America's oil boom and the price at your pump

Chicago Tribune ^ | May 12, 2014

[re_tail20]

After a harsh winter, it's time to get out and hit the open road. So what's with $4-a-gallon gasoline? North American oil production is on the rise, so you might have expected a break at the pump by now. Yet gas prices remain stubbornly high.

What happened to the homegrown energy boom? Wasn't North Dakota supposed to be America's Saudi Arabia? How come gas isn't back to $2 a gallon?

The boom is real, and North Dakota, along with states and Canadian provinces, is producing a gusher of oil. The North American energy bonanza now underway is helping the U.S. economy to pull out of the doldrums. It helped ease the pain of Chicago residents during the cold winter, since stepped-up natural gas production kept heating bills lower.

But gasoline, alas, is not going to be half price anytime soon, if ever. America's oil boom is delivering broad benefits, but not necessarily at the pump.

The good news is that oil analysts say gas prices probably peaked for this year in late April. Based on today's market conditions, prices should decline by a nickel or a dime over the next month. The U.S. Energy Information Administration expects a gallon of regular unleaded to sell for an average of $3.48 nationwide in 2014 and $3.39 in 2015. That's a steady, significant decline from $3.63 in 2012 and $3.51 in 2013. Chicago prices generally run higher than the national average.

Prices bounce around during the year. It's not unusual for prices at the pump to rise in the spring, ahead of the summer driving season. That's due in part to refineries switching to a different formula for gasoline that meets clean-air requirements during the warm-weather months...

[Mariner]

"The fact that they are not is quite suspicious."

If crude is selling for $100/bbl delivered to the USA and the cost of production in whogivesash!t is $40/bbl with another $10 in payoffs and another $10 for security and another $10 for transport, that oil has less margin than domestically produced oil at $65.

This push by the producers is a clear indicator the overall cost of delivery is less in the USA than oil sourced elsewhere.

However, that is NOT a reason to allow export. The reference "glut" mentioned by the author has not materialized and will not until domestic oil is above 10mil bbl/day.

A far better move would be to tariff all imported oil by $25/bbl flat.

And drill, drill, drill.