Fact or Fiction?
7
If the U.S. produces more oil domestically, gas will be cheaper
Not necessarily. While the cost of crude oil is a major component in the price of gasoline, prices are also determined by supply and demand around the world.
Domestic oil supply comes from refinery production and imports. Reductions in U.S. fuel supply – which could result from a hurricane shutting down several major Gulf Coast refineries and pipelines for a few days – could tighten supply and cause prices to increase and remain high. In September 2008, Hurricanes Ike and Gustav shut down several Gulf Coast refineries as well as a major gasoline pipeline that supplies products to the U.S. Northeast. That particular supply disruption caused prices at the pump to spike for several weeks, even as world crude prices were declining.
Oil is traded on a global market, and prices are determined by supply and demand. As a result, and as the U.S. Congressional Budget Office points out in a 2012 report, “even if the United States increased production and became a net exporter of oil, U.S. consumers would still be exposed to gasoline prices that rose and fell in response to disruptions around the world.”
- By Elizabeth Bunn