One Year Into the Ukraine War US Gas Prices Are Lower

After one year of Russia's conflict in Ukraine, US gas prices are lower. But experts warn that costs will become even more expensive due to higher oil costs.

After Russia's invasion of Ukraine, crude oil prices reached a record high. Unfortunately, this high was short lived.

1. Crude oil prices are down

Crude oil prices have decreased since the war began last year, yet they remain volatile. A variety of factors can influence crude's value: global economic growth, natural disasters and politics.

OPEC, which produces the majority of world oil, has recently limited their output in an effort to curb demand. This practice is well-known within the oil industry.

Other factors, such as geopolitical tensions like the Ukraine conflict and natural events like hurricanes that disrupt supply, can drive up oil prices. These are the primary drivers behind increases in crude oil prices.

But there are ways to reduce the price of gasoline at the pump. One option is driving less frequently and combining errands. You could also shop around for the cheapest gas in your area.

According to AAA's monthly average for gas prices, they're down 2.8% from $3.42 a gallon nationwide; however, some states are much pricier than others: Hawaii boasts an average gas price of $4.88 per gallon while Texas only costs $3.03 per gallon.

Meanwhile, US crude oil prices have plunged more than 35% since June, reaching their lowest level in December 2021 due to concerns that China's COVID-19 lockdowns will reduce demand. This development has further driven down US gas prices as well.

Another factor contributing to lower gas prices is drivers' changing habits due to higher costs. Studies have indicated that Americans are now driving less and combining errands in an effort to save money at the pump.

However, there are other potential drivers of future oil prices: hurricanes in oil-producing nations such as Nigeria, Venezuela and Iran could disrupt supply.

It may take years for Russia to completely subjugate Ukraine, but eventually Russia could pull back from their border and allow the Ukrainian government to begin integration with western Europe and Nato.

2. Gas prices are down

Gas prices have fluctuated throughout the winter, but are currently down two cents a gallon from their high last summer. Barring any oil price hikes in the future, prices should remain relatively flat throughout the rest of this year.

One major reason is the decline in the price of raw crude oil. According to data from the U.S. Energy Information Administration, crude oil accounts for 52% of the average cost of a gallon of gasoline.

That's significantly lower than before the conflict that disrupted the petroleum market. Last year, diesel prices averaged almost $5 a gallon; however, that high of nearly $5 hit in summer 2022 has since receded.

Although crude oil prices have decreased, US gas prices remain far from where they were before Russia's invasion. This is due to a variety of reasons.

Before the Ukraine invasion, oil and gas were heavily subsidized by governments. That is now a thing of the past as countries such as the United States and Europe are cutting fossil fuel subsidies as they take a more proactive approach to climate change mitigation.

Therefore, global demand for natural gas has surged in recent years, leading to an unprecedented explosion in LNG export facilities around the world. This demand helped drive up prices even before Covid-19 restrictions and a cold winter in 2022 added further stress on markets.

Now, as the war enters its second year, it appears that market pressure may have finally eased off. This could signal further price drops; however, how long this trend will persist remains uncertain.

President Putin and his government must ensure this conflict remains limited in scope, otherwise, it could erupt into a full-fledged civil war.

Although unlikely in the short term, it could pose a challenge to Putin and his leadership in the long run. The costs of war will increase domestic pressures in Russia, raising the possibility that its elite may be forced to choose between defending Ukraine or leaving it.

3. Electric vehicles are out of reach

One year into the Ukraine war, US gas prices are lower but still out of reach for many consumers. While worries about rising gas prices could affect vehicle purchases, that doesn't guarantee that buying an electric or hybrid will make financial sense for everyone.

The primary factor influencing electric vehicle prices is the cost of battery packs. While these prices have fallen dramatically over the last decade, Russia's invasion of Ukraine has disrupted supplies and driven up costs for key ingredients like palladium, nickel and cobalt used in batteries.

Automakers' EV supply chain issues, which include unsold inventory and pent-up demand, mean many prospective buyers who wish to switch to electric vehicles will be disappointed. Those who do manage to purchase an EV must pay a high premium for the technology - making it out of reach for most mainstream consumers when compared with gas-powered vehicles.

This trend is expected to persist over the next several years as electric vehicle sales increase, yet they remain out of reach for most Americans. Without federal EV tax credits, electric vehicles won't be financially feasible for many families.

Automakers are currently struggling to balance demand for battery-powered cars with traditional car and truck production that needs gasoline. To meet demand, they're decreasing production of small fuel-efficient models while ramping up large pickups and SUVs.

Unfortunately, much of the new electric-vehicle stock has already been taken. According to Cox Automotive - which tracks car sales - EVs and hybrids make up only 2.4% of their total inventory.

If you can't justify purchasing a high-end electric vehicle, there are still plenty of other options. For example, Lucid Air starts at $77,400 before tax credits and is manufactured in Casa Grande, AZ.

The rise of electric vehicles (EVs) is being spurred on by several factors, including Europe's green deal, incentives and emissions targets. Furthermore, rising fuel costs are contributing factors as well. Ultimately, politicians in Europe must support this transition and guarantee a viable electric-car supply chain is established.

4. The war isn’t over

One year into Russia's military invasion of Ukraine, there are no signs that the conflict is over. While Ukraine has lost much of their territory and Russia too has suffered significant setbacks, both sides still appear unequipped to win this fight.

President Volodymyr Zelenskyy of Ukraine's military, led by Vice President Volodymyr Zelenskyy, has put up a much stronger fight than Moscow had expected against Russian forces. As such, Russian military officers have had to adjust their expectations about what Ukraine could actually accomplish.

One year into the conflict, experts still doubt whether it will end soon. The conflict is currently in an "informational" stage where both sides are testing new tactics and trying to determine how it will ultimately conclude.

Robert Goomans, an expert on international conflicts at the University of Rochester in New York, believes it could take one or more years for peace negotiations to commence. But that timeframe could also be shorter.

If the United States and Russia fail to reach a compromise, the conflict could linger for decades. Putin cannot afford to walk away from this battle; he's invested so much effort into building up his military that it's ready to wage the fight that he cannot let it end without some kind of victory.

Even if he were to successfully exit the war, it would take three or five years for him to rebuild his army and weapons, before returning for more. Additionally, any settlement must involve giving up all or part of Ukraine - something which he does not believe he is capable of doing and could leave Ukraine vulnerable in the long run.

Furthermore, the conflict is already having an impact on energy markets worldwide. European nations that import a significant amount of their oil from Russia are bracing for lower supplies as hostilities continue.

Meanwhile, Russia is taking advantage of the crisis to increase their oil production. Estimates suggest Russia will boost output by 10% this year, bringing its total to approximately 15 million barrels a day. Unfortunately, that supply won't be enough to keep global economic activity going at its current rate; consequently, oil and gas prices are likely to increase in coming months.