Yes, oil prices overseas affect the cost of gasoline in the US – WFAA.com

Science & Technology

TEXAS, USA — When gas prices rise as they have in recent months, frustrated drivers want to know where to point the finger and place blame. 
Several factors determine the price we pay at the pump and the pandemic, supply chain issues and inflation all play a part this time around. 
But since the United States is the world’s leading producer of oil, just how much influence do foreign oil markets and producers have on our gas prices here in North Texas? We spoke with two energy industry experts for the answer.
Do oil prices overseas affect the cost of gasoline in the United States?
Yes, the price of oil overseas does impact US gas prices.
Bud Weinstein, Retired Associate Director of the Maguire Energy Institute at the SMU Cox School of Business.
Bruce Bullock, Director of the Maguire Energy Institute at the SMU Cox School of Business.
The United States is the world’s leader in oil production and does not rely on foreign oil nearly as much as it once did decades ago. However, the oil market is a global one and the supply/demand across the world impacts oil prices in the US according to both Weinstein and Bullock.
“What happens in the middle east does affect the cost of gas the pump in Texas even though we do not import a lot of oil from the middle east anymore,” said Weinstein.
He added that the increase in domestic production has lessened the impact of foreign factors.
“If we were where we were a couple of decades ago when domestic production was half of consumption, what happened abroad would have a bigger effect here.”
As far as the most recent rise in prices, it stems from the COVID19 pandemic and a drop in demand which, in turn, impacted supply.
“Producers in OPEC, Russia and other parts of the world were restricting production to keep prices high during the pandemic,” said Weinstein.
Now the demand has returned but the supply has not done so as quickly as there are still concerns about overproducing amid uncertainty about the pandemic’s future according to Bullock.
“OPEC countries who still produce a significant amount of oil on the world level have been reluctant to produced it in a rapid manner.”
That has created a lower supply for a higher demand globally and, hence, higher prices at the pump across the world.
Bullock estimated the price of crude oil makes up approximately 55-60% of the gas price we pay with the remainder determined by costs associated with refining, distribution and taxes.
    
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