Consumers are driving less and buying more fuel-efficient cars. Oil production in the U.S. has increased dramatically in recent years. Still, gasoline prices have doubled since the depths of the Great Recession and have stubbornly stayed between $3 and $4 per gallon.
The average price for a gallon of regular unleaded in Ohio at the end of July was $3.41, compared to the national average of $3.65.
The state’s average price dipped 30 cents from June, but prices this week spiked back over $3.60, the average monthly price since the beginning of 2011.
Experts say gas-pumpers shouldn’t expect relief anytime soon despite some favorable trends.
According to data from the Energy Information Administration, total gasoline sales by suppliers has trended steadily downward since August 2005, when the national average price for a gallon of regular gas was $2.49 at the pump. (It was $2.44 in Ohio.)
In addition, the number of miles traveled in the nation has been decreasing since November 2007, and domestic oil production has increased by 30 percent since 2009. The nation produced an average of 5 million barrels of oil a day that year; last year’s average was 6.5 million barrels a day.
So why doesn’t decreased demand increase supply and drive down prices? The oil and gas markets don’t work that way, experts say.
If demand gets too low in this country and threatens to drag down prices, oil refineries look for better-paying markets around the globe.
“Refineries here can oftentimes make more money by exporting their products,” said Patrick DeHaan, a senior petroleum analyst for GasBuddy.com. “And so when we’re in that kind of situation where oil refineries can export products, it keeps pressure on supply here in this country.”
The increased domestic supply, in part sparked by new drilling technologies such as hydraulic fracturing, or fracking, has led to exporting of gasoline and diesel “for the first time in mass amounts,” said Stephen Hightower I, president and CEO of Hightowers Petroleum Company in Middletown.
“So instead of that product coming back into the marketplace, where it would create an excess supply and the price would actually be dropping,” Hightower said, “refineries are shipping the product to Europe, Africa and India and China.
“That alone, with the loss of refining capacity, has constrained supply. So, therefore, the price goes up.”
Crude oil exports from the U.S. have tripled since 2006, increasing from 1 million barrels a day to 3 million per day.
But despite that output, gas prices have fluctuated wildly since 2011, a Dayton Daily News analysis has found. During the past 31 months, the price for a gallon of regular in Ohio has bounced up and down from a low of $3.10 to a high of $3.91.
On one day this week, for example, the price for a gallon of regular gasoline in the area ranged from $3.25 to $3.65.
Drivers in Ohio, however, have it a little bit better than the nation as a whole when it comes to pain at the pump.
Over the past 10 years, the average monthly price of regular unleaded gasoline in Ohio has been about 6 cents lower than the national average, an analysis of data from the U.S. Energy Information Agency found.
Part of the reason Ohio drivers get a break is geography, Hightower said.
“You’ve got product coming in from Canada,” Hightower said. “You’ve got refineries in Ohio in the Toledo area, the southern part of Ohio and in the middle of the state as well, like Lima. And all the major pipelines go through Ohio, so it’s supply.”
Another cause is slightly lower gasoline taxes, said DeHaan.
In fact, at 46.4 cents per gallon, Ohio ranks 22nd out of the 50 states, and is slightly below the national average of 49.4 cents per gallon, according to the American Petroleum Institute.
Still, Thursday’s $3.65 a gallon at the UDF at Stewart and Brown streets in Dayton was not sitting well with customers.
“I think they’re ridiculous!” Dayton resident Lisa Sargent said of gas prices as she pumped more than $100 into her 1999 Chevy Suburban. “No, I’m not happy!”
Sargent, a 45-year-old University of Dayton employee, says she and her husband have had to cut back on driving.
“This tank isn’t my only vehicle,” she said of the Suburban. But her family likes to get out in the country and visit state parks, and if she and her husband want to take their three kids, their friends and three dogs, they have to take the Suburban.
“It used to just be, OK, we’ll go do this,” Sargent said. “But now it’s like, wait a minute, if we take the whole family in this, it’s $120 to fill it up.
“I don’t understand why you have this big increase in gas prices that we’ve had in the last few years. We were like in the $2 – $2.50 range, and now all of the sudden we’re in the $3.50 range?”
Gas won’t hit $6
At least prices have stayed below $4. Hightower said he knows why: The oil industry learned an important lesson during the Iraq War, when prices shot up in some areas close to $5 a gallon.
“The industry was then able to see the tolerance of the U.S. consumer and how much they would actually spend before they would stop driving,” Hightower said. “And anything over $4, east of the Rockies, will begin to constrain driving, which would then constrain consumption and would then affect their profits.
“So they know what the threshold is. And you will not see $6 gasoline for that very reason.”
Asked what price would make them stop driving, several gas customers interviewed Thursday said $4 was the limit.
“We need lower gas prices,” said Samuel Parker, a 20-year-old Dayton resident. “At $4, I’d start biking or get on the RTA.”
Rosie Aingston, a 16-year-old student at Stivers School for the Arts, said she’s been driving about a year, and only wishes she could remember the days of $2 a gallon gas.
“If it was above $4, that’s a bit much for me,” said Aingston, who has to pay for her own gas from her job a Cracker Barrel. “I would stop driving and resort to a bike.”
Sargent, however, said her family is at its limit.
“This is about as high as we can go,” she said. “My husband is employed, too. But we’re not really high wage-earners.”
DeHaan, however, does not agree with Hightower about the effect of the oil industry on prices. The oil companies, he said, don’t have that power.
“Some of what they do impacts the price, but it’s the free market that dictates prices,” DeHaan said. “And to suggest that oil companies will raise prices up until people stop driving, that’s pretty flawed.”
DeHaan said it would take a “significant physical disruption” in the supply chain, such as a refinery going down or a destructive hurricane, to push gas over $4 a gallon this year.
He predicts that prices will remain mostly in the mid-$3 range for the rest of the summer, and then drop some in the fall when the weather gets cooler.
“But it could be a volatile rest of the year,” DeHaan said. “Prices could be all over the place.”