Donald Trump tweeted that gas prices in America were the lowest they’ve been on a 4th of July weekend in over a decade. He also said he would like to see them go even lower.
What President Trump was referring to here was an analysis released by AAA on Monday, July 3 which concluded that “refinery rates continue to exceed demand for gasoline, which is helping drivers save at the pump.” Basically two things are happening, 1) America is producing more crude oil and 2) Consumer demand for oil has gone down.
When there’s more supply and less demand, prices drop.
Like most Trump tweets, it sparked controversy right away. Trump supporters were quick to praise the president for his "America First" economic policies which they claim helped consumers save money at the pump this past holiday weekend.
But other Twitter users weren't so quick to praise the president for low fuel prices. Some simply pointed out that the price of gas is out of any president's control.
Even some historical figures weighed in on Trump’s Twitter gas-gate fiasco. Fredrick Douglas responded with a series of snarky snaps for the commander in chief.
Other folks chimed in with their own theories to explain declining Gas Prices here at home saying Middle Eastern countries were flooding the market with cheap oil.
Ok so, what really affects the price of gas in America? In short, lots of things. But here are two main reasons why gas prices are at record lows for America's Independence Day this year. . .
More oil
The number of active oil rigs in the U.S. is way up from last year. According to the AAA report, “The U.S. oil rig count is up by 415 when compared to the count last year at this time.” It goes on to say that “drivers will continue to benefit from high crude production rates that have contributed to record refinery output rates this year.”
In addition to increased domestic output, the U.S.
is also importing more oil from other countries. According to the U.S. Energy and Information Administration, the EIA’s weekly petroleum status report says, “Over the last four weeks, crude oil imports averaged about 8.1 million barrels per day, 3.0% above the same four-week period last year.”
In short, right now we are producing more oil ourselves and buying more oil from other countries than we were at this same time last year.
But that's not the whole story.
Consumers buying less oil
The EIA’s report also noted that “gasoline demand dropped by 278,000 barrels per day” which also contributed to the drop in gas prices consumers are now seeing at the pump. Less demand = lower prices.Maybe the electric car is finally catching on!
Should Trump take credit for cheaper gas?
Donald Trump campaigned for president on a platform of decreasing U.S. dependence on foreign oil and increasing domestic production of crude oil here in America by building more pipelines, slashing environmental regulations that stifle drilling, and muscling Middle Eastern countries into selling the U.S. cheaper oil. As an unapologetic ally for the fossil fuel industry, oil industry executives were overjoyed when Trump took over the oval office.
If Trump does successfully manage to open up more federal land and deepwater offshore drilling sites here at home, while also eliminating the EPA’s regulatory burdens around drilling, he's hoping this will keep pushing down the national average for gas prices.
But wait, it's not really that simple
What really makes predicting oil prices so tricky is that we have to factor in what’s going on in the rest of the world. Oil is one of the most widely traded global commodities, and even a small political misstep could trigger a domino effect on gas prices around the world. To complicate matters even further, some of the top producers of oil are also the most politically unstable regions in the world-- which contributes to the volatility of global gas prices.
Political unrest and economic turbulence in major oil producing countries like Venezuela and the Middle East cause oil stock prices to swing dramatically. Remember -- the market likes stability and predictability, so stuff like populist uprisings, civil wars, and violent sectarian conflicts make powerful people in suits very uncertain about that region’s ability to keep producing tons of oil.
As a result, prices go crazy.
Right now we’re seeing Venezuelan citizens flooding the streets and fighting for a revolution. At the same time, the U.S. is experiencing mounting political tension with Iran, and Trump just signed the biggest arms deal in history with Saudi Arabia. On top of all that, Trump has vowed to break up OPEC (a super powerful alliance of countries who have a lot of oil), AND Trump has a rocky relationship with our neighbors Canada and Mexico (two of the U.S.’s largest suppliers of oil) so literally anything could happen to make the price of oil swing dramatically in the near future.
It's electrifying
To complicate the situation even further, many consumers are opting out of owning a gas guzzler altogether.
Electric car ownership is on the rise, which may have contributed to the overall decrease in demand for oil. If consumers continue to embrace the renewable energy sector when it comes to powering their cars and homes, the overall demand for fossil fuels will continue to decline - which will make the oil execs who love Trump very, very sad.