| Jr. Feature |

Fuel Hike

Why is gasoline so important? And what makes the price go up or down?


It gets you to school. It takes you on vacation. It brings your favorite snack to the store. It’s so precious that wars have literally been waged over it. No wonder it’s called “liquid gold.”

Gas is something we rarely see, yet is so important in our lives. Recently, gas prices have soared. Because gas is used as fuel to ship products to the market, higher gas prices cause everything else to go up in price too.

Why is gas so important? And what makes the price go up or down?


Supply and Demand

Like most things in life, the more people want something, the more it’s going to cost. When more people are traveling, like during vacation and national holidays, gas is more expensive.

During the lockdown months of 2020, gas prices fell dramatically. People were stuck at home, unable to travel to work or school. Airplanes, which use a lot of gas, were mostly grounded due to travel restrictions. Demand for gas was very low, and that was reflected in the shockingly low gas prices of spring 2020.

Once the vaccines were distributed and lockdowns were mostly over, gas prices slowly crept back up. Then they shot upward suddenly, and we’ve been feeling the repercussions ever since.

What happened?


The Great Fuel Shortage of 2021

During lockdown, many fuel truck drivers lost their jobs, because low demand for gas meant that fewer truck drivers were needed to transport the fuel from the refineries to the gas stations. This was obviously a difficult time for the drivers, but it quickly became a situation that affected us all.

When demand for gas returned to pre-Covid levels, the fuel-hauling companies found themselves without enough truck drivers. A driver shortage turned into a fuel shortage, as not as much fuel was getting to where it needed to go. The low supply combined with high demand created really high gas prices.

Besides for paying more at the pump, dramatic increases in fuel prices means we pay more for virtually everything. Before a product reaches a store shelf, it has likely traveled thousands of miles. Raw materials are produced in one country and then shipped to another country for manufacturing. (FYI, ships also use fuel.) The manufactured product is shipped elsewhere for packaging before shipping out to the country where it will be sold. Then it gets shipped from one warehouse to another until it finally makes it to the store. That’s a lot of fuel.

Oil, Fuel, and Gas

In American English, gasoline is the stuff you put into your car to give it the power to drive. This is often shortened to “gas,” which shouldn’t be confused with the type of gas that is usually invisible and floats in the air. In British English, gasoline is known as “petrol.”

Unfortunately, it gets more confusing.

In this article, any mention of oil doesn’t refer at all to any oil you may have seen before. Here, oil will always refer to crude oil, which is a thick liquid that is pumped out of the ground. Crude oil can also be called petroleum, although petroleum can also refer to substances that are not crude oil.

Once petroleum (or crude oil) has been extracted from the ground (a costly and difficult process), it is taken to oil refineries where it is refined into different types of fuel. (Fuel is anything that can be burned to create energy.) In the refinery, the crude oil is heated to release the vapors. Different temperature points release different vapors, each of which are cooled into fuels. These fuels include gasoline (petrol), diesel, kerosene, and propane. Each of these fuels have different properties, making them useful for different purposes.


It’s All Politics

It’s not just pandemics that affect gas prices. You may have heard adults in your life blame President Biden for rising gas prices. People may be reminiscing about the good old days under President Trump when gas prices were much lower.

The fact is that there are many external factors that cause gas prices to fluctuate, and politics can be one of them.

California is known for having the highest gas prices in the country. That’s because California charges more taxes on gas than any other state. In 2017, the Californian Senate passed a bill that requires an increase in fuel taxes virtually every year. Currently, California charges 51.1 cents per gallon in taxes. Alaska, on the other hand, charges less than 15 cents per gallon. The reason for California’s high tax on fuel is because the Democrat state government wants to reduce fuel usage and encourage sustainable energy usage instead.

California happens to have a lot of underground oil reserves, which could theoretically keep fuel prices down (due to high supply). But for the past 20 years, the state has severely limited the amount of oil that can be extracted from the ground, which means that supply is lower. This also contributes to higher gas prices.

As a Democrat, Joe Biden is actively seeking to reduce carbon emissions across the country in order to protect the environment. Some of the very first policies that went into effect soon after he took office have resulted in the reduction of the amount of oil and natural gas that is produced in the United States. Critics of Biden’s policies say that what we are currently seeing in California will eventually be the norm for the whole country.


At the gas station

When the adult in your life fills up the gas tank of their car at the gas station, you’re only seeing half the picture. Let’s find out what goes on at the gas station.

Pump: Most gas pumps (also known as dispensers) will have two or more fuel options for customers to choose from, based on the car manufacturer’s instructions.

The display screen tells customers how much fuel is being pumped into the car and how much they will have to pay.

The nozzle has a splash guard to prevent customers’ hands from being splashed by fuel. The nozzle also has an automatic shutoff mechanism to prevent the customer from overfilling the car’s fuel tank.

Gas tanker: This massive truck with a cylinder trailer transports fuel. One cylinder can contain up to six compartments, each of which can carry a different type of fuel.

Underground storage tank: There is an underground storage tank for each type of fuel that the station sells. The storage tanks are made from corrosive-resistant materials to prevent leaks. Other safety measures include valves and sensors that notify the operator if there is a leak.

Manhole: Each storage tank has a pipe leading to a manhole, which is uncovered by the driver of the gas tanker when he refills the storage tanks. The manhole covers are color-coded to indicate the fuel type.’


Summer Fun

Another factor that affects the price of gas is the weather. In spring, gas prices rise everywhere, no matter who’s in the White House.

First of all, in the spring and summer, there is an increase in demand for gas. The winter hibernation is over and people head out to enjoy the sun.

But the main reason for the summer price hike is regulations involving the manufacturing of gasoline. Prepare yourself for a short science lesson, which I will try to make as painless as possible:

During the summer months, gasoline is required by law to be different than in the winter. This is because of atmospheric pressure. Atmospheric pressure is caused by the weight of the ocean air pressing down on us. Atmospheric pressure is different in different climates, but for the most part it averages at 14.7 pounds per square inch, which we call 14.7 psi. Now, liquids have a vapor pressure — that is the pressure of the vapors (or gas) in the liquid. When a liquid’s vapor pressure is higher than the atmospheric pressure, the liquid boils. Take water for instance. When water is heated, its vapor pressure increases until it reaches atmospheric pressure and that’s when it starts to boil. At normal atmospheric pressure, water boils at 212oF (100oC). At high altitudes the atmospheric pressure is lower and water reaches boiling point at a lower temperature.

Like water, gasoline is a liquid and has a vapor pressure. In fact, gasoline is considered very volatile due to its high vapor pressure. In the summer, high temperatures outdoors result in the gasoline being vaporized. The vapors are released into the atmosphere and contribute to pollution. To minimize this, summertime fuel needs to be kept to a much lower vapor pressure than normal. Special additives are added to the gasoline to keep the vapor pressure down. Different climates will require different vapor pressures, but in most places, gasoline needs to have a vapor pressure of 7–8 psi in the summer. This makes summer fuel more expensive.


The Good Ol’ Dollar

Since the 1920s, the US dollar is the primary currency used for trade around the world. When countries trade with each other, it’s helpful to have one currency that is used by everyone. (Before the 1920s, the British pound sterling was the gold standard for international trade.)

Like most other commodities (commodities are raw materials that are traded, for example precious metals, grains, lumber, livestock, or crude oil), all oil contracts around the world are valued in US dollars. In fact, crude oil (which is what gasoline is produced from) is the world’s most important commodity, and the United States is the world’s largest producer of crude oil. When the dollar is strong against other currencies, the price of oil (and by extension, gasoline) remains low. When the dollar falls in value, gas goes up in price.

Right now, inflation is increasing. Inflation is when the value of a currency decreases significantly. Inflation is usually caused by a poor economy, and it means that prices go up. The pandemic dealt the global economy a massive blow. People were not spending as much money (because there was nowhere to go and nothing to do). Also, many people lost their jobs. The US government handed out billions of dollars in stimulus checks. Free money is nice for the people who get it, but bad for the government since they didn’t actually have all that money to begin with. The Federal Reserve had to create the money, which significantly weakened the value of the dollar. When the dollar is weak, we all pay more for everything.


It’s a Disaster

The pandemic is by no means the first disaster to affect the price of gas. The worst kind of disaster that affects gas prices are those that directly involve oil refineries. In 2017, Hurricane Harvey hit Texas. Texas is the nation’s largest producer of oil. Ten refineries in Texas, which together are responsible for more than 16 percent of the country’s daily oil refining capacity, were shut down for up to two weeks. Gas lines to the Midwest and East Coast were also shut down, so people across the country felt the shortage. The decrease in supply caused prices to shoot up.

On another occasion, in 2019 a massive explosion destroyed the East Coast’s largest oil refinery. A failed pipe at the Philadelphia Energy Solutions refining complex caused vapors to leak out, which resulted in a series of blasts. The last explosion was so powerful it sent a 38,000-pound barrel flying across to the other side of the Schuylkill River. Gas prices soared due to the knock to the supply system. However, gas prices also had to be high enough to make it worthwhile for gas to be shipped in from Europe and other parts of the country. Philadelphia Energy Solutions declared bankruptcy a short while later.

The All-Important OPEC

No article about gas would be complete without mentioning OPEC.

The Organization of the Petroleum Exporting Countries was created in 1960. It is an alliance of the world’s largest petroleum exporters. It was founded by Saudi Arabia (the world’s largest oil exporter), Iran, Iraq, Kuwait, and Venezuela. Since then, many other countries have joined OPEC, including the UAE, Libya, Nigeria, Algeria, Congo, and some other African countries. Currently, OPEC consists of 13 member countries who control more than 50 percent of global oil supplies. Despite being the world’s largest oil producer, the United States is not a major exporter of oil and therefore it is not an OPEC member.

The purpose of OPEC is to stabilize oil prices among member countries and to oversee production and supply so that producers and consumers get a fair deal.

OPEC doesn’t actually set the price of oil. Instead, it manipulates the oil market. Member states are only allowed to produce and export as much oil as OPEC dictates. Keeping the supply of oil regulated helps keep the price stable. When global demand increases or decreases dramatically, OPEC will adjust its caps on oil production. Twice a year OPEC ministers from each member state meet at the headquarters in Vienna to set caps and prices based on predictions of oil demands.

OPEC is an example of an international cartel. A cartel is when a group of competitors in the same industry make an agreement to control the price together. Cartels are usually illegal but it seems people can’t agree on whether or not OPEC is illegal. It doesn’t help matters that some OPEC members are from the most corrupt countries in the world. OPEC is known to withdraw oil production in order to keep prices high. The United States sometimes counters this by increasing its own oil production.


Turns out, the price of gasoline tells us so much more than just how expensive our road trips will be. It tells us the story of what’s going on around the world.


(Originally featured in Mishpacha Jr., Issue 880)

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