Minnesota gas prices rise by more than 30 cents as Russia invasion causes spike
Gas prices in Minnesota climbed an average of more than 30 cents per gallon in the last week.
According to the American Automobile Association, prices for regular gas in Minnesota as of Monday averaged $3.771 per gallon. A week ago, average prices were $3.452.
The increases come as Russia's ongoing invasion in Ukraine causes uncertainties surrounding the global fuel supply.
According to CNBC, Secretary of State Antony Blinken said Sunday that the U.S. and its European allies are considering a ban on Russian fuel imports as they seek to enhance the economic sanctions against Russia in an effort to encourage its withdrawal from Ukraine.
Prices have risen even without the import ban as a number of energy traders are avoiding Russian oil due to the scandal that comes attached with it, which Fortune argues gives the U.S. less reason to hold off formalizing its ban.
Related: 6 ways to use less gas and save money — even while driving
In the Minneapolis-St. Paul area, the average price per gallon on Monday was $3.795, up from $3.494 a week ago.
Prices in Rochester jumped from $3.462 to $3.835 per gallon, while the Duluth area saw an increase from $3.321 to $3.782 per gallon.
Among the areas with the highest prices in Minnesota is Houston County, where prices rose from $3.540 to $3.929 per gallon.
Prices in neighboring Wisconsin saw an even steeper increase. According to WEAU in western Wisconsin, prices in the state increased by more than 50 cents over the past week.
Oil suppliers reportedly reluctant to increase production as prices spike
The uncertainty over Russian energy supply has provided fresh impetus into efforts to increase renewable energy supplies to reduce the reliance on fossil fuel-rich nations, but it has also put the world's oil producers under the microscope.
The United States only gets around 3% of its oil from Russia, with the majority of its imported oil coming from Canada (61%).
But oil prices are spiking globally amid concern over the Russian invasion and the subsequent constraints on supply a ban on Russian imports could cause.
White House press secretary Jen Psaki was asked why President Joe Biden wasn't calling for the United States to increase its own energy production, much like he was calling on an increase in domestic manufacturing to reduce inflation.
She responded: "Well, there are 9,000 approved oil leases that the oil companies are not tapping into currently. So I would ask them that question."
The Bureau of Land Management does indeed say there are more than 9,000 approved permits to drill on federally owned lands across the country, but there have been multiple reports as gas prices have risen that some oil suppliers are reluctant to ramp up production, partly because of supply chain issues, but also because some are prioritizing its shareholders and bottom lines over consumers.
Colorado News Online reports that Colorado-based PDC Energy held a conference call for investors last Monday during which it laid out three financial strategies, with its chief financial officer stating: "As you can see, in all of the prices, our first commandment is to honor the base dividend."
A similar stance is being reported in Oklahoma, where Devon Energy and Continental Resources is sticking with its plan to increase production by between 0-5% annually over the next five years. The Oklahoman reports its long-range plan is "focused more on returning money to shareholders than growing production."
And in January – before the Russian invasion unfolded – Exxon CEO Darren Woods said the company's priority is "less about volume and volume targets and more about the quality and profitability of the barrels that we’re producing."
This comes amid a wider reluctance among new investors to pump money into fossil fuel producers amid wider concern about climate change and the shift towards renewables, which an analyst told CNN is teaching oil companies to reward existing investors rather than increasing production.
Increasing domestic production would not yield results for months
Scott Sheffield, chief executive of the U.S.'s largest shale oil operator Pioneer Natural Resources, says that it would take the United States "many months" to boost its oil output in response to a ban on Russian oil, even though he agrees banning imports from Russia is the right step for America and its allies to take in response to Vladimir Putin's invasion.
This delay in output, he told the Financial Times, was due to a combination of "supply chain constraints and demands from Wall Street that operators use their oil price windfall to pay dividends rather than drill more wells."
Even if efforts to drill more wells started now, Sheffield said it would take 6-8 months to get first production, and argues that cooling gas prices would require not just a domestic effort, but a global one.
Last week, the group of oil producers known as OPEC (Organization of the Petroleum Exporting Countries) said it would not be taking extra steps to cool the market, approving only a 400,000-barrels-a-day increase in production during April. The New York Times reported in January that OPEC countries have been producing less oil, causing prices to stay high.
It's being reported by the New York Times that the Biden Administration is reaching out to Venezuela in an effort to rupture its alliance with Putin in the wake of the Ukraine invasion, and could see it as a possible replacement oil supplier for Russia, despite the U.S. having sanctioned oil imports from the South American country since 2019.
The world's largest gasoline companies made bumper profits in 2021 as gas prices rose. The Guardian reported that in the third quarter of 2021 alone, the 24 largest oil and gas companies – which includes Exxon, Chevron, Shell, and BP – made more than $74 billion in profits between them.
The rising price of oil, which gets passed onto consumers, was cited among the main reasons for the increase in profits, prompting criticism from consumer groups who say some of the world's wealthiest people continue to benefit from larger profit margins while the low income families are hit with rising costs.
