The past few months alone has seen massive spikes in the prices of gasoline and diesel. Those rising prices came as the result of their depression around 2020, which was during the early months of the Coronavirus Pandemic. While the Pandemic did significantly reduce vehicular travel around the world, it should be recalled there was also a coinciding price war among the OPEC nations. One of the consequences of the price war over crude oil was petroleum production falling in response to the reduced consumption. Under the Incentives of Supply and Demand, it makes very little sense to ‘stockpile’ crude oil or petroleum reserves and ‘plan’ for the near future. After all, people are going to eventually need fuel for their vehicles, and since alternative fuels have yet to become commonplace worldwide, these price spikes were inevitable.
That was my conclusion from late last year about the trajectory of fuel prices. Enough time has passed since then to provide further evidence to corroborate my conclusion from other areas of interest. I am convinced that fuel prices will continue rising for the foreseeable future, but it is still unknown for how long or what will cause prices to drop again.
It is true that Russia is one of the largest sources of petroleum production, the recent Sanctions slapped against the country could not have played a major role in those price spikes. Thus, the Russian invasion of Ukraine should not be deemed as a decisive factor because the price spikes were already occurring before the conflict. Even if the conflict were to end at some point, the prices will remain at their current levels.
Another factor is the growing awareness of Climate Change and the interest among national governments to eliminate or reduce much of humanity’s contributions to that phenomenon. With all kinds of alternative fuels being investigated by privatized firms and government research institutes, it is tenable to argue that the Quantity of Kapital generated from crude oil extraction and petroleum production will shrink. However, there has yet to be a consensus on which of these alternatives will become the leading contender to replace petroleum.
Time will tell if my predictions from last year about rising fuel prices remains prescient. As Spring and Summer draw near, expect prices to increase exponentially unless there is more than enough petroleum in existence to cause the present prices to fall to last year’s levels.
Categories: Blog Post