Oil Prices, Gas Prices and Domestic Production

Jeff Bingaman, chairman of the Senate Energy Committee, has a well-deserved reputation for focusing on facts. He worries about the many myths surrounding gasoline prices, oil prices and domestic production. Today, on the Senate floor, he called out some of these fictions and refocused attention on the facts.


“I wanted to speak for a few minutes about gasoline prices, which my colleague from Utah just talked about a few minutes ago. Also, about domestic oil and gas production and also about access to federally-owned oil and gas resources. These are issues that have been raised by numerous senators on this Transportation bill. They are issues of critical importance to our country’s economy, to national security and to resource management. And I’ve been increasingly concerned that the issues that we’re debating, and the facts that are being put out there are often not the true facts. There is widespread misunderstanding of what needs to be done to deal with this set of issues, in my opinion.  


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“Let me start with the issue that’s most important to most Americans – and that is, the price of gasoline at the pump, and the price of oil. We need to understand clearly what is causing this, and we need to be direct with our constituents about what is causing this.

“Let me state this as clearly as I can – what I believe is really without dispute among experts. That is, we do not face cycles of high gasoline prices in the United States because of a lack of domestic production. We do not face these cycles of high gasoline prices because of lack of access to federal resources, or because of some environmental regulation that is getting in the way of us obtaining cheap gasoline.

“As was made clear in a hearing we had in the Senate Energy Committee in January, the prices that we are paying for oil and the products refined from oil, such as gasoline, are set on the world market. They are relatively insensitive to what happens here in the United States with regards to production.  Instead, the world price of oil and our gasoline prices are affected more by events beyond our control, such as instability in Libya last year or instability in Iran and concerns about oil supply in Iran this year.

“First, I’ve got two charts that I think clearly make this point very clearly.

“The first chart I believe is very instructive. This is entitled, ‘Weekly Retail Price for Premium Unleaded Gasoline, Including Taxes Paid.’ And, there are two lines on the chart. The top line contains the weekly retail prices in France, Italy, Belgium, Netherlands and the UK. You can see how those prices fluctuate. This is through January of last year. The comparable prices paid in the United States are reflected in this bottom line, and of course, this is because we pay much less in taxes than these other countries.  It’s a useful chart that makes a couple of important points. First, that the price patterns are remarkably similar in all countries. That is, the prices for gasoline in all these countries reflect the world price of oil. Second, while the patterns are similar, the U.S. price is significantly lower, because of the lower taxes that we pay in this country.