"These are just really strange and scary times," said Jim Ritterbusch, president of Ritterbusch & Associates, an oil trading and advisory firm in northern Illinois. "I think Milwaukee needs to be prepared for $4-plus-a-gallon gasoline," Ritterbusch said. "You're going to see pump prices north of $4 a gallon here pronto, unfortunately. We could see $4 pretty quick."… Once gasoline hits $4 a gallon, what's known as demand destruction will begin to occur, Ritterbusch said. That's a fancy economic term that means a lot of us will start driving less. "More and more office workers will be begging to work from their homes and avoiding the expense of a commute," Ritterbusch said. "That will certainly drive demand down for gasoline. "That's a tough way to contain high pricing, but I think that's going to be one item that helps to slow the price increases," Ritterbusch added.But many people are already working from home (the most recent jobs report had 13% of respondents saying the pandemic led to them working from home at some point in February, on top of those who could already work from home). US gasoline demand still isn’t back to pre-pandemic levels, and the level of available supply isn't really any different than it was 3-4 years ago.
So if Shell can get Russian oil for a bargain, that means we should be seeing prices plummet at Shell in the next month to take advantage of their cheap costs, right? That's what economics 101 tells us, but you know that isn't going to happen - they're going to charge the same prices every other gas stations will. Likewise, White House Press Secretary Jen Psaki called out the American Petroleum Institute for asking for additionalShell bought 100,000 metric tons of Russia’s Urals crude on Friday. Paid $28.50 a barrel below the price of international benchmark Brent crude, the widest discount on record.
— Catherine Rampell (@crampell) March 4, 2022
But this supply is being held back by both American and Middle Eastern oil producers in order to grab higher profits on oil that has been bid higher, but whose scarcity has yet to happen, and will be artificially induced this Spring in the name of "shareholder value." I know it's micromanaging, but there has to be some kind of research that shows what a typical profit spread is for an oil/gas company. If they're pulling 25%-50% higher than this general amount in 2022, it needs to be taxed and sent back to Americans, in addition to this price spike being a good reason to make it even more cost-effective to find alternatives to fossil fuel energy. Might not be a bad time to bring back some of those Build Back Better provisions to give Americans more choices and less pain at the pump. But those solutions will be relatively small adjustments in prices for 2022 compared to changes down the road. I assume there will be some demand destruction when gas hits $4 or even (gulp) $5 a gallon in the coming months. But it's a real wild card as to how much of that are we going to see, if it doesn’t result in layoffs and COVID almost completely fades out in Spring and Summer? What we know today is that these higher oil prices are based on speculation instead of any real market shortage, at least in March 2022. The Wall Street traders and oil companies are counting on expectations of shortages, but are able to bank their profits now. We need to tell this truth and tax and regulate accordingly.Every American should see this: Jen Psaki destroys the liars in the @GOP and at the @APIenergy for their attempts to exploit the war in #Ukraine for cheap political purposes: “The oil and gas industry is literally sitting on stockpiled leases and permits.” pic.twitter.com/2IcT4aIhjI
— Richard Hine (@richardhine) March 5, 2022
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