New Jersey drivers can expect gas prices to continue to rise this summer, due to growing demand during the busy holiday season, according to a new report from the Sweeney Center for Public Policy in New Jersey. Rowan University.
Gas prices are largely determined by global supply and demand issues, primarily declining oil production that has yet to return to pre-pandemic levels and the Russian-Ukrainian war. Steps taken by the Biden administration to release one million barrels a day of the country’s strategic oil reserve have had little effect on prices.
Meanwhile, the risks of supply disruptions due to the Russian-Ukrainian war have pushed up the price of crude oil, both internationally and in the United States, even though Russian oil imports represent only a fraction of the US market.
“While you stand in line to pay $60 to $90 to fill your tank, you can blame everything from the pandemic and the Russian-Ukrainian war to rising gas prices, low production and strong consumer demand,” according to the report’s authors. “Contrary to popular belief, it’s not just about gasoline taxes.
A report by the Sweeney Center for Public Policy at Rowan University
Why New Jersey Gas Prices Are So High This Memorial Day Weekend
New Jerseyans heading to shore or meeting family and friends for Memorial Day weekend meals pay an average of $4.76 for a gallon of regular gasoline. That’s $1.70 more than the average price of $3.06 before the traditional start of the summer season last year.
So why are gas prices so high?
As you stand in line to pay $60-90 to fill up, you can blame everything from the pandemic and the Russian-Ukrainian war to high gas prices, low production and high demand. consumers.
And the bad news is that market analysts expect gasoline prices to continue rising this summer.
It could be worse.
The average price of gasoline in New Jersey is 17 cents higher than the Delaware average and just half a cent lower than the Pennsylvania average. But that’s 17 cents per gallon less than the $4.93 average New York price and, incredibly, it’s $1.30 per gallon less than the $6.07 average California price.
Contrary to popular belief, it’s not just about gasoline taxes.
New Jersey’s gasoline tax of 42.4 cents per gallon is the fifth highest in the nation, even after being reduced by 8.3 cents per gallon last October 1 under a 2016 law that adjusts gasoline taxes each year to maintain a steady flow of funding into the Transportation Trust Fund. which pays for the improvement of roads, bridges and public transport.
But gasoline prices in New Jersey actually ranked 12e in the country, despite the Garden State’s relatively high gas tax and its status as one of only two states to ban self-serve gas.
The 19-cent difference between New Jersey’s gas tax and Delaware’s low 23-cent-per-gallon tax is almost the same as the current price difference of 17 cents. But Pennsylvania’s price per gallon is only a fraction higher than New Jersey’s, even though its gasoline tax of 58.6 cents per gallon is the highest in the country.
Gasoline prices in New York are 17 cents higher than New Jersey, even though New York’s current gas tax of 40.45 cents is just a penny less than the Garden State.
Gasoline prices in New York are expected to fall to around New Jersey levels on Tuesday when a 16-cent gas tax cut, billed as a “gasoline sales tax holiday” when it has been approved by the Governor and the Empire State Legislature, will be in effect for the remaining seven months of the year. Connecticut suspended its 25-cent gasoline tax for three months beginning April 1; Maryland and Georgia enacted short-term gasoline tax holidays effective March 18.
Various New Jersey lawmakers have proposed gasoline tax exemptions or rebates aimed at offsetting rising gasoline prices, but these proposals have so far been unsuccessful and there has been little political support to end the ban on self-service petrol.
California’s 53.3-cent gasoline tax explains only a fraction of why its gasoline prices are $1.31 higher per gallon than in New Jersey. The state’s cap-and-trade program, designed to limit greenhouse gas emissions, requires energy companies that exceed state emission standards to purchase credits, which adds about 20 cents per gallon to state fuel costs.
But the biggest problem is that California and other West Coast states are cut off by the Rocky Mountains from the main sources of East Coast oil supplies, forcing them to rely primarily on international oil shipped through the Channel. Panama. Oregon, Washington, Nevada, Alaska and Hawaii are the only other states in the country where the average gasoline price is currently above $5 a gallon.
Nationally and internationally, high gas prices are a matter of supply and demand.
US oil production peaked at 13.1 million barrels per day in February 2020, the month before the Covid-19 pandemic caused large sectors of the US economy to virtually shut down, causing demand to plummet fuel and prices. In August 2020, US production fell to 9.7 million barrels per day, the lowest level since October 2017.
The drop in oil production during the first months of the pandemic was not surprising, as the drop in demand caused the price of West Texas crude to fall from $68.69 in December 2019 to just $21.25 a barrel in April 2020 at the height of the COVID shutdown. Prices recovered to $44.02 in June, but did not return to the $68 level until April 2021. Domestic oil production has generally increased since last time, but was still just $11. .6 million barrels per day in February, despite steadily rising oil prices that hit $110.33 a barrel this week for West Texas crude.
OPEC, the Organization of the Petroleum Exporting Countries, currently pumps 30 million barrels of oil a day. This is a significant increase from its low of 24.25 million barrels per day in June 2020 as COVID-19 ravaged the global economy, but it remains well below 33 million barrels per day. day produced in 2018 and 2019. The 13 member countries of OPEC produce around 40% of the world’s oil.
Both in the United States and in OPEC countries, the fall in demand for fuel during the pandemic has caused producers to reduce their investments in drilling and refining capacities, and the oil and gas sector now finds itself poorly equipped to meet the demands of a society that is back on the road.
Last month, the Biden administration announced it would release one million barrels per day from the Strategic Petroleum Reserve from May through October and plans to boost domestic production by one million barrels per day from May to October. end of the year. Biden’s actions, however, appeared to have little effect on prices.
The risk of supply disruptions due to the Russian-Ukrainian war led to increases in the price of crude oil, both internationally and in the United States, even though Russian oil imports were supplying only a fraction of the US market.
Considering all of these factors, don’t be surprised if New Jersey and other states in our region top the $5 average later this summer as demand continues to increase during the summer vacation season. .
Kul Prasad Kapri, Ph.D., and Yupeng Li, Ph.D., are assistant professors in the Department of Economics and Political Science, College of Humanities and Social Sciences, Rowan University. Mark Magyar is director of Rowan’s Sweeney Center for Public Policy. For more information, contact Mark Magyar at email@example.com or call 856 256-5868.
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