Gas Price CHANGE Reported – Another Shift!
(RightWing.org) – In early July, gas prices peaked at over $5 per gallon nationally. Heading into the second week of August, fuel costs have fallen by nearly $1 in numerous states, but why? Is it because the Biden administration saw oil production increase, or was it something else?
According to the Energy Information Administration (EIA), consumer demand for gasoline dropped significantly. In one week alone, it fell from 9.25 million barrels per day to 8.54 million. It’s nearly the same as July 2020, when fewer people drove during the pandemic. Still, gas is too high for many. So, what factors go into the price, and why is there a big difference in cost at the pump from one state to another?
Why the Discrepancy In Gas Prices?
During the 2020 presidential election, then-Democratic presidential candidate Joe Biden promised voters he would eradicate the use of fossil fuels. Among his first acts in office in January 2020, he began fulfilling his promise by revoking the permit for the Keystone XL pipeline and reducing drilling on public lands, among other measures. In June, the president let it slip that US energy was in an “incredible transition.” He added that the country should be less dependent on fossil fuels after the process takes its course.
While federal government policy directly impacts the national average gasoline price, it doesn’t account for the vast differences between states. The cost of a gallon of fuel is over $5 in California, and in Chicago, it’s over $6. Still, in other parts of the country, it’s below $4.
To better understand the wide-ranging difference, one must understand the supply chain.
- Large oil companies extract oil from the ground
- They ship it to a refinery
- Refineries transport the fuel to a station
- Consumers purchase the gas
Different companies control the varying parts of the supply chain. Each piece of the process has its own expense, and the consumers at the bottom pay for the profits each step of the way.
Price Differences Are Not a Complex Formula
Most US fossil fuel refineries are in southern Texas and Louisiana. The closer one is to a refinery, the less expensive it is to transport the gas to a fill-up station. The closer the consumer is to a plant, the less they pay for gas.
Another factor is taxes. Pennsylvania enjoys the highest gas tax in the country at 58 cents per gallon. Yet, Alaska drivers only pay 9 cents per gallon. State and local regulations also play a vital role in what you pay. The cleaner burning the fuel, the more it costs to refine. California leads the way in environmental regulations, which is why drivers pay a high rate in the Golden State.
How low will gas prices drop?
It depends on many factors, including whether or not demand comes back strong or if Americans decide to permanently alter their driving habits. What policies will the government pursue in the near and distant future? Weather also plays a role. If a significant hurricane develops in the Gulf of Mexico, the tab could rise back to $5 or more overnight.
So, are lower gas prices here to stay?
Only time will tell.
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