Photo: Flickr / miss-britt
America’s booming crude production industry has done amazing things for the economy.It’s created jobs.
It’s balanced budgets.
Some argue it’s even gotten presidents elected.
But all that production is never really going to lower Americans’ gas prices, because we are competing with the entire world for it.
For years now, American gasoline has been priced to the international benchmark crude price, Brent.
That’s in part because there is now so much production that existing infrastructure can’t handle it — we’ve discussed this elsewhere.
As a result of this glut, West Texas Intermediate, the benchmark price for purely American production, has been severely discounted.
But the main reason why everything is now priced to Brent is that a lot of other folks around the world are now demanding it.
And while we’ve explained why many peak oil theories are misguided, oil is still a finite resource that’s going to be dictated by basic economics.
One final point: in order for gas prices to go down, we’d have to lower our consumption of crude to reduce prices.
Here’s a table showing domestic crude production and total consumption. The former is less than half the latter:
As a result, America will continue to import much of its oil, and therefore be subject to Brent crude price movements.
“For the foreseeable future, [Brent] will still be the price,” the EIA’s James Preciado told us.