Economics An Overview – Adam Norman April 9, 2022 Drastic Rise in Gas Prices A View of Why Fuel Prices are Increasing Brayan Javier Ibaceta Velarde Seneca College Page 1 of 6 Economics An Overview – Adam Norman April 9, 2022 Drastic Rise in Gas Prices To get an idea of how the price of oil and gas has been changing over recent years, it should be clarified that this change began as a result of the arrival of the pandemic in 2019 with the Covid-19 virus. , this disease forced the population around the world to take refuge in their homes, to reduce the spread of the virus, which immediately generated a change in the demand for fossil fuels, since people used cars much less to move at the same time Air travel to the interior and exterior of the country was also drastically reduced, therefore fuel prices decreased due to low demand. However, all this changed when the prohibitions in different countries were softened thanks to the arrival of vaccines and the decrease in deaths due to the virus, this inevitably led to an increase in demand and consequently an increase in the price of fuel. (Picchi A. 2022) It should be noted that the current economy depends on a globalized world, where all countries trade with each other, it is for this reason that the most important reason for the current rise in fuel prices in the world is due to the start of the war between Ukraine and Russia, however, it is appropriate to mention that the price increase does not respond to the war per se, but rather responds to all the sanctions that the mostly Western countries have imposed on the Russian country, which is undeniably one of the main oil and gas producers in the world (Hopper T. 2022). I believe that these sanctions were issued with the sole purpose of damaging the Russian economy, in this way the western countries believe that a strong blow to the Russian economy would make them stop the advance of their troops in Ukraine, however, it seems that all the sanctions they had a rebound effect and it is currently the sanctioning countries, especially Page 2 of 6 Economics An Overview – Adam Norman April 9, 2022 the European bloc, who are having a worse time than the sanctioned country due to the vertiginous rise in inflation of its member countries (Inflation 2022). By removing a large amount of Russian oil from the international market, due to the law of supply and demand, prices will rise because the product on offer is in short supply, this means that by suddenly withdrawing millions of cubic meters of oil from the market, buyers will be forced to fight for the remaining oil, and this undoubtedly causes a rise in fuel prices (Hopper T 2022). “The market sees (the invasion of Ukraine) as an incredible degree of instability,” said Kevin Birn, the chief analyst of Canadian oil markets at IHS Markit. “And so, the price of oil is being bid up as people are increasingly uncertain about the availability of Russian crude going forward.”. (Birn K 2022) This sanctioning measure against Russia and the growing demand for fuel due to the progressive exit from the confinement caused by the pandemic are the main causes of the current rise in fuel prices throughout the world, although Canada is not as dependent on Russian oil as Europe is, the rise in prices has also affected the country because it is a trading partner of the United States who does import a considerable amount of oil from Russia, that is why in a conflict thousands of kilometers away, there are raising prices of oil Also in North America (Evans P. 2020). Dan McTeague, president of Canadians for Affordable Energy argues that Canada's reliance on US refineries is once again a major factor in why Canadian drivers are paying more. "We price all of our fuel in US [dollars] ... and that makes the bad situation worse, which is why we're looking for an increase of at least five to six cents per liter."(McTeague D, 2022). In my opinion, the main solution to this new global crisis is to find a solution to the main cause, which is the armed conflict between Russia and Ukraine, although the armed conflict is not the exact cause of the price rise, the sanctions imposed on Russians are. Therefore, a Page 3 of 6 Economics An Overview – Adam Norman April 9, 2022 consensus between the sanctioning countries and Russia would be the best short-term solution to end the current crisis, although this does not seem to be the solution that world leaders plan to make. Another possible solution to the crisis, although it would be one in the medium and long term, would be to progressively stop depending on oil to mobilize within the city, since oil is a product that has a volatile price and is constantly changing, and such as we have seen, its price can vary depending on the extent to which the main players in the market are affected by a conflict of any kind. It is vital to gradually eliminate this dependence on other forms of energy that do not depend so much on this factor. According to a survey published in the national post, it states that the majority of Canadians think that high fuel prices are here to stay, which is why many of those surveyed were considering purchasing a vehicle that does not depend on fossil fuel (Suhanic G. 2022). According to the global news chain, Canadians are beginning to change their habits when traveling from one place to another, there is an increase in the use of public transport in different cities in Canada, as well as an increase in the purchase of bicycles, which undoubtedly reveals a concern for the Canadian people to reduce the use of their vehicles due to the high price of fuel. (Lavery I, 2022). There is no doubt that the best solution in the medium and long term is to reduce or replace the use of motor vehicles that work with fossil fuels, for vehicles that use renewable energies, in this way in the face of a next world crisis, the population can be more protected and prepared for an imminent rise in prices and consequently an increase in inflation. In conclusion, the growing demand for oil due to the gradual return to normality after the fierce attack of the covid-19 virus added to the sanctions imposed on one of the largest oil and gas producers in the world has led to these products suffering a significant increase in their prices, due to the high demand that exists and the low availability of the product, as a conclusion, Page 4 of 6 Economics An Overview – Adam Norman April 9, 2022 prices throughout the world, even in oil-rich producing countries such as Canada, suffer from the rise in prices, this reveals the vital importance of changing our transportation methods that use fossil fuels for others that use renewable energies. Page 5 of 6 Economics An Overview – Adam Norman April 9, 2022 Works cited Connolly, A. (2022). Global News Website. “Calming global uncertainty key to easing soaring gas prices, says natural resources minister”. from https://globalnews.ca/news/8676211/canada-oil-price-spike-uncertainty/ Dawson, T. (2022). National Post Website. “As gas prices soar in wake of Ukraine war, Canadians could see cost of goods go up”. from https://nationalpost.com/news/canadianeconomy-faces-inflationary-trend-as-gas-prices-soar Evans, P. (2022). CBC Website. “Gasoline has never been more expensive — and high prices are likely to stick around for a while”. from https://www.cbc.ca/news/business/gasprices-friday-1.6371492 Hopper, T. (2022). Driving Website. “Why Canadian gas prices are higher than ever (it's not all Ukraine)”. from https://driving.ca/auto-news/driver-info/why-canadian-gas-prices-arehigher-than-ever-its-not-all-ukraine Inflation (2022). Historic harmonised inflation Europe – HICP inflation. From: https://www.inflation.eu/en/inflation-rates/europe/historic-inflation/hicp-inflationeurope.aspx Lavery, I. (2022). Global News Website. “Rising gas prices drive Canadians to bike-buying and public transit”. from https://globalnews.ca/news/8679063/gas-prices-canada-impact/ Picchi, A. (2022). CBS News Website. “3 reasons why gas prices are so high — and when they might come down”. from https://www.cbsnews.com/news/gas-prices-high-expensivecome-down-cbs-news-explains/ Suhanic, G. (2022). Finantial Post Website. “Posthaste: Majority of Canadians believe that high gas prices are here to stay”. from https://financialpost.com/executive/executivesummary/posthaste-majority-of-canadians-believe-that-high-gas-prices-are-here-to-stay Page 6 of 6
