We don't seem to understand how gas prices work Conspiracy theories and free-floating anger run rampant in small talk, blaming everyone from the president to greedy oil company executives. Someone has to be to blame.
The price of gas isn't determined by the president, a shadowy group of price-fixings, China, or reverse vampire. It is almost all a function of supply and demand and is more powerful than the presidential administration.
The price of crude oil is the main factor in determining the price of gasoline. Around 60 percent of the price of a gallon of gas is due to the price of crude oil according to the American Petroleum Institute. There is a mixture of refining costs, federal and state taxes, and distribution and marketing costs. Over the last two years, crude oil prices explain more than half of the variation in gas prices. Because crude oil is expensive or cheap, gas is either expensive or cheap.
The price of crude oil is determined by the availability of a product and the desire of people to purchase it. The price of a Gary Basswood is less than 90 dollars, which is why the 1956 Fender Stratocasters are worth $22,000.
Demand for oil fell quickly in 2020 because so many people stopped driving. The price of oil and gas fell because there was a lot of oil in the market. Oil producers cut production because they didn't want to sell oil at a low price.
Demand for oil went up when people traveled and commuted again. Demand for oil in the US rose to pre-pandemic levels in 2022. It takes a while to restart wells and refineries, but some of it isn't practical. Oil companies and oil producing nations take a strategic approach to how much crude oil to produce because they don't want to be stuck selling cheap oil if the price goes down.
There was a war between Russia andUkraine. The U.S. and E.U. imposed sanctions on Russia because of its oil production. High demand and low supply led to high prices at the pump.
There are a number of reasons why the price is falling. Oil suppliers and refining companies have been restarting their wells and increasing their refining capacity recently. Money is not worth as much as it used to, so everything is more expensive. Markets are anticipating an economic downturn.
While the price of gas is ultimately a supply-and-demand thing, it is also determined by predictions about future prices of crude oil, and the gas futures market has been falling since its high on June 8 The futures market is worth less because people don't want to be caught holding a bunch of oil if the economy goes into a recession. The consumer gas prices lag behind the futures market.
There isn't anything the president can do to directly control the price of gasoline, even though 64 percent of Americans think the president has at least some control of gas prices. The president doesn't have a "Make Prices Lower" button on his desk, he's mostly at the mercy of supply and demand.
The president can release oil from America's strategic oil reserves, called on oil producers to increase production and proposed a three-month gas-tax holiday. The price of gas didn't fall until supply was increased and markets began to fall Gas was cheap at the end of the Trump administration because demand suddenly fell, not because of anything the government did or didn't do.
There is no evidence that oil companies are any more greedy than they were a decade ago. It is easy to point a finger at Exxon and say, "just lower prices, ya asshole" An Exxon CEO who decided to give gas away for free just to be nice would be breaking the law. If you want to see it that way, corporations have a legal obligation to be profitable.
It is not possible to tell how long gas prices will stay low or how long they will stay high. Patrick De Haan, head of petroleum analysis at GasBuddy, says that a lot of things can affect both supply and demand, but that the price of gas is the only thing that will change.
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