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Economic experts explain why gas prices are increasing rapidly

Gas prices are reaching a new record across the state and are showing no signs of relief.
Published: May. 17, 2022 at 10:13 PM EDT
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SAGINAW, Mich. (WNEM) - Gas prices are reaching a new record across the state and are showing no signs of relief.

Tuesday, AAA said the average price for a gallon of gas is $4.49 and some experts believe prices will only go up heading into the summer months.

Dr. Zachary Cohle, assistant professor of economics at Saginaw Valley State University, and Gabriel Ehrlich, an economic forecaster at the University of Michigan, agree the surge boils down to two main causes.

“Gas prices are sky high. They’re $4 or higher in every state in the country right now,” Ehrlich said.

“Part of the reason for that is the pandemic. We are still catching up in terms of production,” Cohle said.

Then there is Russia’s invasion of Ukraine.

“The United States has banned imports of Russian oil and that’s driving the price of oil up. That translates directly to the price at the pump,” Ehrlich said.

Prices hit a record in March. The Biden administration released oil from the strategic reserve, pushing prices down.

“The United States released a whole bunch of oil, so that let prices go down for a bit. But the war had gone on longer than anyone had anticipated, and that risk drove prices back up again,” Cohle said.

Ehrlich pointed to other factors affecting supply.

“OPEC has been very reluctant to increase supply quickly. The other reason is that in past cycles, shale producers here in the united states had actually stepped in to produce more oil, but they lost quite a bit of money in the last bust, and they’ve really been reluctant to get back on the rollercoaster,” Ehrlich said.

Ehrlich and Cohle disagree on the direction of gas prices in the months ahead.

“I think that high gas prices are going to be here to stay for the summer. They might even go higher,” Ehrlich said.

Cohle is feeling more optimistic.

“I think we may have hit the apex, we may have peaked,” Cohle said.

They do agree that it may take peace in Ukraine before prices return to normal.