With uncertainty over the Iran conflict, who knows what gasoline prices will be next week or next month. The recent rise at the pump brings to mind when oil rose to $147 in 2008 or, for those old enough, the prolonged high prices and shortages in the 1970s.
A dynamic change over the last 15 years likely means this global disruption could be different than in past years for the U.S., relative to the rest of the world. Then, a large majority of oil consumed in the U.S. was imported, much of it from the Middle East. Not today.
Because U.S. independent oil companies discovered how to unlock oil bound in shale rock formations, U.S. oil production went from 5 million barrels per day in 2008 to over 13 million barrels per day currently. Consequently, oil imports are 75% lower. See chart below.
The impact of growth in U.S. oil production is seen today in market price differences. The U.S.-based market (WTI) was trading Friday around $98/barrel while the global-based market (Brent) was trading around $113/barrel. As of Monday morning, markets had calmed down some with lower oil prices.
Despite oil being a global commodity, proximity to production and refining capacity is among the biggest factors impacting fuel prices. Looking around the U.S. and the world, fuel prices are highest in the places most dependent on imports (state/national tax rates matter too).
Here are gasoline prices in a sample of locations as of Monday:
Mississippi - $3.55/gallon
California - $5.79 (partially dependent on fuel imports from east Asia)
Oklahoma - $3.25 (lowest in U.S.)
Arizona - $4.54
Illinois - $4.17
U.S. Average - $4.07
Hong Kong - $15.01 (highest in the world)
Germany - $8.87
Australia - $5.56
Saudi Arabia - $2.39
China - $4.51
Mexico - $5.66
The moral to the story is, energy follows basic economics - supply goes up then price goes down; supply goes down then price goes up.
Those places with the most exorbitant fuel prices and experiencing actual supply disruptions are typically further from or have cut off supply sources. Comparing global energy prices today is a good reminder - the best energy is locally-produced energy that's available.
Patrick Sullivan authored this post. He is President of the Mississippi Energy Institute.
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6 comments:
Gas prices are only part of it. Several GCC nations produce precurser chemicals for fertilzer as well as gasses used in high tech manufacturing. GCC states they are looking at minimum 5-8 months rebuilding, a year or more to return to normal production. The US may not be affected but there is a high probability of global famine as more than 1/3rd of the emerging economies rely on cheap precursers for affordable fertilizers to grow crops. And these arent nations full of fatties like America. These are people already struggling to meat their daily nutrition needs. Not a lot of Good will remaining in these places towards Trump and Israel. It will be worse if people are watching their loved ones die because of Operation Epic Fail. Maybe the US government can print more money and provide food aid to them like they will be give billions to Israel to pay for them to rebuild their cities and military?
Trump declared that Iran will not build nukes & so Trump said he will quit bombing them..
Oil down $10.00 dollar this evening $89.00 a barrel
Elections have consequences.
Most who follow this blog can probably afford the increase, but some households cannot and must give up or cut other spending drastically. Sadly, gasoline prices may be the least of our worries and Trump's war may create the first battle on our American soil since the Civil War.
I work from home, and everything I need (walmart, kroger, home depot) is within 2 miles of me, and everything else I order on Amazon.
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