Amidst general economic instability, war in Ukraine and the loosening of pandemic restrictions, these past few months for the world have been hectic. One of the ways we are feeling these changes on a personal level is increasing prices, particularly that of gas. According to American Automobile Association, as of April 1, the average national price of gas was $4.21. Why are we seeing this sudden increase? Economists suggest three main reasons: monetary inflation, international uncertainty and drilling restrictions.
Since the pandemic erupted in February of 2020, M2 money stocks have increased by about 30%. This will inevitably leave an impact on prices in all areas, including gas. The pandemic relief packages were a short-term solution to some issues, but they will have very negative, long-term consequences in the form of increased prices and devaluation of the USD.
The continued uncertainty in the Middle East due to the Yemeni war and the newer Eastern European Ukraine war has disrupted regular trade and has increased prices. Gas, which used to flow from Russia to Europe, is now been sold to China and Middle Eastern countries are now servicing both Europe and America, driving prices up. Some countries are also holding gas reserves in the case of further disruption.
Despite having a wealth of natural gasses, current restrictions have prevented American business from drilling domestically to increase supply and drive prices down. We continue to import fuel from other nations, which results in simultaneously exporting environmental damage and increasing prices domestically. These onerous regulations are stifling production and making it more difficult for everyday citizens to afford to travel.
There’s no simple reason for the increase in gas prices, but several recent factors have compounded to create a hard situation for many of us. Frankly, I’m surprised that prices have not risen higher. What’s the solution? Pull back on monetary expansion by cutting the budget, achieve peace in the Middle East and Europe as quickly as possible and open up domestic drilling. There are ways to make our nation and the world more peaceful and prosperous, but we have to be willing to take those steps.
