Why Gasoline Prices Are Rising

Petrol Stations, Oldtimer, Old Gas Station

Image Source: Pixabay

This past week the national average price for regular gasoline rose to $2.71 per gallon. That marks an increase of $0.46/gallon since the beginning of the year. 

On a daily basis, I see accusations on social media that this price rise is a consequence of Joe Biden winning the presidential election. I am going to explain why this is ludicrous, but I would pose the following to those who believe this to be the case.   

(I feel the need to insert a caveat here because many people don’t seem to make it past this point before stamping their feet and sending me hate mail. I am not saying his policies will never impact gasoline prices. I am saying that there hasn’t been time for them to yet, and we have good explanations for why prices have risen).   

Since Biden’s inauguration, daily Covid-19 cases have fallen by two-thirds. Daily deaths are down by nearly half. Is Joe Biden responsible for this? If you say “No”, or you feel the need to hedge or qualify your answer, then you probably realize that cause and effect isn’t quite as simple as that. The same holds true for gasoline prices.

The main reason I can say that Biden isn’t responsible for the rise in gasoline prices is that we understand pretty well why those prices are rising. Those reasons (mostly) have nothing to do with him.  

Factor 1: Rising Oil Prices

The single biggest factor influencing changes in gasoline prices is almost always underlying changes in the price of oil. Show me a time that gasoline prices spiked or plunged, and the vast majority of the time you will find that oil followed the same pattern.

On the first trading day of January 2021, the price of West Texas Intermediate (WTI) closed at $47.47 per barrel (bbl). Two months later, on the first trading day of March, the price closed at $60.54/bbl. During the time gasoline prices rose by $0.46/gallon, the price of oil rose by $0.31/gallon.

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