What Really Determines Gasoline Prices for U.S. Drivers? New IHS Report Explains
July 30 2015 - 10:00AM
Business Wire
Gasoline price determined by international (Brent) price of
crude oil; ban on U.S. crude exports bolsters Brent price by
reducing global supply from what it would otherwise be, report
says
A summer driving season in full swing brings renewed attention
on gasoline prices. But the factors that are central to determining
the price at the pump are different than what many assume,
according to a new report by IHS Inc. (NYSE: IHS), the leading
global source of critical information and insight.
Despite a boom in U.S. crude oil production that has lowered the
price of U.S. crudes compared with international crudes, U.S.
gasoline prices have, on average, continued to closely follow the
international prices for gasoline and crude oil. The surge in U.S.
oil supply has not had more of an impact on prices at the pump
because export restrictions on U.S. crude dating back to the 1970s
have created a gridlock that prevents additional production from
coming to market, the report says.
The new report, Pump Primer: How U.S. Gasoline Prices are Set,
builds on the gasoline pricing analysis previously used in a series
of comprehensive IHS studies on U.S. crude export policy. The
studies found that removing the U.S. crude export ban would
actually lower U.S. gasoline prices an average of 8 cents per
gallon by encouraging greater U.S. crude production. All else being
equal, a more well-supplied world oil market will put downward
pressure on international crude oil prices—and consequently on U.S.
gasoline prices.
The new report incorporates several more months of gasoline
price data into the analysis. It confirms that the direct link
between international crude prices and U.S. gasoline prices has
continued.
For example, the study found that the wholesale price of
gasoline in the inland Chicago market continued to track those in
other markets in recent years—even as U.S. oil production grew and
inland crude prices weakened relative to international crude
prices. The gasoline price in that market continued to track prices
in other domestic and international hubs rather than weaken with
the U.S. crude price.
“This latest analysis further confirms what IHS research has
consistently shown – that the fear that lifting the ban on U.S.
crude exports would raise U.S. gasoline prices is unfounded,” said
Kurt Barrow, IHS vice president, downstream energy. “The price of
U.S. gasoline tracks global gasoline prices. The reason is
fundamental—gasoline is traded openly on the global market unlike
U.S. crude. Therefore, global gasoline prices follow international
crude prices, not U.S. crude prices. Removing the crude export ban
would actually lower U.S. gasoline prices by increasing the supply
of crude on the global market that is central to determining the
price of gasoline the world over.”
Pump Primer: How U.S. Gasoline Prices are Set and previous IHS
crude oil exports studies are available for download at
http://www.ihs.com/crudeoilsupplychain.
The Web site also features an interactive tool providing access
to jobs, income, tax and related data for state and congressional
districts and supply chain sectors. In the coming weeks, additional
supplemental reports examining the potential impact of crude oil
exports on specific areas of the crude oil supply chain will be
added.
About IHS
(www.ihs.com)
IHS (NYSE: IHS) is the leading source of insight, analytics and
expertise in critical areas that shape today’s business landscape.
Businesses and governments in more than 150 countries around the
globe rely on the comprehensive content, expert independent
analysis and flexible delivery methods of IHS to make high-impact
decisions and develop strategies with speed and confidence. IHS has
been in business since 1959 and became a publicly traded company on
the New York Stock Exchange in 2005. Headquartered in Englewood,
Colorado, USA, IHS is committed to sustainable, profitable growth
and employs about 8,800 people in 32 countries around the
world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2015
IHS Inc. All rights reserved.
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IHS Inc.Jeff Marn, +1
202-463-8213Jeff.marn@ihs.comorPress Team+1
303-305-802press@ihs.comTwitter: @IHS_news
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