The ongoing Russian invasion of Ukraine has caused disruptions in oil prices across the country, which may lead to higher prices at the pump.
UC Berkeley Haas School of Business professor Lucas Davis said prior to the Russian invasion of Ukraine, the global oil market was already “tight,” with high demand for oil but low supply due to the COVID-19 pandemic. Davis added that Russia maintains about an 8% hold on the world’s oil supply, whereas the United States has not reached its pre-pandemic oil production levels yet.
“You already had high oil prices in this very tight oil market,” Davis said. “Add to that Russia invading Ukraine with disruptions in Russian oil production, and that has already pushed global oil prices higher to near $100 a barrel.”
As of Feb. 27, the average cost of gas nationally was $3.60, up from $3.53 a week ago, according to the AAA gas prices website, whereas California gas prices are averaged at $4.82, up from last week’s average of $4.73. The AAA website notes that California is one of 10 states that has seen the largest increases in average gas prices since last Thursday.
Davis said that if it were a time when the oil market wasn’t already tight, there wouldn’t be much potential for Russia to exercise market power.
While it is difficult to predict how high gas prices are going to rise, Davis said that Americans will start to see effects quickly, since gasoline prices react rapidly when oil prices go up.
“I don’t think anything is going to happen that’ll reduce global demand; people are driving more than ever, so I think we need to increase supply,” Davis said. “I think it’s time to get out and start drilling.”
Campus political science professor Steven Fish said paying a few extra cents at the pump is a small sacrifice considering the threat the Russian invasion imposes on world peace and democracy.
While Fish is uncertain about the impact of the invasion on gas prices, he said that Russian President Vladimir Putin’s actions will be disastrous for the world economy in many ways. Fish said the U.S. focus should be to stand up to Putin, similar to how Americans stood up to Adolf Hitler in World War II.
“They gladly paid higher taxes in order to stand up to Hitler and fascism,” Fish said. “And we’re in a situation that’s getting almost that dramatic right now. If we have to pay a little bit more for it, we should do it.”