NEW YORK — The U.S. is increasing its oil production faster than ever, and American drivers are guzzling less gas. But you’d never know it from the price at the pump.
The national average price of gasoline is $3.69 per gallon and forecast to creep higher, possibly approaching $4 by May.
“I just don’t get it,” said Steve Laffoon, a part-time mental health worker, who recently paid $3.59 per gallon to fill up in St. Louis.
U.S. oil output rose 14 percent to 6.5 million barrels per day last year, a record increase. By 2020 the nation is forecast to overtake Saudi Arabia as the world’s largest crude-oil producer. At the same time, U.S. gasoline demand has fallen to 8.7 million barrels a day, its lowest level since 2001, as people switch to more fuel-efficient cars.
So is the high price of gasoline a signal that markets aren’t working properly? Not at all, experts said. The laws of supply and demand are working, just not in the way U.S. drivers want them to.
U.S. drivers are competing with drivers worldwide for every gallon of gasoline. As the developing economies of Asia and Latin America expand, their energy consumption is rising, which puts pressure on fuel supplies and prices everywhere else.
The U.S. still consumes more oil than any other country, but demand is weak and imports are falling. That leaves China, which overtook the U.S. late last year as the world’s largest oil importer, as the single biggest influence on global demand. China’s consumption has risen 28 percent in five years.
“There’s an 800-pound gorilla in the picture now — the Chinese economy,” said Patrick DeHaan, chief petroleum analyst at GasBuddy.com.
Two other factors are making gasoline expensive:
High oil prices. Brent crude, a benchmark used to set the price of oil for many U.S. refiners, is $108 per barrel. It hasn’t been below $100 since July. On average, the price of crude is responsible for two-thirds of the price of gasoline, according to the Energy Department.
Refinery shutdowns. Refineries temporarily close in the winter, when driving declines, to perform annual maintenance. That lowers inventories and sends prices higher in the late winter and spring.