If you live in the US, you’ve seen wild fluctuations in what you pay for gas over the years.
Eta: pressed “send” too soon. But hopefully the OP question is clear
We’re not a planned economy.
We’re a part of the world’s economy. If demand spikes in Europe, our prices go up even though we supply a lot of the oil on the market.
Oil is a fungible asset with worldwide demand. It’s not like we have some law or tradition or any mechanism whatsoever to say “American oil is for Americans”, so if other countries are paying more, we’re going to sell oil there. And enacting such a law would have all sorts of economic consequences. Which means, ignoring regional transportation costs, the price of oil more or less reaches a global equilibrium.
Since the demand is pretty constant and global, it does mean that any significant exporter of oil can basically send the price spiking. People tend to think OPEC controls like 90% of the market because we hear about them manipulating gas prices as a cartel, but they actually only produce about a third of the oil on the planet. But the demand/supply curve is delicate enough that one supplier playing games with production will significantly impact overall global prices. So the US could send global gas prices rising by limiting their exports, but can’t really do anything to lower the price below what it is currently without some sort of subsidy scheme like Venezuela along with import/export restrictions, which would ultimately be counterproductive.
Refineries play a significant role since they’re all domestic. If some are shut down due to disaster or otherwise, or even that they mispredicted demand, there will be fluctuations in the gas price.
Also, many of our refineries are old and designed around crude that is no longer produced as much in the US. So we import heavy crude and export light.
Probably sufficiently answered already, but I’ll add some more.
I do think we need to be clear on what you mean…
First, net energy exporter means to me: Energy is a big word, and means oil, coal, natural gas, etc. (or rather not just oil, certainly not just “gas”). With that, it means the US exports more of those types of raw energy products than the US imports.
And “gas prices”, I’m thinking you mean gasoline that you use in your car and buy at a gas station, is only one byproduct of those types of energy products. With that, I do not think the US is capable of refining enough of it’s own crude oil (of which there are several types) to be hypothetically independent of other countries particular crude oil. We still need and rely other countries crude oil to refine into gasoline to put into your car.
Regardless if we are a net energy importer or not, how and whether the US can control gas prices I think was answered above.
Late: Ruken intelligently hits on the different types of crude and why not all crude is equal/can be refined here.
Also geopolitical consequences, such as how US energy resources are helping to fill needs in Western Europe formerly met by Russia (this was news to me when I heard it in an NPR interview this morning, and I may have gotten it wrong).
Because the goal of the people providing gas is to charge as much as they can get away with without losing all their customers, not the minimum they can.
Yes, and the oil & gasoline companies can raise their prices anytime they want. Some people claim that are working together, even working to support trump and not Harris, but certainly when one raises prices, the others feel free to do so also.
Yep.
Exactly. And since they know high gas prices hurt the Democrats, that is just fine by them.
This is very true. The “Shale Revolution” brought by expansion of hydraulic fracturing (“fracking”) of oil-bearing shale has produced near record volumes of petroleum but not the heavier products needed for the bulk transport sector, so we export a lot of that oil while importing heavy crude. Those sources are also ‘source rock’ for petroleum; although there are large volumes of liquid hydrocarbons in those shale reservoirs, they are progressively more expensive and difficult to extract usable product from and will eventually not be cost effective regardless of how much water is pumped down into them (or the “external costs” of environmental damage wrought by overextraction and subsequence substrate collapse).
Even if we had domestic sources of petroleum that were completely sufficient for our own needs, we still wouldn’t be wholly independent of international prices, because if the cost of foreign-bought are lower than domestically-produced product, it will crash the market and producers will slow down or close oil fields, and then when foreign prices rise or sources become unavailable, those domestic producers will have months or often years lag bringing those fields back up to full production volume. We see this with natural gas where despite having vast domestic reserves foreign markets can drive our domestic prices because we’ll ship liquified natural gas to Europe and elsewhere because the price that those countries will pay is higher even after the massive costs of cryogenic liquefaction and shipping.
Stranger
I’m kind of confused by this, and possibly missed some context.
Who is “they/them”? I’m missing that part. The oil and gas companies?
Gas prices are set at a hyper local level, mostly all by the independent owners. Like an Exxon gas station is no longer “Exxon”, it’s just Mr. Smith who pays for the Exxon brand. And the other Exxon (or Chevron, or whichever) station down the road is owned by Ms. Harrington. And so on. I don’t see how politics comes into it. It’s a retail product and those owners set the price for as much as people will pay while still selling the most they can. Basic capitalism as Der_Trihs stated.
If by “we” is meant the U.S. Congress, we can, at least if the gas was shipped between states. Congress can pass a price control on gas. And Biden can sign it into law.
If the controlled price was too low, there would be a gas shortage. But if high enough — and the oil companies would be lobbying for this — there would be plenty of gas (and profits). In any event, I think that gasoline, and natural gas, federal price controls are practical.
Many countries adopt this bad policy. You do not have to be an energy exporter. When the government increases the prices, rioting sometimes results.
Yes, the oil and gas companies, mostly run by Republicans, who of course dont like the Dems idea to cut down on carbon emissions.
This and also the government does not control the oil industry, and some would even say, with some merit, the oil industry (and the major holders and CEO’s) control the government, after all it is not uncommon for the government to beg oil to open the taps.
It’s a refinery configuration issue. The lighter crude actually has a higher percentage of diesel-fraction hydrocarbons, but refining isn’t just a separation process.
It’s worth noting that Canada tried to do this in the 70s, during the oil crisis. We asked Alberta if they could sell domestically at a lower price than they were selling internationally, to support Canadian industry in competition with the rest of the world.
The Albertans freaked out at such a request, and still bitch and moan about it today. The fact that current PM Justin Trudeau’s father was behind this plan is half the reason they absolutely hate JT today.
Agreed; I just didn’t want to delve into a discussion about the complexity refinery processes and why they can’t just be changed by turning a few knobs. Refineries are multi-billion dollar facilities that take years to design and build in order to provide a specific array of hydrocarbon fuel and feedstock products, and are optimized to work with a narrow range of ‘raw’ inputs.
I ready Oil 101 by industry analyst and commodities trader Morgan Downey, which was really insightful about the complexities and global interactions of the petroleum industry. Although I think it is really intended to be a primer for investors and analysts, it does a good job of laying out how the global petroleum industry works without coming at the reader with a specific agenda. Frankly, it is amazing that oil and gas prices are as stable as they are, and it would not be difficult for a major world conflict or global economic downturn to severely disrupt the energy sector, which despite all of the advocates for nuclear fission, hydropower, wind and solar renewables, et cetera, is dominated by the petroleum industry.
Stranger
As the OP, I confess that I posted it accidentally, as it was in my Drafts folder for a while. I was going to add more nuance regarding the ability of our government to soften the volatility of gas prices, in a manner that allows private companies to reap the same profits over time, perhaps by setting prices that are based on a longer-term average; i.e. some kind of reserve that keeps consumer prices more stable.
But I didn’t fully think through the question being asked, and by the time I checked back in, there were very good educational responses. So thanks everyone for the great info!
Since the government’s role has been mentioned, it should also be noted that gas prices have actually been kept low by how skillfully Biden used America’s strategic reserve; selling at a time when OPEC was trying to raise prices and refilling it now when prices are low again.
At the time, when making these trades, he got criticism from many on the left and right, and yet with prices showing little fluctuation and remaining low (despite the continuing sanctions on Russia and threat of regional war in the middle east), most concede that his strategy is working.
Of course, understanding this requires understanding a lot of things, including everything we’ve discussed in this thread, so I don’t think the Biden administration has even attempted to tout this success.