XPost: alt.society.futures, talk.politics.guns, sci.geo.petroleum   
   XPost: sac.politics   
   From: invalid@dont-email.me   
      
   By CNN COM WIRE SERVICE |   
   PUBLISHED: June 6, 2022 at 10:40 a.m. | UPDATED: June 6, 2022 at 3:49 p.m.   
      
   Russia’s invasion of Ukraine is a major reason that US drivers are paying   
   record prices for gasoline. But it’s not the only cause of the spike.   
      
   Numerous factors are pushing prices up, with regular gasoline hitting a   
   record $4.87 a gallon Monday according to AAA’s survey — up 25 cents a   
   gallon in just the last week.   
      
   Gas prices were already expected to breach the $4 a gallon mark for the   
   first time since 2008, with or without shots fired in Eastern Europe or   
   economic sanctions imposed on Russia. But now the national average is   
   expected to hit $5 a gallon within the next two weeks, said Tom Kloza,   
   global head of energy analysis for the OPIS, which tracks gas prices for   
   AAA.   
      
   “I think we reach $5 somewhere between this weekend and   
   Juneteenth/Father’s Day weekend,” he said.   
      
   It was back in March that prices first broke the record of $4.11 a gallon,   
   which had stood since 2008. That now seems like the good old days: The   
   national average has been rising steadily for the past month, setting 27   
   records in the last 28 days.   
      
   More than one out of every five gas stations nationwide is now charging   
   more than $5 a gallon for regular, and just more than half are charging   
   $4.75.   
      
   There are 10 states, plus Washington, DC, where the average price is   
   already at $5 or more: Alaska, Arizona, California, Hawaii, Indiana,   
   Michigan, Illinois, Nevada, Oregon and Washington. Several more are within   
   a penny of $5, so those states’ prices are likely only a day or two at   
   most from crossing the mark.   
      
   That’s because there’s a number of reasons beside the disruption of   
   Russian oil exports driving prices higher according to Kloza. And making   
   predictions about where prices will go has proved difficult. As school let   
   out and summer travel picks up, so will gasoline demand and price, he   
   said.   
      
   “Anything goes from June 20 to Labor Day,” Kloza said. “We could certainly   
   see the national average approach $6.”   
      
   Here’s what’s behind the record price surge:   
      
   Russia’s invasion of Ukraine   
   Russia is one of the largest oil exporters on the planet. In December it   
   sent nearly 8 million barrels of oil and other petroleum products to   
   global markets, 5 million of them as crude oil.   
      
   Very little of that went to the United States. In 2021 Europe got 60% of   
   the oil and 20% went to China. But oil is priced on global commodity   
   markets, so the loss of Russian oil affects prices around the globe no   
   matter where it is used.   
      
   The concerns about disrupting global markets led Western nations to   
   initially exempt Russian oil and natural gas from the sanctions they put   
   in place to protest the invasion.   
      
   But in March the United States announced a formal ban on all Russian   
   energy imports. And last week the EU announced a ban on imports of Russian   
   oil by ship, which represented about two-thirds of the oil European   
   nations imported from Russia. Russia’s oil is slowly and steadily being   
   removed from global markets.   
      
   China lockdowns ending   
   One factor keeping oil prices somewhat in check has been the surge of   
   Covid cases, and strict lockdown rules in much of the country. That was a   
   major drag on demand for oil.   
      
   But as the Covid surge has started to retreat, the lockdowns are being   
   lifted in major cities such as Shanghai. And more demand without increased   
   supply can only drive up prices.   
      
   Less oil and gas from other sources   
   Oil prices plunged when pandemic-related stay-at-home orders around the   
   world crushed demand in the spring of 2020, and crude briefly traded at   
   negative prices. In response, OPEC and its allies, including Russia,   
   agreed to slash production as a way to support prices. And even when   
   demand returned sooner than expected, they kept production targets low.   
      
   US oil companies don’t adhere to those types of nationally mandated   
   production targets. But they have been reluctant or unable to resume   
   producing oil at pre-pandemic levels amid concerns that tougher   
   environmental rules could cut future demand. Many of those stricter rules   
   have been scaled back or failed to become law.   
      
   “The Biden administration is suddenly interested in more drilling, not   
   less,” Robert McNally, president of consulting firm Rapidan Energy Group,   
   said earlier this spring. “People are more worried about high oil prices   
   than anything else.”   
      
   It takes time to scale up production, particularly when oil companies are   
   facing the same supply chain and hiring challenges as thousands of other   
   US businesses.   
      
   “They can’t find people, and can’t find equipment,” McNally added. “It’s   
   not like they’re available at a premium price. They’re just not   
   available.”   
      
   Oil stocks have generally lagged the broader market over the last two   
   years, at least until the recent run-up in prices. Oil company executives   
   would rather find ways to boost their share price than increase   
   production.   
      
   “Oil and gas companies do not want to drill more,” Pavel Molchanov, an   
   analyst at Raymond James, said earlier this spring. “They are under   
   pressure from the financial community to pay more dividends, to do more   
   share buybacks, instead of the proverbial ‘drill baby drill,’ which is the   
   way they would have done things 10 years ago. Corporate strategy has   
   fundamentally changed.”   
      
   One of the starkest examples: ExxonMobil last month announced first   
   quarter profits of $8.8 billion, more than triple the level of a year ago   
   when excluding special items. It also announced a $30 billion share   
   repurchase plan, far more than the $21 billion to $24 billion it expects   
   to spend on all capital investment, including searching for new oil.   
      
   Not only is oil production lagging behind pre-pandemic levels, US refining   
   capacity is falling. Today, about 1 million fewer barrels of oil a day are   
   available to be processed into gasoline, diesel, jet fuel and other   
   petroleum-based products.   
      
   State and federal environmental rules are prompting some refineries to   
   switch from oil to lower carbon renewable fuels. Some companies are   
   closing older refineries rather than investing what it would cost to   
   retool to keep them operating, especially with massive new refineries set   
   to open overseas in Asia, the Middle East and Africa in 2023.   
      
   And the fact that diesel and jet fuel prices are up far more than gasoline   
   prices shows that refiners are shifting more of their production to those   
   products.   
      
   “Economics mandate you make more jet and diesel fuel to the detriment of   
   gasoline,” said Kloza.   
      
   And with prices in Europe even higher than in the United States, both   
   Canadian and US oil producers have increased exports of oil and gasoline   
   to the continent. That has also limited the US supply.   
      
   Strong demand for gas   
   But supply is only part of the equation for prices. Demand is the other   
   key, and while it’s very strong right now, it’s still not back to pre-   
      
   [continued in next message]   
      
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