Oil Prices Gas Prices

Oil Prices Gas Prices – WASHINGTON – As the summer travel season begins and gas prices rise, Americans are not happy, and many are turning to Washington for help.

But consumers hoping for a quick fix may be in for a rude awakening. Lowering gas prices in 2022 isn’t just about “opening the hole” or drilling for more oil. There’s a long list of problems that drive prices up, and they defy a simple solution to bring them back to Earth.

Oil Prices Gas Prices

Let’s start with last week’s big headline: The average price of a gallon of regular gas in the United States hit $5.01 last week.

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That price, recorded Tuesday by AAA, came after the average price hit $5 a gallon for the first time on June 11. The numbers elicited a long list of reports of frustrated and angry drivers standing at the pump shaking their heads in disbelief.

But if you look carefully at the amount of crude oil that is produced, you will see that the price increase is only due to the lack of supply. In fact, the price of oil was higher than the current price. In fact, the cost of obtaining crude oil for refiners was higher in 2011, 2012 and 2013 and most of 2014 than it is today, according to monthly averages from the US Energy Information Administration.

One of the biggest culprits of recent price increases is the reduced ability to store oil and convert it into fuel, which increases refining costs.

The International Energy Agency stated that the global oil refining potential decreased by 730 thousand barrels per day last year, which is the first reduction in 30 years. Meanwhile, Reuters estimates that Russia has idled 30% of its production capacity this year due to sanctions over its war with Ukraine. According to the Energy Information Administration, U.S. refining capacity has decreased by about 1 million barrels per day since the start of 2020, just before the Covid-19 pandemic.

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Add it all up and you have an expensive problem. Some of that processing capacity may come back “on-line” in the coming months, but many operators are wary of building too much capacity as fears of a slowdown grow. And those concerns may increase as buses switch from gasoline engines to electric motors.

When you look at how the price of a gallon of gas fluctuates, you can see how the effects of higher crude oil prices and higher refining costs combine to produce record AAA numbers.

According to the Energy Information Administration, in January 2021, when the economy was still dormant, the average price of a gallon of gas was still low. Of that, oil was $1.22, tax was 49 cents, distribution and marketing was 34 cents, and production was only 28 cents.

Flash forward to April 2022 and these were the numbers: Gas was $4.11 a gallon, $2.48 of which was oil, taxes were up 49 cents, distribution and marketing was up 43 cents, and refining was up 70 cents. was increased to the Energy Information Administration.

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Therefore, at that time the price of oil increased twice, but the cost of its production increased more than twice.

Gas would still be expensive if refinery prices remained largely constant, but the $5-a-gallon benchmark would not be broken — at least not yet. That doesn’t mean drivers will spend more than $4.60 or $4.70 a gallon of gas, but the experience at the pump will be different.

There’s something else to keep in mind this week or next when you go to the gas station. That $5 registration seems like a lot, but in terms of “real” costs, you paid more at the pump. Gas prices not only cause widespread inflation, but also affect them.

According to the Energy Information Administration, when you adjust the current average price at the pump for inflation, using constant 2010 dollars, you pay about $3.51 per gallon. (This was on June 7.)

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That’s more than last year, when the average price per gallon in June was $2.51 in 2010. But in 2011, when adjusted for inflation, the average price was $3.61. As of June 2008, it was $4.14 in 2010.

In other words, this number of $5 may be psychologically traumatic, but the idea of ​​a “record price” is relevant. Remember, $5 today doesn’t buy anywhere near what it used to, and that’s at the pump. Source: Energy Information Administration Note: Prices adjusted for inflation are in June 2022. The average price is forecast for June.

The price of gas in America has reached a high level. And even when adjusted for inflation, those average levels have rarely been seen over the past 50 years, including during the energy crisis of the late 1970s. When fuel prices rise, consumers suffer directly at the pump, but also indirectly when higher transportation costs raise the price of everything from food to building materials.

The single biggest factor driving this momentum is the price of crude oil. As of April, the cost of food was about 60 percent of the price of a gallon of regular gasoline, according to the Energy Information Administration. That’s up from 52 percent at the same time a year ago, and just 25 percent in April 2020 — when the pandemic reduced demand for fuel, along with most goods.

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How much people pay for gas is the result of trading in the wider international market for oil and oil products. But like many other aspects of the global economy, it comes down to supply and demand, and when these two forces are out of balance, costs inevitably change.

The United States is the largest producer of oil and refined petroleum products. In recent years, it has become a major exporter, sending large quantities to Latin America and Europe.

But America also buys a lot of oil from other countries. After China, it is the second largest importer in the world. This is because American refineries are often built to produce different types of oil than those produced in the United States.

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Reconfiguring refineries to produce more American oil will be expensive and difficult, so the United States will likely continue to export large amounts even as it produces more domestically. The US uses more oil than it produces.

By comparison, Russia is the world’s second largest producer, accounting for one in every 10 barrels in the global market. Before the country invaded Ukraine in February, roughly half of Russia’s oil exports went to Europe, representing $10 billion in monthly transactions. Last year, 8 percent of US crude oil exports came from Russia.

Since the start of the Ukraine war, Russia has been selling less oil, partly because of sanctions imposed by the European Union, the United States and other major economies. This reduced global supply and caused prices to rise.

To alleviate this major crisis, the Biden administration asked US oil companies and other major oil producers to increase production, but with little success. Because the oil managers are afraid that if they increase the production, the price may fall. Countries such as Saudi Arabia and the United Arab Emirates cannot increase production quickly enough to compensate for the expected shortage of Russian goods.

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However, efforts to stabilize the oil market are at odds with Mr. Biden’s goal of moving the country toward electric cars and renewable energy.

Even before the invasion, the price of oil and gasoline was increasing because the world was gradually recovering from the Covid pandemic. For a brief period in 2020, the price of a barrel of oil dropped below zero as storage tanks filled to capacity due to lack of demand. Now travelers and vacationers are back on the road and offices and industries have reopened.

Oil companies have been slow to respond to recovery during the pandemic crisis after laying off workers and removing containers.

Oil prices have fallen twice in the past eight years, and many executives believe another crisis is imminent. Christopher Knittel, an energy economist at the Massachusetts Institute of Technology, says that makes them hesitant to drill new wells and significantly increase production. Lack of investment has led to a decline in production in recent years.

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“Even though they’re seeing high prices today, they’re worried that prices will exceed the life of this well,” Mr. Knittel told industry executives. “They also hope for electric cars

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