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Fuel Prices

(Topics: The Economy | Back to Home)

The price of gas goes up and down. And the best way to understand why is to look at the main component of gasoline: crude oil. The government of the United States has an office with three hundred people in it devoted to studying these kinds of questions. It's called the Energy Information Administration and they put together this helpful graph:

The United States is the largest producer of oil in the world, but we are also the the largest consumer. Ask the EIA. We are able to make enough oil for ourselves almost entirely, which has been the case for decades. So why does the price of fuel go up and down if we can make most of it for ourselves? And would energy independence change that?

Nope. Even if we made way more oil than we used, the prices would still fluctuate. In Saudi Arabia, they produce about four times as much oil as they need domestically, but the price still goes up and down. In fact, the government will occasionally set a price cap to try and help the economy. [1]

To summarize:

  • Fuel prices go up and down because we live in a global economy with largely free trade
  • Even if we made way more oil than we needed, fuel prices would still fluctuate
  • Gas prices have very little to do with who is in office
  • Reducing our dependence on foreign oil is good; reducing our dependence on oil in general is even better.

[1] Here's one from July of 2021. It's not clear if this would be legal in the United States (or if it's even a good idea) but Congress and many states have at least looked into anti-gouging laws.


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