AUSTIN (KXAN) — How high will it go?
That’s the question drivers are asking as they fill up at the pump, currently paying more for gas than they have at any time since 2014.
On Monday, gas in Travis County averaged $3.73 per gallon, according to AAA. Nationwide it’s $4.07.
However, Joshua Rhodes, a research associate at the University of Texas’ Webber Energy Group, said you can expect prices to keep climbing higher.
The following conversation has been lightly edited for clarity.
How high could it climb?
Tom: How high do you potentially expect gas prices to climb?
Joshua: I think a lot of it depends on if we go into a full oil embargo on Russia itself. Russia supplies a significant amount of oil to the world markets, and if those markets get tighter than they already are then that’ll result in a higher oil price, which will result in a higher gasoline price.
Tom: Are we talking about a matter of 10, 20, 30 cents more, or could we be looking at dollars more in terms of what we’re paying?
Joshua: I mean I wouldn’t be surprised if we’re well over $4 by the time this is done. Potentially up to $4.50 which would be higher than I think we’ve seen, maybe ever.
What is causing higher prices?
Tom: What is the confluence of factors contributing to these higher prices?
Joshua: The ones making the headlines right now are the ones in Ukraine, but prices have been going up even before this conflict began because of the recovery from COVID. People are traveling more, people are wanting to get out more, and during that time when many of us were working from home and not traveling as much, demand for gasoline and things like that declined, so did investment in new oil fields or production capabilities. So, as that demand has come back into the market we’ve seen an increase in prices.
Tom: Is Texas situated better than other states because of how much oil we produce?
Joshua: I think Texas is better situated than most states. Prices are typically lower here than they are in other locations. We produce a lot of oil. We also refine a lot of oil and so those refined petroleum products, things like gasoline and diesel, don’t have to travel as far after they’ve left our refineries.
Tom: If the US does decide to block all oil imported from Russia, what potentially happens to prices?
Joshua: If the U.S. went at it alone, it wouldn’t impact prices that much. We only import, about four percent of our imports from Russia. It’s the rest of the world that’s the bigger issue. If the rest of the world also goes along with blocking Russian oil exports, then that would decrease the amount of oil that’s on the global market, and since we are tied to a global market, that would lead to higher prices here.
What will need to happen for prices to go back down?
Tom: What needs to happen for prices to eventually start going back down?
Joshua: For prices to come back down essentially we need to have supply and demand be in better balance. We either need to consume less oil, we need to be more efficient in the way that we use gasoline and petroleum products, or there needs to be an increase in oil production on the global market. So that could be either domestic production here in the U.S. or other countries, or if the Russia-Ukraine war would calm down such as that there wouldn’t be as big a fear that Russian oil will no longer be on the global market.
Tom: Some people have said, ‘why don’t we just produce more oil, pull more oil out of the ground.’ Is that easier said than done?
Joshua: It is a little bit easier said than done. We can actually increase oil production, crude oil production. But we don’t necessarily have the refining capacity to turn that into petroleum products. Refineries are actually very complex systems, and they’re made for a certain type of oil. So, if they’re made for a certain type of oil that say comes from Russia, or the Middle East, you can’t just take U.S. oil and put it in there. It would take money and upgrades and capital to make them such that they’re able to refine that oil into the finished products that we consume. So while we can produce more, it doesn’t necessarily mean that every barrel we pull out of the ground could translate into a barrel of gasoline.