Forum Discussion
LindsayRichards
May 04, 2013Explorer
Exporting gasoline reduces supply of gasoline here in the US, increasing price by the law of supply and demand due to the finite refinery capacity. Gasoline demand in the US is steadily dropping so the excess should drop the price. Oil companies are propping up the price by exporting it.
Your statement appears to make sense except for the fact that the supply and demand is on the crude oil, not the gasoline. All of the gasoline we need is refined out of the crude oil (about 75% of the cost of the finished product.). There is no shortage of gasoline, the shortage (caused by OPEC) is in the crude oil. The refiners now have the ability to make more than they can sell and are left with the following choice... do we buy imported crude oil, keep the refinery running and make gasoline to sell to South America or close the refinery and lay off the employees? 5 years ago before the recession, we had to import gasoline as well as crude oil. Now with demand for gasoline in America down, are exporting the excess capacity. Worldwide,supply and demand for crude oil remains at about the same balanced levels. What we could do to lower prices is increase the supply of crude oil which would lower it's price and thereby reduce the price of gasoline. I hope I clarified this, if not, please let me know and I will try to make it clearer.
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