SHOPSMART AUTOS – AUGUST 17, 2021 – Here’s Why Gasoline Prices Are High And Going Higher
‘Why are gas prices so high?’ That’s a web search question leading readers to my pages this morning, along with another asking ‘why are gas prices so high in California?’ That second one is just as important as the first, since California is basically serving as the canary in the coal mine for the rest of the country. Finally, a third web search question high on the list this week is ‘Is America energy independent?’ The answers to all of these questions are all intertwined with one another. Let’s examine why.First, why are prices at the pump so high in general?
There are several factors at play here that all have had an impact since last November:
The loosening of COVID restrictions globally
in recent months has led to a rapid recovery in global demand for crude oil that has exceeded the expectations of all of the “experts” on the subject, leading to a tightening of global crude markets;
Strong discipline among the
OPEC+ nations
related to their agreement to limit exports has also played a major role in tightening the relationship between global supply and demand;
The U.S. election has also obviously played a big role here.
Since last November 3, the average price per gallon of regular gasoline in the U.S. has skyrocketed by 75 cents. The markets clearly see the Biden/Harris administration as one that will work to inhibit U.S. oil production, which will also have the effect of tightening the global market, and traders have responded by driving up the price of crude oil;
Refinery maintenance and the changeover to summer gasoline blends.
This is a factor that I tend to write about every year at this time. Gas prices have continued to rise even as crude prices have dropped over the past week mainly due to the fact that March and April are the time of year in which many U.S. refineries are taken offline for annual maintenance and all refiners are switching from manufacturing a handful of winter blends of gasoline to the dozens of summer blends required by the EPA. This changeover invariably raises the costs of both refining and transportation of gasoline, and that is always worked into gas prices during these months.
But what about California?
According to AAA, the current average price for regular in the Golden State stands at $3.885 per gallon, while in Texas it is $2.626, about a 47% difference. This differential is almost entirely due to politics around climate change. California is a state that is rich in underground oil resources, but over the past two decades, the state government of California has pursued a policy agenda designed to inhibit drilling and production within its borders as part of an overall program to try to ratchet down emissions via command-and-control regulations. In more recent years, the state government has implemented emissions regulations that far exceed current federal regulation and implemented mandates requiring a rapid phasing-out of gas-powered cars and replacing them with electric vehicles (EVs).
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