It’s Not Russia, It’s Just Business

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New York, USA. May 24 – When JP Morgan informed its clients last Friday that “US gasoline prices to break above US$6” that caught many analysts by surprise including us. The US national average price as per AAA’s poll topped $4.50 last week, the highest in history and to see it fly higher is not what retail consumers expect. Demand however, given going into summer months, is definitely going to increase and $6/gl is going to hurt the wallet.

So happened, since the price increase occurred after Russia’s invasion of Ukraine, Russia was blamed for it to the point it’s called “Putin inflation” in some parts of the United States. Interestingly enough, when we compare the gas prices and the “stuff” to produce gasoline, that is crude oil, we get a different story.

Above is the average gas prices for the past 10 years in North America. Below is the price of crude oil spot for the same period of time.

Here’s a question. If the “stuff” to make gasoline is at the same price it was 10 years ago, then why has the price of gasoline been nothing but rising even before the Russian invasion of Ukraine? Obviously it’s not Russia. It’s just business.

Businesses are known to gouge the price of goods and services when supply could not meet demand requirements. That is the easiest thing to do because raising production is more difficult even when the supplies are there. Maybe manpower shortage is the issue, there could also be a shortage of equipment. All in all it’s the rise in operational and administrative expenses.

We think Summer in North America is going to be hotter than usual!


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