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Why gas prices have soared in America

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For years politicians have said the booming American oil industry would make the country “energy independent.”

Indeed, the United States is the world’s largest producer of oil. That puts it two spots ahead of Russia, which shocked the world — and oil markets — by invading Ukraine. Saudi Arabia is the second-largest producer

The move sent gasoline prices skyrocketing to all-time highs.

But the United States does not import much petroleum from Russia.

Nevertheless, a shock to oil supply and demand anywhere in the world can cause a spike somewhere else. Energy independent just means the U.S. exports more than it imports — not that it is independent of the rest of the world.

“Oil is a global commodity,” said Patrick De Haan, who is head of petroleum analysis at gas price tracker GasBuddy. “We can’t fence the U.S. or take us out of that global system. Just like we’re seeing computer chip shortages — we can’t remove ourselves from that situation either. Even if we produce some supply computer chips here, that doesn’t fix what’s going on outside our borders with drastic impacts to supply and demand.”

The U.S. does have a Strategic Petroleum Reserve. About 700 million barrels are stored in underground salt caverns along the Gulf Coast. That amounts to about a one-month supply for the whole country. President Joe Biden has already authorized the release of oil from that reserve twice, but it has not made much of a difference in the long run.

Russia is one of the world’s largest oil exporters, but only about 8% of U.S. oil imports come from Russia. Russian oil accounts for about 3.36% of the 20 million barrels the U.S. uses each day. For comparison, 50% of imports come from Canada, according to the U.S. Energy Information Administration.

However, that 8% is still important in its own way. Many U.S. refineries were designed before the domestic oil boom that turned America into the world’s largest producer.

The oil which the U.S. mostly produces today tends to be lighter, sweeter crudes — meaning they tend to flow at a faster rate and contain lower levels of sulfur than many other varieties.

The trouble is that many U.S. refineries were constructed decades ago, and were thus built for the heavier, sulfur-rich crudes more common at that time. So many U.S. refineries actually perform most efficiently using heavy sour crudes imported from elsewhere.

And when oil prices spike, the U.S. cannot simply pump more crude to bring them down again. The only way to significantly boost production is to drill. That takes investment, and oil companies have been both shy to spend capital and short of personnel after the years of boom-and-bust cycles, followed by demand crashes during the coronavirus pandemic.

“We’ve got to find a way to reskill, retool, bring back those, those people back to the industry,” said Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston. “The second, is we need to find a better way to get capital to the industry, and that will come with more regulatory certainty.”

In the meantime, drivers feel the pain at the pump, unless, of course, they drive an electric.

Watch the video to learn more.



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Investor Kevin Simpson picks 5 dividend-paying stocks to survive high inflation

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Virgin Atlantic ceases Hong Kong operations, cites Russian airspace closure

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Virgin Atlantic has not operated any passenger flights to Hong Kong since December 2021, after the city-state suspended all flights from the U.K. due to a resurgence in Covid-19 cases.

Sopa Images | Lightrocket | Getty Images

British airline Virgin Atlantic announced Wednesday it was permanently ceasing operations in Hong Kong due to issues related to the closure of Russian airspace.

The decision marks the end of the carrier’s London Heathrow to Hong Kong flight route and the closure of its Hong Kong office. It also ends the airline’s 30-year presence in the Asian financial hub.

Virgin Atlantic said in a statement that the closure of Russian airspace following Moscow’s invasion of Ukraine in late February was one of several “complexities” contributing to the decision.

It said that on the basis of the airspace remaining closed, Heathrow to London flight times would be around one hour longer than in 2019, while Hong Kong to Heathrow flights would be 1 hour 50 minutes longer.

It added that the 2019 termination of Virgin Australia’s Hong Kong to Melbourne and Hong Kong to Sydney services had already reduced the airline’s presence in the city-state.

“After careful consideration we’ve taken the difficult decision to suspend our London Heathrow – Hong Kong services and close our Hong Kong office, after almost 30 years of proudly serving this Asian hub city,” a spokesperson for the airline said.

“Significant operational complexities due to the ongoing Russian airspace closure have contributed to the commercial decision not to resume flights in March 2023 as planned, which have already been paused since December 2021,” it added.

Virgin Atlantic has not operated any passenger flights to Hong Kong since December 2021, after the city-state suspended all flights from the U.K. due to a resurgence of Covid-19 cases.

The airline was previously due to resume Hong Kong services from March 2023. However, with Wednesday’s announcement, it said it would be able to increase services in other key markets from next summer.

Around 46 Virgin Atlantic jobs, including those of office staff and cabin crew, are set to be impacted by the decision, according to Bloomberg.

The airline said it would offer refunds or vouchers for alternate Virgin Atlantic services to the “limited number” of customers due to travel from March next year.

Virgin’s exit from Hong Kong is the first by a major airline since American Airlines left the city in late 2021.



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German minister criticizes U.S. over ‘astronomical’ natural gas prices

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A photo of a natural gas flare burning near an oil pump jack at the New Harmony Oil Field in the U.S. on June 19, 2022.

Luke Sharrett | Bloomberg | Getty Images

Germany’s economy minister accused the U.S. and other “friendly” gas supplier states of astronomical prices for their supplies, suggesting they were profiting from the fallout of the war in Ukraine.

“Some countries, including friendly ones, sometimes achieve astronomical prices [for their gas]. Of course, that brings with it problems that we have to talk about,” Economy Minister Robert Habeck told regional German paper NOZ in an interview published Wednesday which was translated by NBC News. He called for more solidarity from the U.S. when it comes to assisting its energy-pressed allies in Europe.

“The United States contacted us when oil prices shot up, and the national oil reserves in Europe were tapped as a result. I think such solidarity would also be good for curbing gas prices,” he said.

CNBC contacted the White House for a response to the comments and is awaiting a reply.

Habeck, the co-leader of Germany’s Green Party, which is a part of Berlin’s coalition government led by center-left Chancellor Olaf Scholz, said the EU should also do more to address the region’s gas crisis, with countries scrambling for alternative supplies which has pressured prices even more, that was brought about by the war in Ukraine and deteriorating relations with Russia.

The U.S. energy economy is benefiting while Europe suffers, says Citi's Morse

Moscow’s state-owned gas giant Gazprom has cut supplies to the bloc drastically over the last few months, largely due to international sanctions and a desire to punish Europe — the EU used to import around 45% of its gas supplies from Russia but is seeking to halt all imports — for supporting Kyiv.

Habeck said the EU “should pool its market power and orchestrate smart and synchronized purchasing behavior by the EU states so that individual EU countries do not outbid each other and drive up world market prices.” 

European market power is “enormous,” it just has to be used, he noted, according to the German news outlet.

Europe is facing a hard winter with gas shortages predicted across the region. Countries like Germany have been largely dependent on Russian gas supplies for decades with massive energy infrastructure, such as the Nord Stream 1 and 2 gas pipelines, designed to bring gas from Russia to Germany via the Baltic Sea.

While the $11 billion Nord Stream 2 pipeline was never even launched, with Germany refusing to certify the pipeline following Russia’s invasion of Ukraine in February, Nord Stream 1 has become a pawn in souring relations between Moscow and Brussels.

Over the summer, gas supplies via the pipeline stopped and started seemingly at Moscow’s whim, although it invariably cited the need for maintenance and sanctions as a reason for halting supplies. But then supplies came to a halt in September.

More recently, Russia and Europe’s energy ties have literally been damaged with the Nord Stream pipelines suffering leaks last month in suspicious circumstances.

Russia denied it had sabotaged the pipelines, with reported underwater explosions damaging the pipes in several places, sending natural gas spewing from the Baltic Sea. The damage prompted an international outcry with the EU vowing a “robust” response to attacks on its energy infrastructure.



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