Tens of thousands of people have died due to the fighting in Ukraine. Along with the immediate humanitarian disaster, the fighting has caused energy costs to rise globally, harming consumers and putting pressure on international leaders to alleviate their suffering.
What causes the price of gasoline to rise?
A perfect storm of three reasons is present.
First, oil prices are generally rising since there hasn’t been as much money available to explore new oil resources. Over the past ten years, most investors lost money on oil and gas development, and they don’t want to lose any more. Simply put, they do not believe it to be long-term profitable.
The war in Ukraine is the second. Financial restrictions imposed by the West after Putin’s invasion made it difficult for Russian oil transactions to be cleared via Western institutions. Typically, 10% of the world’s oil supply comes from Russia. We have a supply gap because it’s still being traded, but not to the same extent.
Third, pre-pandemic levels of oil consumption have virtually been reached.
The AA motoring organisation said that the average price of gasoline in the UK had reached 155p/litre.
Concerns over the price of several necessities, including food, gasoline, and heating, which are already growing quickly in 30 years, are fueled by market turbulence.
Analysts have previously cautioned that the rise in oil and gas prices might cause UK energy costs to increase to as much as £3,000 annually.
Russia, which provides nearly a third of Europe’s requirements with crude oil, is the world’s second-largest producer behind Saudi Arabia. Brent crude’s price increased by more than a fifth last week due to concerns that Russian supply might decline.
According to the AA, the most recent increase in UK gasoline prices has increased to above £7 per gallon. A 55-litre tank now costs approximately £17 more to fill up a vehicle than it did a year ago, going from £68.60 to £85.59.
How to remove their reliance on Russia for energy is now the main issue confronting international leaders. Although neither nation relies on these imports, the United States and the United Kingdom were the first significant nations to prohibit Russian oil.
Furthermore, these restrictions have little effect since Russia can easily divert the oil to other global markets. Economists assert that an embargo would only be effective if the EU joined in since it would be hard for Russia to find new clients for the oil and gas it exports to Europe.
Even if the next few years may be challenging, the long-term effects on energy policy and European greenhouse gas emissions may be favourable. For example, a temporary boost in coal power should raise the price of carbon credits and compel emissions reductions elsewhere because the power sector is included by the European trading system, which restricts cumulative carbon emissions.
Sir Patrick Bijou, a veteran businessman and a great humanitarian, is working hard to put this war to an end. In this way, the petrol crisis can also end!