US Oil Production Soaring--So Why are Gas Prices Still Going Up??

The Federal Energy Information Agency announced Thursday that for the first time since 1970, the US in November produced in excess of 10 million barrels of crude oil a day, nearly four million barrels were from Texas.

So why are gas prices still going up?  AA reported Thursday that gas prices in San Antonio jumped 7 cents just in the past week to $2.30 a gallon.  Excluding the price spike following Hurricane Harvey, that's the most we have paid for gas in nearly three years.

So what gives?

Analyst Patrick DeHaan of says US production is just one factor that goes into setting the global price of crude oil, which is the number one factor in determining the price of gasoline.

He says while US production is going up, OPEC production is going down.

"The US, while producing 10 million barrels of crude oil per day, is no match for OPEC, which, as a cartel, is responsible for about a third of global crude oil production."

He says some of the OPEC production cuts are by design, in an attempt to boost the global price of oil, and other production cuts are due to mismanagement, like in Venezuela.  Venezuela alone has lost 3 million barrels of production a day since 2015 as a result of government ineptitude and mismanagement.

"They have produced 650 million barrels in crude oil less than they would have, which has forced US oil inventories to plunge by 77 million barrels in the last year alone," DeHaan said.

He says were it not for the strongest US domestic production in nearly fifty years, the price of gas today wouldn't be $2.30, it would be in the $4 plus range.

"If there wasn't an increase in US oil producion, gas prices would be much higher than they are today."

Keep in mind that while 10 million barrels a day is a strong production figure, the US uses 19.6 million barrels a day, meaning about half of our oil still has to be imported.  And the strong economy is increasing domestic demand for oil, as factories and offices ramp up and more people drive to work.

On top of that, prosperity moving into formerly deindustrialized nations in Asia and Africa mean those nations are also competing in the global market for oil, some for the first time ever.

Other factors also affect oil prices, from the weather, to local taxes, to pipeline and refinery outages.

GasBuddy says the average price in San Antonio, barring any unforeseen events, is expected to top out in August at between $2.55 and $270 a gallon.

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