WASHINGTON, DC, July 8 -- Reports in advance of the Fourth of July weekend showed that the price of gas had been dropping -- albeit by pennies -- but a new analysis by JP Morgan predicts prices will increase to “stratospheric” highs if Russia decides to cut oil production. They say it could wind up tripling the price of a barrel of oil.
Do the math. A barrel of oil can produce 20 gallons of gas. If you’re currently paying about $5.00 a gallon at the pumps at today’s $110 per barrel price, you don’t have to be a mathematician to figure out that at $380 per barrel we could be paying “stupid-scary-dollars” per gallon in the not so distant future.
So, why would Russia want to cut production? “To inflict pain on the West,” the analysts wrote in what they described as a worst-case scenario. “The tightness of the global oil market is on Russia’s side,” they said according to The Epoch Times.
The reasoning behind the JP Morgan report is that “The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy.”
The G-7 consists of the United States, the United Kingdom, France, Germany, Italy, Japan and Canada. Russia used to be part of the G-7 but was ousted from the Group in 2014, the last time Russia attacked Ukraine and annexed its Crimean territory.
The New York Times says that the West has already put economic sanctions on Russia but they didn’t have the impact they sought. “The plan, which would allow Russia to keep selling oil to the world but would sharply limit the price, is an acknowledgment that the embargoes the United States and allies swiftly imposed on Moscow’s lucrative energy exports have not dented Russian oil revenues. And they have driven up gasoline and other fuel prices, prompting consumer backlash in the United States and Europe.”
Meanwhile, President Biden is taking heat over a social media message he posted online last week saying, “My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril. Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.” It didn’t take long for Jeff Bezos, the founder of Amazon, to reply: "Ouch. Inflation is far too important a problem for the White House to keep making statements like this. It's either straight ahead misdirection or a deep misunderstanding of basic market dynamics."
As for the market dynamics of gasoline stations, the business website thehustle.com explains Mr. Biden’s ill-informed notion of the gas station business. “It’s easy to look at the gas pump right now and think that station owners are taking you for a ride. But the business model of gas stations is a bit counterintuitive...Most gas stations barely turn a profit on their core product — and when the price of oil goes up they may even take a loss on it...Gas stations make an average net margin of just 1.4% on their fuel...That’s far lower than the 7.7% average across all industries — and ranks beneath other notoriously low margin businesses like grocery stores (2.5%) and car dealerships (3.2%).”
President Biden, you caused this by initiating your administration’s war against fossil fuels – which means gasoline, natural gas, diesel oil, and coal.
President Biden, you caused this by the misguided notion that you could fix the climate with one quick change.
President Biden, you caused this by not considering the impact on everyday American’s.
The result is that you put us back into an import dependent energy economy and surrendered our energy independence to Putin and Russia. Either you and your administration do not understand the impact and cost from your war on fossil fuels. Or you don’t care.
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