I have a dumb question. If the US is energy efficient and we are the world’s oil exporter, why can’t the US set the price of a gallon of gas?
mark
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U.S. production costs are much higher than in S.A., for example, where it may cost as little as $6 per barrel to produce.
U.S. can only be a production leader as long as S.A. sells far above their breakeven price and limits production.
Of course S.A. wants the price as high as possible for their own income; so there's that. But basically if the price of oil goes (and stays) significantly below about $40-$50 per barrel, then USA fracking wells start to get capped off and exploration/drilling activity ceases.
Incidentally, whenever the U.S. really wants to punish Russia, we twist the Saudis' arms to increase production and reduce the world price. This causes pain for U.S. producers; but, is catastrophic for the Russian economy.
It's how we brought down the USSR in the late '80s.
We produce about 12 mm barrels of oil a day, and we use about 29mm a day. Most of what we use comes from other countries.
The 7 largest energy companies in the world control about 7% of the world market. Governments control most oil production, which means concerns not necessarily related to the actual market are heavily in play.
Oil is fungible, like money, and the price is set with global input, except for places like Venezuela. You can see how that has worked out.
As far as the price of gas goes, I remember reading from the past where regulations made it very difficult to build new refineries so this is an issue when it comes to the price of gas.
According to this article from U.S. Energy Information Administration, we have built some new refineries but they are small. The last significant high-volume refinery was built in 1977.
https://www.eia.gov/tools/faqs/faq.php?id=29&t=6
President Trump has brought in some deregulation in this area. Take some of these strangling regulations off of the refining industry, so they can build new refineries or lower costs. Lower processing costs, along with more capacity, should lead to lower prices at the pump as long as the price of oil stays stable.
CGato
Because that is done by commodity speculators.
I am sure that you know that 'free' govts have little to do with setting the price of gas. However, it is worth mentioning that for fracking to be profitabe, oil needs to sell for at least $50 a barrel (I think), and fracking is an important part of our energy independence. So the Trump Admin is likely to be supportive of somewhat higher prices for oil, within reason.
In days gone by, Iran seizing an oil tanker during times of tension would cause the barrel price to spike in the world market. So far it does not appear to be having that effect. I suppose one reason is that Iran does not supply much of the world's oil; obviously traffic through the Straits of Hormuz does have an impact. One customer that depends on that clear passageway is China... just saying. (A bit above my pay grade.)