What most surprises me about the steady run up in gasoline and diesel fuel prices since late 2020 is that any American adults are surprised by the increases.
Huge changes in the U.S. economy always affect demand for fuels, thus their prices.
U.S. fuel prices plunged when the recession of 2008-09 hit, slamming the economy, and the same thing happened when the pandemic knocked out the nation’s economy in 2020. After both recessions, the economy recovered and, as expected, the country’s economic growth and employment rallied, sparking companion increases in fuel demand.
The rebound from the 2020 recession, boosted by mountains of government cash distributions, has been phenomenal.
Already in 2021, the first year after the economic knockdown, the U.S. economy expanded by 5.7 percent, its fastest year of growth since 1984. Meanwhile, February’s national unemployment rate shrank to 3.8 percent, far below the 6.2 percent a year earlier and is again approaching the long-term low of 3.5 percent just before the pandemic.
What’s more, new U.S. jobs are emerging in droves: 678,000 in February, the biggest one-month gain since last summer.
Such massive changes in the economy drive fuel prices.
The 2008-09 recession, for example, drove U.S. average regular gasoline prices, as charted by the Energy Information Agency, below $2 a gallon for months, but it then climbed back up to near $4 by the spring of 2011.
That price trend has repeated through the pandemic recession and recovery: regular gasoline dropping below $2 a gallon in mid-2020, but by the end of last month, it had shot back up nearly 30 percent, clamoring to $3.61, and it’s already up around $4 in the Washington, DC, area.
Diesel fuel prices have followed a like path during and after both recessions: Plunging to about $2 a gallon in 2008 and $2.40 in 2020, then rebounding to around $4.10 in both the spring of 2011 and again two weeks ago. The past year’s increase is nearly 40 percent.
Broadcast and print news outlets have been faithfully reporting the recent short-term jump in fuel prices. Regular gasoline was up 81 cents a gallon year-over-year in the final week of February, with diesel fuel up $1.13 a gallon in the same 12 months, according to EIA. It’s important news, and those higher prices do hit truckers, airlines, cabbies, and many other folks and businesses.
Of course, other major factors, such as restraints on supplies, affect fuel markets. Some oil exporting countries reduced output during and after the 2008 recession, and OPEC resisted expanding their exports in those years.
In 2022, the fuels market may soon feel what Russia’s attack on Ukraine and the likely curtailing of its exports portend for U.S. and world fuel prices.
But fuel price increases aren’t a new idea. When news outlets report just bare short-term fuel price increases as if they are a surprise it’s kind of a Chicken Little tale. The sky ain’t falling; it’s just the economy.
This column was also published March 8 in The Hill, Washington, D.C., newspaper.