Gasoline prices on the rise despite high oil production in the US

The average price for a gallon of gasoline in the U.S. is $3.85. That’s up nearly 30 cents from a month ago. 

Prices are still lower this year than they were last year due to spikes caused by Russia’s invasion of Ukraine; however, they are at their highest point this year. 

Factors influencing the high gasoline prices include oil supply cuts abroad and issues at refineries that turn crude oil into gasoline. 

Oil prices are a major factor in the price of the gasoline that eventually reaches consumers at the pump. Oil prices have been on the rise over the past month or so along with gasoline prices. 

Experts said that production cuts from a group of oil-producing nations known as OPEC+ since October are a major factor in the prices of both oil and gasoline. 

“If not for the OPEC cuts, I think we’d be paying somewhere between $3.25 to $3.50 for gas,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. 

“They took extraordinary measures and I think those measures are having an impact,” he said. 

In October, OPEC+, which includes Russia and Saudi Arabia, said they would cut supplies by 2 million barrels per day of oil before an additional large cut in April. On top of that, Saudi Arabia announced it would cut 1 million barrels per day for at least the months of July, August and September, while Russia also announced a cut of 500,000 barrels per day for August. 

And while the U.S is producing more oil than it did before the pandemic — a new government forecast says it is expected to produce an average of 12.8 million barrels per day this year, up from 12.2 million in 2019  — they’re not expected to fully offset the cuts in other countries. 

Naser Ameen, who leads crude oil production forecasts at the Energy Information Administration — a nonpartisan statistics branch of the Energy Department — said that while the international cuts may create a price signal that encourages more U.S. production, domestic companies would not be expected to fully replace them.

“The U.S. is a bunch of independent producers making their own independent decisions based on their balance sheets,” Ameen said.

Ben Cahill, senior fellow in the energy security and climate change program at the Center for Strategic and International Studies, said that U.S. companies in recent years have been more hesitant than usual to try to make up a deficit created when OPEC+ countries cut supply as they look to pursue discipline rather than expansion. 

“The sector’s not as elastic as it used to be,” Cahill said. “Producers are not chasing higher prices any more, and I think it gives OPEC more leverage. They’re less afraid that if they cut then the shale producers will benefit and that the U.S. will immediately respond and produce more.”

In addition to the OPEC cuts, issues at refineries in the U.S. are also contributing to high gasoline prices. 

According to the American Automobile Association, extreme heat took about 500,000 barrels per day of refining capacity offline. This makes up about 3 percent of the U.S.’s total capacity to make gasoline from oil. 

“The hot weather around the world forces refiners to cut back on their processing rates because the equipment simply can’t function correctly,” said Andy Lipow, president of consulting firm Lipow Oil Associates.