According to Yellen, there's a risk of gas prices spiking at the start of 2023 because the EU will no longer buy Russian oil by the end of 2022, which means global oil prices could rise. She added that the Group of Seven (G7) nations and the EU were working to place a price cap on Russian oil to prevent gas prices from getting too high.
Yellen also noted that it is possible the prices at the pump could spike further in the winter. "It's a risk, and it's a risk that we're working on the price cap to try to address." (Related: Gas prices in California are rising so high they’re about to beat the state’s all-time record.)
The average national gas price peaked at over $5 per gallon in June, but has been falling for the past three months and is now at $3.72. However, it is still $0.55 higher on average than it was on September 13, 2021.
On September 2, the G7 announced its plans to put a price cap on Russian crude oil and other fuel exports to further target the Russian economy and force the country to stop its invasion of Ukraine. The U.S. and its allies are also hoping that putting a price cap will force Russia to sell its oil for a cut price or not sell it at all.
Moreover, they will ban the provision of services that enables Russia to ship oil by tanker. Yellen also previously stated that the price cap and other measures that target Russia's oil profits would protect Americans from future price spikes and fight inflation, as per the Department of the Treasury's press release.
Chevron CEO Mike Wirth said the energy situation in the U.S. is dire at best. "Prices already are very high relative to history and relative to the rest of the world. We're already seeing this impact being felt in the European economy and I do think it’s likely that Europe goes into a recession," he said.
Natural gas prices could be "significantly higher" in the winter in the U.S., with oil prices already up more than 15 percent so far this year.
The increased gas prices have so far helped boost sales, earnings and stock prices of companies like Chevron, with shares up nearly 40 percent in 2022. They also reported a net income of $11.6 billion in the second quarter, with analysts forecasting that the company will post an annual profit of $36.2 billion.
However, Wirth disagreed with the windfall tax on oil industry profits. He noted that such windfall taxes on profits had been tried before – and the government failed to achieve the desired results.
He pointed out that the energy industry is notorious for having big boom periods and equally bad busts, so Wirth said that he did not think Chevron should be penalized because of the high prices. (Related: Natural gas prices worldwide soar to record highs.)
"I recognize that high energy prices are difficult for consumers. That's why we've talked about increasing production, trying to increase supply to markets in a commodity business. You go through these cycles. Two years ago, we were losing billions of dollars a quarter. Now we're making strong profits," he said.
Visit NewEnergyReport.com for more information about the soaring gas prices this winter.
Watch this video about Russia shutting down the main gas pipeline to Europe amid sanctions.
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