil and gas correlate with increased prices at the gas pump. This will only get worse if legislation like the Green New Deal or CLEAN Future Act pass Congress.”

Looking forward, there is concern about more shortages — or, less severe, supply constrictions — this summer as travel picks up even further with Americans taking to the open road for vacation.

The root cause for this speculated hiccup is a dearth of truckers to deliver gasoline from refinery to pump. With travel next-to-nonexistent during the pandemic’s height, many truckers qualified to drive the tankers retired early due to the lack of work.

The market will adjust eventually to the demand ebbs and supply flows, but it does not happen overnight. And the continuous federal aid has made it difficult to attract new workers to replace the old — as it has for businesses across the board.

Wright commented critically on this aspect, saying, “As long as you’re handing out free money, people aren’t going to want to work.”

“Lack of truck drivers is just the same as a lack of anything else, and it affects the price.”

Every action has an opposite reaction.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.