America and its Gasoline Prices

The United States has produced more crude oil than any other nation on Earth for the past six years in a row. Crude oil production in the United States averaged 12.9 million barrels per day in 2023, breaking the previous U.S. and global record of 12.3 million barrels per day in 2019. We literally produce 3-4 times more oil than China, Kuwait, or the United Arab Emirates. Every year.

America’s top crude oil producing states are Texas (42.5%), New Mexico (13.3%), North Dakota (8.9%), Colorado (3.7%) and Alaska (3.7%). Internationally, the largest producers of crude oil are the United States (14.7%), Saudi Arabia (13.2%), Russia (12.7%), Canada (5.6%) and Iraq (5.5%).

This is big business for America’s Big Three oil producers. ExxonMobil reported a net income of over $36 billion in 2023. Chevron Corporation reported a net income of $21.37 billion in 2023, and Phillips 66 reported a net income of $7.24 billion.

What does this mean for the price of gasoline in America, and in Connecticut? As of July 12, the average price for a gallon of regular gas in Connecticut was $3.53. That’s exactly the national average, it’s about the same as what people in Florida, Montana and Arizona are paying, and it’s even a penny less than last year at this time in Connecticut.

But gasoline prices are always highest in the summertime and lowest in the winter. In fact, the typical price per gallon swing between winter and summer is 50 cents. According to the NACS, which is a global trade association dedicated to advancing convenience and fuel retailing, in the winter months, only a few fuels are used across the United States. Gasoline blends used in the summer months are different than the blends used in the winter. In the winter, fuels have a higher Reid vapor pressure, meaning they evaporate more easily and allow cars to start in colder weather. In the warm summer months, these evaporative attributes would lead to increased emissions and smog.

However, because of various state or regional requirements, 14 different fuel specifications are required for the summer months. Refineries must produce enough fuel for each area to ensure that there are no supply shortages, and that can complicate the production and distribution of fuels. Summer-blend fuel is also more expensive to make than winter-blend fuel. First, the production process takes longer and, second, the overall yield of gasoline per barrel of oil is lower. These complexities add as much as 15 cents per gallon to the cost to produce these higher-grade fuels.

May 1 is the federal compliance deadline for terminals to fully purge their systems of winter-blend fuels, and this is considered one of the biggest factors in seasonal price increases. This regulatory requirement can lead to lower inventories at the terminal, which puts upward pressure on gas prices. This is why seasonal gas prices tend to peak in May.

Gas demand increases a few percentage points each month beginning in February, and it peaks in August. Total fuel demand is 10% to 15% greater in August than it is in February, and any stress on the system — such as a refinery or pipeline outage, perhaps caused by a hurricane — can cause a supply/demand imbalance and affect prices at the pump.

By the end of September, gas prices generally decrease as demand for gasoline falls and refineries switch over to producing more home heating oil.

For a worldwide context, American gasoline prices are near the bottom: 41^st-lowest out of 179 countries (bottom 23%).

As of July 8, gasoline averaged $3.81 a gallon in America – about the same as what people are paying in Columbia, Syria and Panama. But as of July 8, gasoline is more than $5.22 a gallon (in U.S. dollars) in our bordering nations of Mexico and Canada. It’s over $6 a gallon in Poland, Austria, Spain, New Zealand and Sweden. It’s over $7 a gallon in Britain, Portugal, Ireland, Germany, France, Greece, Switzerland and Italy. And gasoline costs $8 a gallon or more in Norway, Israel and the Netherlands.

Quite simply, America produces more oil than any other nation, our gasoline prices are among the lowest on the planet, and Connecticut residents are paying essentially the same prices as everyone else in America. And big oil companies are making billions of profits on every fill-up.

Posted by Lawrence Cook