Despite oil boom, there's gas price gloom
NEW YORK — America is increasing its oil production faster than ever, and drivers are guzzling less gas. But you'd never know it from the price at the pump.
The national average price of gasoline is $3.69 per gallon and forecast to creep higher, possibly approaching $4 by May.
“I just don't get it,” says Steve Laffoon, a part-time mental health worker, who recently paid $3.59 per gallon to fill up in St. Louis.
U.S. oil output rose 14 percent to 6.5 million barrels per day last year — a record increase. By 2020, the nation is forecast to overtake Saudi Arabia as the world's largest crude oil producer. At the same time, the country's gasoline demand has fallen to 8.7 million barrels a day, its lowest level since 2001, as people switch to more fuel-efficient cars.
So is the high price of gasoline a signal that markets aren't working properly?
Not at all, experts say. The laws of supply and demand are working, just not in the way American drivers want them to.
Americans are competing with drivers worldwide for every gallon of gasoline. As the developing economies of Asia and Latin America expand, their energy consumption is rising, which puts pressure on fuel supplies and prices everywhere else.
The United States still consumes more oil than any other country, but demand is weak, and imports are falling. That leaves China, which overtook America late last year as the world's largest oil importer, as the single biggest influence on global demand for fuels. China's consumption has risen 28 percent in five years, to 10.2 million barrels per day last year.
“There's an 800-pound gorilla in the picture now — the Chinese economy,” says Patrick DeHaan, chief petroleum analyst at the price-tracking service GasBuddy.com.
U.S. refiners are free to sell gasoline and diesel to the highest bidder. In 2011, the United States became a net exporter of fuels for the first time in 60 years.Two other factors are making gasoline expensive:
• High oil prices. Brent crude, a benchmark used to set the price of oil for many refiners, is $108 per barrel. It hasn't been below $100 per barrel since July. On average, the price of crude is responsible for two-thirds of the price of gasoline, according to the Energy Department.
• Refinery shutdowns. Refineries temporarily close in the winter, when driving declines, to perform annual maintenance. That lowers gasoline inventories and sends prices higher nearly every year in the late winter and spring.
Rising gasoline prices act as a drag on the economy because they leave less money in drivers' wallets. But because average prices have remained in a consistent range — between $3 and $4 per gallon since the end of 2010 — economists say their effect on growth has been minimal.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- U.S. to assign 3,000 from U.S. military to fight Ebola
- Meteor lights up night sky above eastern U.S.
- Florida socialite’s lawsuit vs. feds in Petraeus scandal OK’d to proceed
- Medal of Honor awarded to veterans of Vietnam War
- House preps to aid rebels
- Rare respiratory illness reported in at least 10 states
- Coverage in jeopardy for 115K Obamacare enrollees
- House preps resolution to aid Syrian rebels, combat ISIS
- Medal of Honor awarded to veterans of Vietnam War
- U.S. will increase aid to Ebola-stricken Africa
- Black lung disease on rise in Appalachia