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Why are gas prices so high? Attack on Ukraine may not be the only reason, experts say

Posted at 7:11 PM, Mar 07, 2022
and last updated 2022-03-07 19:13:11-05

INDIANA — The United States has yet to ban oil imports from Russia as have other countries across the globe, but according to energy experts, just the conversations about doing so can cause a reaction and fluctuation in oil prices.

According to the U.S. Energy Information Administration, Only about 7% of our oil and gas is imported from Russia.

"Often time, oil prices can be affected by things that are actually happening, meaning actual reductions in oil supplies,” said Nikos Zirogiannis, an energy policy expert at Indiana University. "Sometimes they can be reacting to what buyers are expecting to happen."

Essentially, countries are reacting by stockpiling oil and gas in case action is taken against Russia. At last check, gas was fluctuating between $115-120 a barrel, but one economist says those high prices will likely encourage American oil producers to ramp up production.

"So right now, across Texas and the great plain states where we have a huge petroleum reserve, you are beginning to see pumps come back online,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State. “You are beginning to see refineries ramping up production, so those are all things that will moderate gas prices in the year to come."

So, why don't domestic oil companies always produce the same amount of gas and oil? Economists say it comes down to profits.

"The reason we don't pump gasoline when it’s under $85 a barrel is because it’s not profitable for an oil company to do so," said Hicks.

Regardless of American oil producers' plans, the oil and gas markets are global Which means America is only a small piece of the pie - and prices are determined by world markets.

"The policy's the US implements and the amount of oil that the US consumes can have some impact on global oil markets, but that impact is relatively small," said Zirogiannis.

Experts did say the cost of gas in America is significantly cheaper than in other parts of the world.

In Europe, a gallon of gas can cost anywhere from six to seven dollars a gallon. They say it may take some time, but eventually, gas prices will stabilize.