Why the Price of Gasoline is High (or what it should be)?

During the last decade, the U.S. oil and gas industry finally was able to convince the US Federal government and regulatory agencies to drop federal restrictions that limited crude oil and refined petroleum exports.


The rationale was simple. The exponential growth of US shale oil and gas production would be sufficient to satisfy domestic energy needs and provide more capacity for exports.



All Gasoline Consumers are Created Equal


“Why shouldn't we sell petroleum products to every buyer for the highest price - no matter where the buyer might be? ”

That's right. Every company wants to sell to every potential consumer regardless of location.



Current Refining Capacity is Not Sufficient - The Second Perspective


In the previous discussion What Influences the Price of Gasoline, we discussed how about 1,1 million barrels per day in refining capacity was lost since early 2020.


Under normal circumstances, the United States refining capacity is greater than the domestic needs. So the United States exports refined petroleum products - gasoline, diesel, and heating oil.


How much?


Gasoline - about 1 million barrels per day.


Diesel and heating oil - 1.4 million barrels per day.


Are You an Advocate of Free Trade?


“The main advocate of free trade is the United States.”

What would happen if the United States decided to restrict petroleum exports in an effort to reduce domestic prices?


Consumers in other countries would pay higher prices.


Wouldn't that be opposite of what free trade and free markets are?


Yes.


By reducing exports and global supply, the United States would be in violation of long-standing commitments to free trade and free markets.



Liquified Natural Gas - "The New Oil"


“The United States exports of Liquified Natural Gas- or LNG - increased 50 TIMES - between 2011 and 2021"

The United States now exports about 11 percent of domestic gas production to other countries.


What is the Right Price for Gasoline?


“If you are an advocate of free trade, you are paying the right price.”

Apply Critical Thinking ...



... when anyone suggests that sending more crude oil to the US will lower gasoline prices.


... when reading that releasing crude oil from US Strategic Petroleum reserve will lower gasoline prices.





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