By Lauren Fix, The Car Coach
Gas and diesel prices have reached an all-time high. US gas prices have hit an average of over $5 per gallon, according to AAA. These high gas prices hurt every citizen and are no more than an additional tax we all pay at the pump.
Who is to blame for these crazy prices?
No, it is NOT greedy oil companies. So whose fault is it?
Americans are having to spend more of their hard-earned and inflation-diminished money on energy.
Our government is asking producers to defy the logic behind supply and demand and economics. President Biden scolded oil manufacturers saying that Vladimir Putin’s War on Ukraine hiked prices. This makes no sense as leaders in other countries cannot affect the cost of fuel in the USA, especially if we can produce our own oil production. This simply doesn’t make sense.
But there is more to this than what’s on the surface.
This week, President Biden sent letters to seven major oil companies, saying he would “take action” if they didn’t boost fuel output from their domestic refineries. He stated, “I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office. But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.”
The response from the American Fuel & Petrochemical Manufacturers (AFPM) President and CEO Chet Thompson said, “We are surprised and disappointed by the President’s letter, any suggestion that US refiners are not doing our part to bring stability to the market is false.”
In the president’s letter, Biden warned the leaders of seven major U.S. oil producers and refiners — ExxonMobil, Chevron, BP America, Shell USA, Phillips 66, Marathon, and Valero—that he was “prepared to use all reasonable and appropriate federal government tools and emergency authorities” to increase petroleum refinery capacity and output. This sounds like the government wants to inflict price controls on the oil and gas industry as many will recall from the Carter Administration. It was a disaster and cost consumers even more than before the price controls.
It’s important to know that US refining capacity utilization surged to 91.3 percent in March, its highest rate since June 2021, and is expected to average 94 percent between July-September, according to a June 7 report from the Energy Information Administration (EIA). Refining utilization measures how much fuel refiners produce from crude oil inputs relative to their total production capacity.
The oil industry is producing at capacity and continues to explore options that would have the result in delivering additional energy products to customers in the US and abroad.
John Kerry’s solution of increasing the cost of oil does not lower the price of gas at the pumps. Period. It will blow up the price of oil and gas. Would you be surprised to know that before Biden’s election, the Exxon-Mobil company had publicly announced plans for billions of investments to increase its refining capacity in the US? It did. Then only days later, another attack on the oil industry by the administration caused Exxon-Mobil to rethink that investment, as would any business that finds they’ve been targeted by Washington.
The Biden strategy against the oil industry should surprise no one, though. He ran on shutting it down and has pledged to do everything in DC’s power to eviscerate the fossil fuel industry.
Why do such a thing if there wasn’t an agenda that goes along with such an attack—especially when our nation’s infrastructure and energy production capacity is nowhere near where it needs to be to effect anything approaching meaningful impact on the environment.
We have seen shutdowns, bio refiners, and US policy that has punished refiners to produce. This does not promote any company to produce more oil.
It’s not big oil. The price of oil and gas has increased and impacted inflation. Prices are not going up simply because of greed. Increased costs for manufacturing, supply chain, and employee salaries are passed along to consumers. No company can survive at a loss, and they can’t make it up over time. Increasing the volume at a loss will never work, either.
The oil and gas industry kept investing even during the pandemic, when they lost more than $20 billion and had to borrow more than $30 billion to maintain investment to increase capacity to be ready for post-pandemic demand. US refineries are running at a record high utilization rate and expanding refinery capacity is a long-term proposition, not a short-term fix. Any suggestion that the US refiners are not doing their part to bring stability to the market is patently false.
Here’s who stands to win from high gas prices. Saudi Arabia and the United Arab Emirates could benefit from the price spike if they decide to put more oil on the market. Saudi Arabia usually has 1.5 million to 2 million barrels of oil per day of “spare capacity”–or barrels that can be quickly moved onto the market and sustained for a period of time. The UAE also has spare capacity. This is now the oil that our president is going to beg for from the Saudis, while the potential for US oil and gas production makes Saudi Arabia look like a pond, not an ocean.
The Bottom Line
Here is one of many positive solutions to lower gas prices. Shale oil producers are particularly well-suited to benefit from high gas prices given the relatively quick turnaround for extracting this type of oil.
Shale is a type of rock that can be found in Colorado, Utah, Wyoming, and other states that contains oil and gas. Producers often use hydraulic fracking to develop these fuels. The process of extracting shale usually takes less time than extracting conventional oil, meaning that shale producers can more easily ramp up production in response to the high prices. The shale producers so far have been hesitant to ramp up production because of environmental attacks on that process, as well. It’s interesting to note that since its first use in the late 1940s, not a single groundwater contamination has occurred from this technique, but it doesn’t matter to the environmental left who will stop at nothing to put any technique in their crosshairs.
Buying from Canada is an answer that would lower gas prices. Canada continues to offer to sell to us. The current government won’t talk to them. This makes no sense and we are all paying the price, let’s open this conversation.
The federal government should promote investment through “a clear and consistent policy” such as streamlining the regulatory approval process for fossil fuel infrastructure and holding regular oil and gas lease sales. The industry needs to know beyond a 2- or 4-year horizon what our nation’s energy policy will be in order to make the vast investments we will need to meet demand.
So who is to blame for high gas prices?
The administration’s misguided policy agenda shifted away from domestic oil and natural gas from day one and has been compounded by inflationary pressures. Government policy has impacted gas prices and has hurt Americans and our economy.
The government wants price controls. That’s been the goal all along. Control the price–Control the access–Control the supply. Prices will continue to go up just as they did under the Carter administration. Watch gas prices go higher.
There is so much more to discuss on this, put your comments below and let’s start the conversation.
Lauren is the CEO of Automotive Aspects and the Editor-in-Chief of Car Coach Reports, a global automotive news outlet. She is an automotive contributor to national and local television news shows, including Fox News, Fox Business, CNN International, The Weather Channel, Inside Edition, Local Now News, Community Digital News, and more. Lauren also co-hosts a regular show on ABC.com with Paul Brian called “His Turn – Her Turn” and hosts regular radio segments on USA Radio – DayBreak.
Lauren is honored to be inducted into the Women’s Transportation Hall of Fame and a Board Member of the Buffalo Motorcar Museum and Juror / President for the North American Car, Utility & Truck of the Year Awards.
Check her out on Twitter and Instagram @LaurenFix.
Editor’s Note: The opinions expressed in this article are those of the author.
