Rising gas prices in 2021 have alarmed motorists across the United States.
According to the U.S. Energy Information Administration, the national average price for regular retail gasoline surpassed and remained above the $3 mark since mid-May. The last time the national average was that high was all the way back in October 2014, when a nearly four-year-long run of prices above $3 per gallon gas came to its end.
While the highest recorded gas price in the last eleven years occurred the week of May 9, 2011 at $3.97/gal, the recent price surge appears to be making grounds, and fast.
In approximately 14 months, the price of gas has increased by $1.32/gal, from a low of $1.77/gal the week of April 27, 2020 during the COVID-19 pandemic to the recently recorded climb to $3.09/gal the week of June 28, 2021.
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Why are gas prices so high?
The rising gas prices in 2021 are due to the increased demand for crude oil after significantly dropping during the COVID-19 pandemic.
As summer 2021 approached, gas prices were expected to increase as peak travel season came back. However, a ransomware attack on the Colonial Pipeline on May 7 forced the company to halt all operations, thus starting a fuel shortage that was impacted by both the supply chain and by consumers.
After six days of being offline, pipeline operations resumed on May 12 but the national average for gas prices still surpassed $3 with over 10,000 gas stations out of gas after panic buying and delayed distributions. The cyber attack caused gas prices to jump up sooner than expected, and it has remained above the $3 mark past the Fourth of July.
What goes into the cost of gas?
When buying a gallon of gas, the money goes towards the cost of the crude oil, refining, distribution and marketing, and taxes.
The cost of crude oil accounts for more than half of what the consumer pays for at gas stations. However, this wasn’t the case during the first few months of the pandemic when the cost of crude oil dropped to just 25% of what the consumer paid.
So why are gas prices so high?
There are two key factors to sharply rising gas prices in the United States.
The cost of gas was expected to go up due to increased demand in the USA (after a severe drop in demand in 2020). However, the cyber attack on the Colonial Pipeline accelerated the increase with an unexpected shortage. As of July 2021, national average gas prices are at a level that hasn’t been seen for years.
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