A number of factors help to dictate oil prices on the global market. Whether a barrel of oil is produced in Texas, Venezuela or Saudi Arabia, its price is the outcome of decisions by traders at the New York Mercantile Exchange and other trading centers, who are reacting to assessments of market conditions as well as fundamental supply and demand.
The price of crude oil is the major factor in determining the price of gasoline at the pump, while other costs included are refining and distribution costs, marketing and taxes. In fact, every time U.S. motorists pull up to the pump, they pay nearly 47 cents in state and federal taxes per gallon of gasoline.
Occasionally, higher pump prices bring accusations of price gouging. However, America’s oil and natural gas industry is one of the most heavily regulated, and the U.S. Federal Trade Commission (FTC), other federal agencies and state attorneys-general have investigated the causes of price spikes for decades and have consistently found that it is the markets that are responsible for price fluctuations.
To quote the FTC: "In no other industry does the FTC maintain a price monitoring project such as its project to monitor retail gasoline and diesel prices."
Some additional factors that can influence fuel prices include:
- Emptying refinery tanks to switch from winter-grade to summer-grade fuels as called for by clean-air regulations
- Balancing availability and the limitations on substituting inventory of specialized fuels required by various regions of the country
- Major weather events such as hurricanes and extreme cold snaps
- Local market conditions that can affect pricing decisions at retail fuel outlets
- Strikes, acts of sabotage or other operating disruptions that occur in unstable oil-producing regions around the world
Government policies have made it difficult for the industry to produce and deliver the oil and natural gas consumers need. The federal government has restricted offshore exploration and production and it has been slow to remove bottlenecks in government permitting onshore.
There is no question – domestic oil and natural gas development could provide us with more energy now. Decisions we make today impact the energy situation and prices we pay 10 years from now. While other countries are doing all they can to develop their own resources, Congress continues to block access to U.S. oil and natural gas resources and continue to call for our retreat from global markets.
America has the 12th largest oil reserves in the world, but we are unable to develop much of these resources due to restrictive government policies.
Increasing access to oil and natural gas sources would not only lead to more supply, but more American jobs. Resource exploration would put millions of dollars into federal and state budgets – and those additional funds could be used for any number of domestic projects such as infrastructure repairs, new schools and textbooks, or health care expenditures.