So, a couple of weeks ago the Associated Press reported on its own special investigation into whether increased domestic oil exploration and development – supply – has any effect on gasoline prices. AP’s conclusion: There’s no correlation and so more U.S. drilling won’t help.

Since gasoline pricing is more complex than that (see our new website), the more apt question is whether supply can affect the cost of crude oil, which accounts for 76 percent of the price we pay at the pump. It’s elementary: Increase supply and you can put downward pressure on the cost of crude, which is the fundamental driver of pump prices.

That’s what we’ve emphasized in posts on AP’s study here and here. Worth repeating is the review of AP’s report by the Marshall Institute’s William O’Keefe, who noted conf... more »

What's up with U.S. gasoline prices? Or maybe we should say what's down?

The Energy Information Administration (EIA) reports the average price for regular gasoline has declined the past couple of weeks to $3.85 per gallon, down from $4 at the beginning of the month - a twist since the Memorial Day weekend historically marks the start of the summer driving season, higher fuel demand and rising prices.

The reason? Simple supply-and-demand economics, says API Chief Economist John Felmy, who briefed reporters on crude oil and gasoline price fluctuations this week.

Start with the price of crude oil, which accounts for 68 percent of the cost of gasoline. Crude prices reached $113 a barrel, reflecting demand from recovering global economies. Gasoline prices rose with them. "It's a function of the... more »

With the price of crude oil driving the cost of gasoline up, Americans may think little can be done about prices at the pump. Not so. A renewed focus on tapping American sources of oil would send an important message to the global market and, long-term, will help with demand pressures forcing crude prices higher.

That's a key takeaway from API President and CEO Jack Gerard's "Newsmakers" conversation with reporters on C-SPAN. "The message the Congress needs to send the marketplace right now is that help is on the way," Gerard said of new pro-exploration legislation now under consideration. The interview with reporters Dina Cappiello of the Associated Press and Jim Snyder of Bloomberg News aired Sunday. Take a look:

Highlights:

• Gasoline prices are tied to the price of crude oil, whi... more »

Wondering about the factors that cause the fluctuations in global oil and gasoline prices? News articles that have appeared over the past several days attribute the climb to instability in the Middle East, the decline in the dollar's value, and growing demand in China and India. A couple of days ago, Bill O'Reilly of the O'Reilly Factor once again blamed oil companies, asserting that they can raise prices at will. With all due respect to O'Reilly, it's clear that he doesn't understand how the markets work.

As we've explained on this blog, oil companies are price takers, not price makers. Oil companies find and supply crude oil to the marketplace, but the price is determined by buyers and sellers who put a value on oil through their transactions at commodities exchanges including The New Yo... more »

API recently hosted a conference call for bloggers about gas prices. John Felmy, API's chief economist, took questions from the bloggers and discussed the many factors that can influence gasoline prices.

Topics discussed included the relationship between crude oil prices and retail gas prices, the ethanol blend and its effects on gas prices, and the impact oil prices could have on the trade deficit. In addition to these topics, John discussed the supply and demand for oil, and addressed both the turmoil in the Middle East and statements that President Obama made during his press conference about energy policy.

In regards to the impact that oil prices could have on the trade deficit, John explained that, "...We have the power to reduce that [the trade deficit]. We can do it by improving our... more »