Experts: Ukraine crisis could pump up gas prices in Waco, elsewhere
The average price of a gallon of gas dropped a penny in Waco on Monday, but prices have risen steeply in the last two weeks and some experts predict prices could approach $4 in coming months.
Gasoline prices have been moving higher as COVID-19 wanes and the economy expands, but the upward trend may intensify after Russia’s attack on neighboring Ukraine, economists say.
Russia, the second-largest oil producer in the world, and either due to self-imposed curtailment or international sanctions, its oil flow may wane. That could prove a boon to the petroleum-heavy Texas economy but a bane to motorists.
The online price-tracking site GasBuddy.com reported Monday that unleaded gasoline cost an average $3.18 a gallon in Greater Waco, down from $3.17 on Sunday. The price has risen from $3.06 a week ago and $2.93 the previous week, GasBuddy reports.
But there were bargains to find, with $3.09 a gallon reported at locations including H-E-B, Walmart and the Valero on East Loop 340 in Bellmead.
“I think we’ll see gas prices remain elevated, particularly when compared to portions of the past few years when sluggish demand caused by the pandemic pushed them artificially low,” Waco-based economist Ray Perryman told the Tribune-Herald on Monday.
Perryman said Russia’s invasion makes the situation more tenuous.
“I don’t think $4 or even higher is out of the question for periods of time as markets adjust, particularly if the hostilities persist,” Perryman said. “A separate issue is the fact that a lack of capital for oil-related activity in the current environment is slowing domestic production.”
Karr Ingham, an Amarillo-based economic who monitors the oil and gas industry for the Texas Alliance of Energy Producers, offered his views in an interview, but conceded they contain “a qualifier or two.”
“Gasoline prices and crude prices were headed upward even before Russia came along,” Ingham said. “We’ve seen above $90 a barrel for crude for quite some time. Last week they spiked upward about $8 a barrel, then went right back down and were even lower the next day. No one really knows how all this will affect the flow of crude oil from Russia to the world market.”
But Ingham said the United States has energy options.
“We import some crude oil from Russia, but the amount has been falling a few months since it spiked in mid-summer 2021,” said Ingham. “Imports from Saudi Arabia have gone up a bit. Canada is our largest and most reliable supplier, outside of domestic production. We can go into the global marketplace and buy crude pretty much whenever we need to.”
Ingham said prices rising to $3.25 to $3.30 locally would not surprise him. He said he doubts Americans are inclined to change driving habits to save money, not with COVID-19 on the run and warm weather approaching.
“We’re coming out of COVID, feeling locked down a couple years,” he said. “We’re not interested in staying at home. We might buy a few fewer gallons or drive a few fewer miles, but that’s about it. Throw inflation out of the picture, and we’re still not as high as we were in 2008. Nobody liked it. … Broadly speaking, our tolerance for relatively higher gas prices is greater than our lips admit.”
GasBuddy’s chief economist Patrick DeHaan said local prices could increase 25 to 75 cents per gallon for regular unleaded by Memorial Day.
He said he’s not inclined to predict $4-a-gallon gas in Central Texas.
“The primary threat is sanctions on Russian energy, or their taking supplies off the table,” DeHaan said. “So far they are still holding to their agreements, but with sanctions, they won’t have any choice but to stop flow.”
DeHaan said the Biden administration’s expressed willingness to soften sanctions on Iran could return the country to global prominence as an oil exporter. Iran almost exclusively has done business with China as the United States and its allies restricted Iran’s oil dealings. The sanctions are rooted in the Iran nuclear deal, which Biden said he is open to reviving.
“If those sanctions came off, Iran could become a full-fledged supplier,” said DeHaan. “That certainly would be helpful globally.”
Perryman said oil and gas prices ripple through the economy.
“Every industry relies to some extent on fuels, and for some it’s a major cost center,” said Perryman, who responded via email. “Petroleum is also a major input to many other products, thus affecting overall inflation. At the same time, family budgets are negatively affected and spending for other goods and services is therefore impacted. Higher prices are clearly bad news for most individuals and businesses, and much of the economy.”
But Texas remains a whole other country, to quote a tourism campaign.
“In Texas, we do have the offsetting benefit of a large base of companies that benefit from high oil and fuel price environments, from crude producers to refiners to marketers to royalty owners,” Perryman said.
He said the sector accounts for about 14% of all business activity in Texas.
Ingham said Texas remains ground zero for oil and gas production, “and I think it will return to record levels the second half of this year.”
“The Permian Basin already is seeing record levels,” Ingham said.
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