Have you noticed the gas prices recently? The AAA, U.S.’s largest motoring and leisure travel member organization, reported that gas prices have risen to a new record. As of August 2, 2021, the national average price for gas is $3.176 a gallon! There are two primary reasons why gas prices have increased this high and why they may continue to surge. Firstly, there is a high demand for gas. As COVID restrictions ease, Americans are hitting the road this summer. To meet this travel demand, more gas needs to be produced and supplied. People are also consuming a lot more energy to cool their buildings this summer due to unprecedented heatwaves. Secondly, in the past few weeks, the Organization of the Petroleum Exporting Countries Plus (OPEC+), has failed to reach an agreement in increasing oil production.
Who is OPEC Plus?
Founded in September 1960, OPEC is an intergovernmental group made up of 13 oil-producing countries. There are currently 13 OPEC members – Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, and Venezuela. In 2016, other top oil-exporting countries joined OPEC to form OPEC+.
According to the U.S. Energy Information Administration (EIA), in 2020, OPEC produced about 36% of the total world crude oil and holds about 71% of the world’s total proven crude oil reserves. As we can see, OPEC+ has a big influence on the supply and demand of gas. If OPEC+ wants to increase the gas price, they can decrease or limit oil supply. So, until OPEC+ reaches an agreement to increase oil production to meet growing demand, we believe gas prices will continue to increase.
Will This Affect Businesses?
Absolutely! High gas prices will affect all businesses one way or another. For example, if you have a brick-and-mortar store, your customers might curb their driving behavior. Instead of driving to the store, they’ll order online. It might also increase freight costs. Some companies might even increase their products’ prices to cover the additional cost.
Elevated gas prices will not only affect your customers but will also impact the economy and the supply chain system. One way to curb fuel costs is to invest in electric or hybrid vehicles for your business. Another suggestion is to cut energy expenses to cover the extra fuel costs. By developing and implementing an effective energy management strategy, you can reduce your business’s energy usage and costs.