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Fuel costs have been a hot topic across the United States lately as fuel prices hit record highs.
How Gas Prices Affect The Economy
JP Morgan estimates that the national average is currently $5.00 per gallon, and by the end of summer, that figure could rise to $6 per gallon.
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But before we understand what’s happening at gas stations, it’s important to first know what are the main factors that affect the price of gas.
This chart uses US data. The Energy Information Administration (EIA) outlines the main factors that affect the price of gasoline, making sure that each factor has a proportional impact on the price.
More than half of the cost of filling a tank is affected by oil prices. Meanwhile, the rest of the gas station price is split evenly between refining, marketing, distribution costs, and taxes.
The most influential factor is oil prices, which are largely determined by international supply and demand.
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Despite being the world’s largest oil producer, the United States is still a net importer of crude oil, most of which comes from Canada, Mexico and Saudi Arabia. Because the US relies on imports, US gas prices are heavily influenced by the global oil market.
Many geopolitical factors can affect the oil market, but one of the biggest influences is the Saudi Arabia-led Organization of the Petroleum Exporting Countries (OPEC).
Founded in 1960, OPEC was created to fight US domination of the world’s oil markets. OPEC sets production targets for its 13 member states, and historically, oil prices have been linked to changes in her OPEC production. OPEC members currently account for about 60% of the oil traded internationally.
Oil must be refined into gasoline before it can be used by consumers, so the cost of refining is included in gas prices.
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The United States has hundreds of refineries across the country. Owned by Saudi Arabian company Saudi Aramco, the country’s largest refinery processes about 607,000 barrels of oil per day.
The exact cost of refining depends on many factors, including the type of crude oil used, the processing technology available at refineries, and the demand for gasoline in specific regions of the country.
In general, US refining capacity is not keeping up with oil demand. Several refineries closed during the pandemic, but even before COVID-19, U.S. refining capacity lagged demand. Amazingly, no new refineries have been built in the country since 1977.
Across the United States, the average gas tax is $0.57 per gallon, but the exact amount varies by state. Here are the top five states with the highest gas taxes:
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States with high fuel taxes typically spend extra money on improving local infrastructure and transportation. For example, Illinois doubled her gas tax in 2019 as part of a $45 billion infrastructure plan.
California, the state with the highest gas tax, expects to raise tariffs in her July of this year, which should raise gas prices by about 3 cents a gallon.
Gasoline is typically delivered from refineries to regional terminals via pipelines. From there, the gasoline is further processed to meet market requirements or municipal standards.
The gas station then distributes the final product to consumers. Gas station operating costs vary. Some gas stations are owned and operated by brand name refineries such as Chevron, while others are smaller and owned by independent traders.
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Famous brands have a lot of advertisements. According to Morning Consult, between June 1, 2020 and August 31, 2021, Chevron, BP PLC, ExxonMobil and Royal Dutch Shell PLC will air more than 44,495 television commercials in the United States. It aired.
If only a fraction of America’s oil comes from Russia, why is the conflict between Russia and Ukraine affecting America’s prices?
Because oil is bought and sold on the world commodity market. So when countries impose sanctions on Russian oil, it puts pressure on global supplies and pushes prices up.
This supply shock could keep prices high for some time unless the U.S. enters a recession, making it more likely based on the latest data trends.
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Energy and electricity supplies have become essential for nearly all European countries over the past year as the region moves away from its dependence on imported fuel from Russia.
Although many countries have transitioned away from fossil fuels, almost half of European countries still rely on fossil fuels as their primary source of electricity generation.
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This graph uses data from Map Electricity and the IEA to map European countries by main source of electricity generation, showing her breakdown of electricity generation across the EU in 2021.
Europe continues to look to renewable energy sources for power generation and has made great strides in the last decade.
In 2011, fossil fuels (oil, natural gas and coal) accounted for 49% of EU electricity production, while renewable sources accounted for just 18%. Ten years from now, renewable energy sources will almost match fossil fuels, with renewables generating 32% of the EU’s electricity generation by 2021, compared to 36% for fossil fuels.
The expansion of wind and solar power has been a major driver of this renewable energy transition, with the EU generating just 8% of its electricity in 2011, but 19% in 2021. rice field. Wind and sun rank first in Oceania compared to other regions around the world.
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Although hydropower does not contribute as much as other energy sources, it is the most common major source of electricity generation in Europe and plays an important role in providing renewable energy.
Nuclear energy is the largest source of electricity generation in the EU and Europe as a whole, despite declines over the last decades. In 2001, nuclear energy accounted for one-third (33%) of the EU’s electricity production, falling to 25% over the next two decades.
Looking at individual countries, fossil fuels are the main source of electricity in most European countries.
Germany still relies heavily on coal-fired power, and from 2017 to 2021 she generated 31% of the country’s electricity. Despite its dependence on carbon-intensive fossil fuels, wind and solar power together account for 33% of Germany’s electricity production (23% for wind and 10% for solar).
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France is Europe’s largest economy and is primarily dependent on nuclear power, which accounts for more than half of the country’s electricity production.
Italy, the UK and the Netherlands all used natural gas for electricity generation from 2017 to 2021. Italy is the most dependent of her three countries on natural gas, accounting for 42% of electricity generated by natural gas, while the Netherlands (40%) and the UK (38%) are not far behind. do not have.
Spain is unique among European powers and a successful example of the transition to renewable energy sources. Between 2017 and 2021, the country relies heavily on natural gas (29%), but by 2022, wind power will become the dominant generator with a 32% share, making natural gas for power generation contribution drops to 14%.
Since Russia’s invasion of Ukraine, energy self-sufficiency in the EU has become a top priority, and countries have seized the opportunity to accelerate their transition to renewable energy sources.
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A new report from Ember highlights how the transition is making great strides in 2022, with solar and wind (22%) overtaking natural gas (20%) in power generation for the first time.
2022 will see an increase in EU fossil fuel power generation, but Ember expects it to fall by as much as 20% by 2023. If the EU can sustain this accelerated shift away from fossil fuels, this map of primary energy sources for power generation could feature more renewable and low-carbon energy sources in the near future.
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