Although Russia’s war against neighboring Ukraine is 5,000 miles away on the other side of the world, the reverberations have been felt by citizens of North America, not through trendy #StandWithUkraine social media snippets, but directly in their pocketbooks at the gas pump.
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Just nine trading days after Russian Federation President Vladimir Putin announced his country would conduct a “special military operation,” the WTI Crude Oil futures contracts hit a high of $129.42 per barrel, a figure last seen in July of 2008 during the second month of a historic seven month crash that saw the price of the world’s most crucial commodity fall from more than $147 to $33.20 per barrel.
In turn, gasoline prices for both retail and industrial consumers saw a dramatic increase that has yet to be relieved.
Supply and production
Data for the week of March 11 released by the U.S .Energy Information Administration on March 16 showed that while week over week, crude oil input to refineries had remained flat, production nonetheless increased by close to 3.5 million barrels year over year.
On March 11, 2021, WTI Crude closed at a price of $65.89. One year later, the contract closed at $109.14.
Notably, refinery utilization stood at 88.7 percent the week of March 11, up dramatically from 67.4 percent during the same time last year.
Gasoline production increased year over year from 8.48 million barrels per day to 9.376 million barrels, while distillate fuel oil production, which includes diesel, increased from 3.61 million barrels per day to 4.75 million over the same period.
America’s crude oil inventory, however, fell from more than 500 million barrels last year to 415 million as of March 11. While gasoline reserves are actually up year over year from 232 to 241 million barrels, distillate reserves are down from 137 million barrels to only 114 million.
Utilizing data from the American Automobile Association (AAA), we will examine the price of gasoline and diesel in several major U.S. states, and employ GasBuddy and BVD Petroleum to examine pricing in Canadian Provinces.
|State||Gasoline (per gallon)||Diesel (per gallon)|
|District of Columbia||$4.46||$5.36|
|New York State||$4.42||$5.31|
Canada (1 U.S. gallon = 3.78 liters; 1 CAD = $0.79 USD)
|Province||Gasoline (per liter)||Diesel (per liter)|
For passenger car drivers with an average 12 gallon (45 liter tank), today’s prices pressure the pocketbook in the following way:
Cost to fill
- California: $69.24
- New York State: $53.04
- British Columbia: $88.20
- Alberta: $75.15
For domestic truck and large SUV drivers, website It Still Runs estimates an average 26 gallon (98 liter) tank, producing a yet more staggering invoice:
Cost to fill
- California: $150.02
- New York State: $114.92
- British Columbia: $192.08
- Alberta: $163.66
Putting it into perspective, National Resources Canada’s 2022 Fuel Consumption Guide estimates the average fuel economy of the following representative vehicles:
- Toyota Corolla: Combined 7.1 liters per 100 kilometers, or approximately 34 miles per gallon
- Hyundai Santa Fe AWD: Combined 9.9 liters per 100 kilometers, or approximately 24 miles per gallon
- Ford F-150 (V8): Combined 11.7 liters per 100 kilometers, or approximately 20 miles per gallon
According to a national study of 787 American drivers by website Reviews.com, respondents stated that before the Coronavirus Disease 2019 (COVID-19) pandemic, they were filling their vehicles on average once per week, a relevant figure in light of pandemic measures such as working from home and lockdown edicts vaporizing across North America.
For an average passenger car driver in New York, this would produce a gasoline bill of more than $2,700 per year. If you live in Alberta, the number inflates to more than $3,900.
If driving a truck or a large SUV, the hit is more than $7,800 per year for Californians and $8,500 annually for Albertans. However, larger vehicles may need to refuel more often due to their greatly decreased fuel economy.
Rockets and feathers
Unfortunately for consumers, the sharp decrease in the price of oil from a high of $129.42 on March 8 to a recent low of $94.10 on March 15, a stunning 27 percent drop, has not translated into salvation at the pumps for North American consumers.
In a March 9 article by CNN, pundits and analysts attributed the sudden correction to comments made by United Arab Emirates Ambassador to Washington Yousef Al Otaiba, who said that his country wishes to increase production and will push the OPEC+ cartel to follow suit.
After the news, WTI Crude fell to a low of $103.98 and closed the week of March 11 at $109.14. Notably, the price of oil on Feb. 24, the day after Russia launched its assault on Ukraine, closed at $92.98.
In explaining why “rising gas prices ascend quickly like rockets but then they float gently downward for a slow descent,” website Econlife attributed the phenomenon to arbitrage produced because retailers have little reason to lower prices just because costs fall, simply because consumers rely on gasoline for movement and the market completely lacks competition.
“So why do gas prices rise faster than they fall? Because they can…even with our newly identified elasticity and increasing access to information,” states author and economist Jane Schwartz.
A calculator published by website Dollartimes sheds some light on today’s gasoline prices. In 2008, when WTI Crude traded at an all time high close to $150 per barrel, the average price of gasoline in the United States was $3.27 per gallon.
With a simple calculation adjusting for inflation, that figure would amount to $4.24 per gallon in 2022’s dollars.
Canadian refinery Petro-Canada has for years pointed out that arguably the largest contributor to gasoline prices has simply been taxes. While the company estimates an average of 27.6 cents per liter is paid in taxes, the real number can vary dramatically between provinces and states.
For Americans, according to the American Petroleum Institute, on average, Americans are paying 26.16 cents per gallon in state gasoline excise taxes, which increases to 38.69 cents when various additional taxes are applied.
With federal taxes included, the total tax per gallon jumps to 57.09 cents.
However, just as for Canada, this figure varies dramatically on a state-by-state basis.
- State Excise Tax: 51.10 cents per gallon
- Other State Taxes and Fees: 17.05 cents per gallon
- Total including federal excise tax: 86.55 cents per gallon
New York State
- State Excise Tax: 8.05 cents per gallon
- Other State Taxes and Fees: 40.17 cents per gallon
- Total including federal excise tax: 66.62 cents per gallon
For Canadians, Wikipedia carries a handy summary of fuel tax rates across Canada, which reveals that, on average, Canadians are paying 31.06 cents per liter in taxes, before sales tax. In Canada, sales tax is composed of a 5 percent federal Goods and Services Tax and an additional Provincial or Harmonized Sales Tax.
Alberta, for example, does not have a provincial tax and only charges the 5 percent federal tax, while BC has an additional 7 percent tax, bringing their total sales tax rate to 12 percent.
Wikipedia’s data, however, has priced in a hike to Canada’s carbon tax scheme set to come into effect on April 1 that raises the tax from approximately 9 cents to 11.05 cents per liter. Despite rising gas prices, Justin Trudeau’s ruling Liberal Party minority government has no plans to delay the increase.
In Alberta, Premier Jason Kenney, a Conservative, announced his administration would temporarily suspend its 13 cent per liter provincial excise tax starting April 1. Unfortunately for Albertans, only one day after the announcement, refineries hiked the price of gas from 157.9 to 167.9 per liter.
- Federal Excise Tax: 10 cents per liter
- Provincial Excise Tax: 13 cents per liter
- Federal Carbon Tax: 11.05 cents per liter
- Total including sales tax: 37.46 cents per liter ($1.41 per gallon)
- Federal Excise Tax: 10 cents per liter
- Provincial Excise Tax: 1.75 cents per liter
- Federal Carbon Tax: 11.05 cents per liter
- Local Fuel Levy: 6.75 cents per liter
- Total including sales tax: 32.46 cents per liter ($1.28 per gallon)
However, in Vancouver, an additional 18.5 cents per liter is imposed as a local fuel levy, bringing the total tax portion to 52.86 cents per liter, or slightly less than $2 per gallon.
As the cost of mobility increases dramatically while wages nonetheless remain flat, chaos and disorder begins to show itself in human society as gasoline and diesel become more precious.
On March 16, Houston police began an investigation after thieves allegedly stole more than 1,000 gallons of diesel, amounting to close to $6,000, from a local gas station over the course of a three day operation.
Apparently, the scheme involved perpetrators parking a van over top of the station’s storage tanks. The owner told reporters, “At first we were like…I wonder what he’s doing there because we didn’t see anyone get out of the vehicle but then we realized there’s probably a trap door inside the vehicle and he’s pumping like that.”
In a separate case, also in Houston, thieves made off with more than $10,000 in diesel after assailants were able to simply open the panel on pumps with copied or stolen key, removing close to 2,000 gallons after hours, said NBC affiliate Click2Houston.