4.24.12 - Exports - FEATURED

Stats you need to know about gasoline, crude oil and the companies producing it

A U.S. election season … the summer driving season … political instability in some parts of the world … and upcoming earnings results for oil companies. This is the backdrop against which consumers are hearing a lot of commentary about gasoline prices and energy policy.

It can sometimes be tough to tell reality from rhetoric. So I thought I would recap a few key stats about gasoline, crude oil and the companies producing it.

Gas prices fluctuate because the global price of crude oil fluctuates.

About 67 percent of the average price consumers paid at the pump in March was due to the price of crude oil, according to the latest data from the U.S. Energy Information Administration. Crude oil is a commodity traded on global markets, just like corn, wheat or copper.

 

 

History shows that the prices of gasoline and diesel fluctuate with the global price of crude oil.

The price of a barrel of West Texas Intermediate crude oil averaged about $103 in the first quarter of 2012. The high over the quarter was $109 on Feb. 24, and the low was $96 on Feb. 2. This graph demonstrates such price fluctuations, from the run up in 2007-2008 as global economies grew to the sharp decline during the global economic downturn in 2009.

The U.S. Energy Information Administration lists more than 25 factors that can affect the price of crude oil.

The EIA makes it clear that a multitude of factors can affect the market’s views on supply and demand conditions relating to crude oil. In a recent report, the EIA cites several reasons for the rise in crude prices in the past few months:

  • Stronger global oil demand and global economic growth
  • Cold weather in Europe, particularly in February
  • Supply interruptions in South Sudan, Syria, Yemen, and the North Sea
  • Tightened sanctions against Iran
  • A modest level of global spare crude oil production capacity

The U.S. EIA does not list any single oil company as a factor in the price of crude oil.

The world’s oil comes from a multitude of different companies – both international oil companies (IOCs) like ExxonMobil and national oil companies (NOCs) such as Saudi Aramco. ExxonMobil may be the largest oil company in the United States, but on a global scale, we aren’t even in the top ten. In fact, ExxonMobil accounts for less than 3 percent of global crude oil and liquids production.

 

U.S. exports of petroleum products are not a factor in higher U.S. gasoline prices.

While some have tried to link increases in U.S. retail prices with increases in exports of gasoline and diesel, the U.S. EIA says the data “does not support such a linkage.” When U.S. markets are well supplied for gasoline and diesel as they have been recently, refiners – like any other manufacturer – must find markets for their product to keep their business running. U.S. refiners exported about 5 percent of the gasoline they produced in 2011. Compare that to other U.S. commodities: In 2011, the U.S. exported almost 10 percent of the coal it produced; about 15 percent of its corn crop; and an estimated 45 percent of its soybean production.

Gasoline taxes are a significant factor in the price consumers pay at the pump.

The taxes collected by federal and state governments can be several times greater than refiners’ profits. For example, ExxonMobil made less than 6 cents on average for every gallon of gasoline, diesel and other petroleum products we refined and sold in the United States in 2011. On the other hand, the average local, state and federal taxes are more than 49 cents per gallon of gasoline, according to recent data.

Increasing supplies of crude oil can help put downward pressure on oil prices.

Because it’s a global market, new supplies of oil coming online anywhere in the world can help put downward pressure on the market-driven price. And it might surprise people to know that the United States is the third-largest producer of crude oil in the world, behind Russia and Saudi Arabia.

 

The United States is producing more oil thanks to industry-driven technology advancements.

The United States produced about 3 percent more crude oil in 2011 than 2010, according to the EIA, and production is expected to grow by about 22 percent from 2010 to 2020. Much of the increase is due to technologies developed by the oil and gas industry that have boosted unconventional energy production, including deepwater and tight oil resources.

Technology will only be applicable with access to energy resources on private, state and federal lands.

As Congressional Research Service data show, much of the recent increase in production was taking place on lands not controlled by the federal government. Comparing 2010 to 2011, total crude oil production on non-federal lands was up about 11 percent, while production on federal lands declined by almost 14 percent. In fact, the federal government continues to keep the Atlantic Coast, Pacific Coast and nearly all of the Eastern Gulf of Mexico closed to oil and gas development – meaning that about 85 percent of all U.S. offshore areas remain off-limits.

Canada’s oil supplies – and the infrastructure to get them here – are essential to meeting U.S. energy needs.

Canada’s oil sands represent one of the world’s largest sources of energy – as well as the United States’ leading source of imported oil. More than 20 percent of the oil the United States imports comes from Canada, and that number is expected to grow. But the speed and affordability of those supplies will depend upon the infrastructure to get them here. The Keystone XL pipeline would allow about 800,000 barrels of oil per day to flow to the United States’ world-class refineries. It would transport up to 100,000 barrels per day of U.S. oil from the Bakken formation in North Dakota and Montana – where “existing pipeline networks are overwhelmed by the surge in Bakken output,” according to a recent news article.

These are just a few of the things to consider when you hear about gasoline prices, what’s driving them and what the U.S. should do. We can’t overlook the fact that gasoline prices are tied to crude prices – and crude prices are set in the global market.

When it comes to increasing global crude supplies, the United States must play its part by making policy decisions that support safe and responsible long-term development of North American oil resources.


7 Comments

Already have a username? Log in to comment. First-time commenting? Sign up to create your username. It's easy, and we won't share your information.

  1. Drew Hemingway says:

    Ken,

    Good article with government provided stats to back it up. I think another way to gain some perspective on gasoline prices is to look at a gallon of gasoline compared to a gallon of other common products such as bottled water, shampoo, etc. You will see that gasoline is cheap compared to these products, especially when you take into account the intensive technical, logistical, and capital efforts it takes to produce gasoline vs. the bottle of water. The profit margin on a gallon of gasoline is nothing compared to these products. The difference is that ExxonMobil sells several orders of magnitude more units.

    I think it would be useful in future posts to highlight ExxonMobil’s profit margins vs. other compaines such as Apple or WalMart for perspective. Also highlight the volume of business that you do compared to others and how the relatively large profit is driven by sheer volume as opposed to large profit margins and finally dispel the “evil oil company gouging the customer” myth.

    Thanks,

    Drew H.

    • Norman Brewer says:

      Is there some way that some of this info could be made available at the pump, or at the service stations at least? Motorists really need to see what they are paying for, especially the tax part.

  2. john colcombe says:

    If the United States is the 3rd largest oil producer, why don’t we keep America’s oil here for our use? It doesn’t make sense to import oil while we are shipping oil out. Where is the errorr in this?

    • Neil Lynch says:

      John, If the company can produce more than we consume in this country, then it can distribute it’s fixed costs over a larger volume and thus reduce the total per-unit cost. (translated – you save money if they have more than just you for the market)

      You want them to produce the oil products and finished good here in America because of the economic “strategic advantage”. The logistics and costs of getting them to the customer are typically more attractive.

      Government regulation serves a purpose, but must be balanced so as not to be more burdensome than the strategic advantage is beneficial. (translated – do not let the government force the oil company to move operations outside of the country)

      While a chart at the pump may be interesting, we really need the American populace to have at least a basic understanding of economics and an awareness of global economics.

  3. Patrick Maurer says:

    Why is it, that the price of a barrel of oil has dropped over 20% and now is around 83/84 dollars a barrel on the price of a gallon of gas at the pump has dropped only about 20 cents. It now averages $3.80 a gallon. At that rate the price per barrel could drop to zero and we’d still be paying over $2.00 a gallon. Something doesn’t compute. It sounds like we are getting butchered at the pump.

    • Daniel Condrey says:

      Exactly. In 2008 a barrel of crude was approximately $84-85USD. At that time for that price the region in which I reside (Smell.A. CA) a gallon of gas was $2.85USD. when the price of crude jumps gas station owners are quick with their extended poles to hike the gallon of gas. However when the price drops we still pay roughly four bucks a gallon. All the while oil companies report record breaking quarterly report profits of $8BILLION USD. I’m just saying ….I’m no economics or business major I’m just reflecting the two based on the Dow Jones Industrial and what we as sheeps are forced to eat. Really! Really? 8 BILLION IN QUARTERLY PROFITS!

  4. jim woodward says:

    there is some truth, but a lot of misinformation. the spin about the xl pipeline is a classic case in point.
    the simple FACT is that 0% of any oil ever going into that pipeline is contracted overseas. not a single drop is intended for u.s. consumption, ever.
    as to mr. hemmingway’s little nugget about profit margins, it is totally irrelevant. margin means absolutely nothing. obviously, if the oil company’s profit “margin” were only ten cents a gallon, but because of volume, fifty billion dollars of profit is obtained, it certainly doesn’t hurt them if the margin is dropped to a nickel, resulting in only twenty-five billion in profit

  5. Drew Hemingway says:

    Ken,

    Good article with government provided stats to back it up. I think another way to gain some perspective on gasoline prices is to look at a gallon of gasoline compared to a gallon of other common products such as bottled water, shampoo, etc. You will see that gasoline is cheap compared to these products, especially when you take into account the intensive technical, logistical, and capital efforts it takes to produce gasoline vs. the bottle of water. The profit margin on a gallon of gasoline is nothing compared to these products. The difference is that ExxonMobil sells several orders of magnitude more units.

    I think it would be useful in future posts to highlight ExxonMobil’s profit margins vs. other compaines such as Apple or WalMart for perspective. Also highlight the volume of business that you do compared to others and how the relatively large profit is driven by sheer volume as opposed to large profit margins and finally dispel the “evil oil company gouging the customer” myth.

    Thanks,

    Drew H.

    • Norman Brewer says:

      Is there some way that some of this info could be made available at the pump, or at the service stations at least? Motorists really need to see what they are paying for, especially the tax part.

  6. john colcombe says:

    If the United States is the 3rd largest oil producer, why don’t we keep America’s oil here for our use? It doesn’t make sense to import oil while we are shipping oil out. Where is the errorr in this?

    • Neil Lynch says:

      John, If the company can produce more than we consume in this country, then it can distribute it’s fixed costs over a larger volume and thus reduce the total per-unit cost. (translated – you save money if they have more than just you for the market)

      You want them to produce the oil products and finished good here in America because of the economic “strategic advantage”. The logistics and costs of getting them to the customer are typically more attractive.

      Government regulation serves a purpose, but must be balanced so as not to be more burdensome than the strategic advantage is beneficial. (translated – do not let the government force the oil company to move operations outside of the country)

      While a chart at the pump may be interesting, we really need the American populace to have at least a basic understanding of economics and an awareness of global economics.

  7. Patrick Maurer says:

    Why is it, that the price of a barrel of oil has dropped over 20% and now is around 83/84 dollars a barrel on the price of a gallon of gas at the pump has dropped only about 20 cents. It now averages $3.80 a gallon. At that rate the price per barrel could drop to zero and we’d still be paying over $2.00 a gallon. Something doesn’t compute. It sounds like we are getting butchered at the pump.

    • Daniel Condrey says:

      Exactly. In 2008 a barrel of crude was approximately $84-85USD. At that time for that price the region in which I reside (Smell.A. CA) a gallon of gas was $2.85USD. when the price of crude jumps gas station owners are quick with their extended poles to hike the gallon of gas. However when the price drops we still pay roughly four bucks a gallon. All the while oil companies report record breaking quarterly report profits of $8BILLION USD. I’m just saying ….I’m no economics or business major I’m just reflecting the two based on the Dow Jones Industrial and what we as sheeps are forced to eat. Really! Really? 8 BILLION IN QUARTERLY PROFITS!