Culprit behind High Cost of Gasoline: U.S. Exports16 Oct

In the Boston Globe (10/12/2012), Congressman Ed Markey noted that gasoline prices are increasing (8 percent), while crude oil prices have declined (7 percent) during the past four weeks.  He wants the Federal Trade Commission to determine whether price gouging can account for increasing gasoline prices.

The U.S. Department of Energy attempted to assure motorists that the price of gasoline and its export were unrelated (i.e., the law of supply and demand does not apply in this case). “The growth in U.S. gasoline exports does not necessarily mean higher pump prices for U.S. consumers. Rather, export markets are providing an outlet for refiners that might otherwise have faced lower profit margins that could encourage them to reduce output or possibly even shutdown, which could cause gasoline prices to increase.”

The graph below depicts U.S. exports of finished gasoline to the world market. Notice that from the early 1960s until the early 1980s there was practically no export of gasoline. The export curve began to ramp up from around 1988 and then flattened from the mid 1990s until 2008, where it increased nearly exponentially up to present time.

 

 

 

 

All U.S. exports of finished gasoline

Fifty eight percent of U.S. finished gasoline exports are delivered to Mexico. It is noteworthy that 78 percent of all gasoline imports to Mexico are from the United States. Thus, Mexico is highly dependent upon its neighbor for finished motor gasoline, most notably due to a 77 million-barrel/day shortfall of Mexican production.

This dependency on gasoline from the United States is due in great measure to the starkly declining Mexican proved reserves as indicated by the following graph. Notice that Mexican crude oil reserves peaked around 1990 at nearly 55 billion barrels and have declined to about 10 billion barrels at 2011.

 

 

 

 

 

 

 

 

 

Mexican proved crude oil reserves

Conclusion: Petroleum products are traded on the world market. Energy companies will always seek the best price, either at home or abroad for their products.  Ever increasing exports of finished motor gasoline will decrease supply at home and cause price increases. Consequently, conservation of fossil fuels (i.e., a non renewable resource) will never happen in the United States based on business as usual (i.e., ever increasing sales to satisfy share holder desire for even greater profits).

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2 Responses to “Culprit behind High Cost of Gasoline: U.S. Exports”

  1. MrColdWaterOfRealityMan Reply

    It’s simple, really.

    1) Oil supply doesn’t equal energy supply.

    2) An abundant oil supply doesn’t equal lower costs.

    We went after the cheap to get, easy to access oil first. Since it took little energy to get, it had the highest energy return. The last half of the world’s remaining oil represents a far smaller net energy total then the first half.

    We have a great deal of oil left, but much of that is, for want of a better word, crud. Unfortunately, that’s all there is; oil which is difficult, and therefore expensive to get, and which yields *much* less net energy.

  2. “Drill Baby, Drill” Leads to Cheaper Gasoline? Think Again | JHEverson Consulting Reply

    […] A more compelling explanation for sky rocketing gasoline prices is due to ever increasing gasoline exports (See the fifth and sixth headlines). Gasoline exports were the subject of one of my previous blog posts. […]

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About Dr. Everson

Prior to forming this SBIR consultant practice, Dr. Jeffrey Everson was director of business development for QinetiQ North America’s Technology Solutions Group (previously Foster-Miller, Inc.).

Dr. Everson has won and been the principal investigator for several SBIR programs, including a Phase I program for NASA, a Phase I project for the U.S. Air Force, and Phase I and II contracts from the U.S. Department of Transportation. For the Phase II program, he received a Tibbetts Award for exemplifying the best in SBIR achievement.

Previously Dr. Everson held senior scientist positions at Battelle Memorial Institute, The Analytic Sciences Corporation (TASC), Honeywell Electro Optics Systems Division, and Itek Optical Systems Division.

He holds a PhD in physics from Boston College and a MS/BS in physics from Northeastern University.

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