Five Fast Facts About U.S. Gasoline Prices
Posted April 28, 2022
While gasoline prices across the U.S. have dipped ever so slightly, Americans are still paying some of the highest prices they have ever paid. But instead of enacting policies that would spur U.S. oil production to replenish supply and help alleviate consumer costs, the Biden administration has asked foreign countries to increase their oil supplies. This approach is perilous and is opposed by wide margins among Democratic and Republican voters.
So, what’s the primary answer to high gasoline prices? It’s complicated, but more production in America can add more supply. More U.S. supply means relief for the global market. America has an abundance of resources right under our feet and policymakers should send a clear message that America is open for energy investment.
Gasoline prices are determined by the supply and demand of crude oil, as well as expenses for refining, distribution, retailing and taxation. Those basic market realities drive prices at the pump.
Below are five critical facts to keep in mind in any discussion about gasoline prices. Decisions made by lawmakers matter a great deal and should be shaped by these basic energy realities:
1. Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump. Oil prices remain high amid a persistent global supply crunch, workforce constraints, increasing geopolitical instability in Eastern Europe, the economic rebound following the initial stages of the pandemic and policy uncertainty from Washington.
2. Policy choices matter. American producers are working to meet rising energy demand as supply continues to lag, but policy and legal uncertainty is complicating market challenges. Read API President and CEO Mike Sommers’ recent op-ed to learn more about pro-energy policies lawmakers should enact.
3. The administration needs an energy-policy reset, and Europe is a cautionary tale. We need not look further than the situation in Europe to see what happens when nations depend on energy production from foreign sources that have agendas of their own. (Read more from Sommers on this topic here.) There is more policymakers could do to ensure access to affordable, reliable energy, starting with incentivizing U.S. production and energy infrastructure and sending a clear message that America is open for energy investment.
4. Repeated in-depth investigations by the Federal Trade Commission have shown that changes in gasoline prices are based on market factors and not due to illegal behavior, and the American people are looking for solutions, not finger pointing. The price at the pump that Americans are currently paying is a function of increased demand and lagging supply combined with the geopolitical turmoil resulting from Russia’s aggression in Ukraine.
5. Lawmakers should focus on policies that increase U.S. supply to help mitigate the situation rather than political grandstanding that contributes to a difficult investment environment at a time when investments are needed the most. Democrats, Republicans and Independents tend to side with this assertion. In fact, recent polling that found 90% of American voters support the U.S. developing its own domestic energy resources rather than relying on foreign energy sources.
Consumers have incurred high costs amid a global energy supply crunch, shrinking supplies and geopolitical instability. In response, U.S. natural gas and oil producers are working to meet rising demand. But uncertainty in Washington contributes to a difficult investment environment for energy that is needed to expand our resources. Policymakers need to embrace U.S. natural gas and oil. Let’s work together to create policies to help increase supply from U.S. producers right here in America – an important variable and key driver to reducing fuel costs.
About The Author
Lem Smith is API’s vice president for Federal Relations. Lem joined API in February 2020 as vice president for Upstream Policy & Industry Operations. He previously served as a principal at Squire Patton Boggs, an international law and public-policy firm, where he advised private and public sector clients on federal and multi-state policy matters and provided counsel on communications strategies, campaign affairs and crises management. Previously, Lem was director, U.S. Government & Regulatory Affairs at Encana, and responsible for all aspects of U.S. government relations and regulatory policy matters at the state and federal levels. Prior to that, Lem was director of Government Relations for Kerr-McGee Corporation. Lem began his career on Capitol Hill, working for U.S. Senate Majority Leader Trent Lott, U.S. Rep. Roger Wicker (Mississippi) and the late U.S. Rep. Charlie Norwood (Georgia), where he negotiated key member priorities within the 2005 Energy Policy Act (EPAct). Lem is a graduate of the University of Mississippi.