The average price for a gallon of gasoline has hit record numbers in Los Angeles and Philadelphia.
This week, prices rose nationally by four cents, and consumers wondered why the cost is so high.
A study of fact sheets provided by the American Petroleum Institute suggests that the complicated answer includes more production in America, which could add more supply. “More U.S. supply means relief for the global market,” Lem Smith, API’s vice president for Federal Relations, wrote in an op-ed.
“America has an abundance of resources right under our feet, and policymakers should send a clear message that America is open for energy investment,” Smith declared.
API noted that gasoline prices are determined by the supply and demand of crude oil and expenses for refining, distribution, retailing and taxation. Those fundamental market realities drive prices at the pump, officials stated.
The main components of retail gasoline prices are the cost of crude oil, taxes, refining costs, and distribution and marketing costs, API officials stated.
Of those, the price of crude oil has the most significant impact — accounting for 56% of the cost.
“Because of this, changes in the price reflect the global cost of crude oil, which is influenced by current conditions and expectations of consumer demand, supply, inventories, geopolitical events, and other factors, generally have an effect on pump prices,” the organization stated in a fact sheet.
Further, federal, state and local governments levy various taxes in fees on transportation fuels.
The nationwide average tax on gasoline is 57.09 cents per gallon, including a federal tax of 18.4 cents per gallon and state-level taxes that range from 68.15 cents per gallon in California and 15.13 cents per gallon in Alaska.
API President and CEO Mike Sommers recently discussed the critical importance of American energy leadership “at a time of geopolitical volatility and rising energy costs around the world.”
Sommers urged policymakers to advance U.S. natural gas and oil production to support stability in global energy markets and ensure access to affordable, reliable energy for American consumers and our allies overseas.
“Most everyone knows that the world needs oil and natural gas in a big way and will for decades or more to come; the only question is where that oil and gas is going to come from,” Sommers remarked. “As much as ever, we need to think hard about that economic truth and our energy future. That means recognizing energy from natural gas and oil as the critical strategic asset it is to America.
“We can’t treat oil and natural gas as a kind of switch that is turned on or off to suit the moment,” he said. “Production and delivery don’t work that way. Yet the overriding policy lately has been to cancel pipelines, block permits and deny leases — all things that discourage investment.
“As more Americans face the consequences of bad policy, the elements of good policy become that much more apparent and desired,” Sommers said. “We have an opportunity together to re-center the energy discussion with basic realities and good common sense as our starting point.”
Sommers called on the administration and Congress to develop a new five-year offshore leasing program; hold onshore leases on federal lands per the Mineral Leasing Act; approve LNG export applications and allow the approval of exports to non-free-trade-agreement nations, and craft transparent, consistent permitting regulations to enable the development of vital energy infrastructure.
The U.S. has pledged to increase LNG exports to Europe by 65% over the next six years.
How quickly could U.S. oil producers scale up production to put downward pressure on domestic gasoline costs?
What could the federal government do to promote that production?
API officials said it begins with access to resources, advancing infrastructure, and enabling — rather than deterring — the industry’s financing.
“Importantly, financial markets have become less hospitable to the natural gas and oil industry partly because of the Biden administration’s positions, policies, and signals,” API officials asserted. “Those who have capital may be reluctant to invest in long-lived energy assets in such a climate, and a relatively fixed pool of cash flows that could be re-invested by industry have been increasingly spread thin.”
API listed four “concrete actions” the organization believes the Biden administration could immediately take to support American production.
They include conducting federal lease sales, completing a new five-year program for federal offshore leasing, supporting energy infrastructure, and reopening access to Alaska.
“The administration should reinstate the leases it suspended in Alaska’s Arctic National Wildlife Refuge and the permit development it approved in the National Petroleum Reserve,” API officials wrote. “These were permitted with stringent environmental standards and could prove a significant source of domestic production over time.”