Locally, nationally, and even internationally, everyone is talking about one thing: gas. Soaring prices are worrisome and causing many people to point fingers at local gas stations, the federal government, and the war in Ukraine. But what’s really happening? Where do we get our oil from? What is fracking and why aren’t we ramping up production? And how can the average American family afford to fill up its tank? Let’s breakdown the issue together.
How much oil does the US import from Russia?
The US imports Russian oil, but it is not highly dependent on the country for its supplies. In 2021, the US imported an average of 209,000 barrels per day of crude oil and 500,000 barrels per day of other petroleum products from Russia, according to the American Fuel and Petrochemical Manufacturers (AFPM) trade association. This makes up three percent of US crude oil imports and one percent of the total crude oil processed by US refineries. Canada is the largest provider of crude oil to the US, where we import 61 percent of its crude oil. We import 10 percent from Mexico, and six percent from Saudi Arabia. According to the AFPM, imports of Russian crude oil have increased since 2019, when the US imposed sanctions on Venezuela’s oil industry. US refiners also temporarily boosted Russian imports last year after Hurricane Ida disrupted oil production in the Gulf of Mexico.
How do sanctions on Russia affect US oil prices?
There are two potential scenarios to consider. The first is with the oil supply and the short answer is it would not affect the US that much. If there was a drastic need for oil, the US has strategic oil reserves.
The broader economic effect to consider is if the US stopped importing Russian oil, that would mean that likely many other countries would also no longer be importing Russian oil. That would make a very tight oil market already much tighter, and that would drive up the price of oil. While the sanctions against Russia have not specifically targeted its energy supply, the measures do cover banks and financial institutions, which indirectly hampers the country’s ability to export oil and other fuels. As such, analysts are seeing a lot of “self-sanctioning.” Banks and traders don’t know exactly what’s going to get caught up in the Russian sanctions, and they don’t want to risk getting investigated for having imported or dealt with a Russian company.
How do EPA restrictions affect the industry?
The current administration hasn’t succeeded in enacting any stringent regulations and the policies that are under active consideration largely offer incentives for clean energy rather than vilify fossil fuels. Oil and gas executives largely point the finger at investors, not government, as their primary source of climate pressure. Trillions of dollars have flowed into ESG funds, short for environmental, social and governance, and investors have become skeptical of the industry’s long-term future in the face of climate change. For many investors, the opportunity for a quick return isn’t worth it. Industry executives blame “underinvestment” for the current crisis. Climate change has reshaped the industry so much that even during a land war in Europe and soaring oil prices, they still need to respond to calls for reduced emissions.
What is fracking? Why aren’t we building more pipelines and drilling rigs?
Hydraulic fracturing, or fracking, is an efficient way for energy companies to extract gas and oil from rock that’s deep underground. Fracking injects high-pressure solutions of water, chemicals and sand into these shale deposits to release the oil and gas. But the popular drilling method is controversial because of its links to earthquakes and pollution.
As oil prices trade well above $100, many oil executives are keen to produce more oil. In the Permian Basin, the West Texas oil field behind the fracking boom, producers can profitably drill a new well if the U.S. is benchmark is around $50 per barrel, according to data from the Dallas Fed.
But investors aren’t convinced that drilling is the best this time around. The most obvious reason for staying the course is that high prices are good for investors. Rather than spend money on new projects that may not be profitable down the road, oil companies generally prefer that the companies return those profits to investors. As oil prices rise, the profits that can be returned to investors will only grow. If they fall, the companies have sufficient padding to avoid steep losses. This padding would not be available if they ramp up building drilling sites or pipelines.
Because no one knows how long the current crisis will last or what its impact on the global economy will be, it is hard for the oil industry to make a game plan. A sustained war in Ukraine would mean sustained high prices, so a solution would be more production. But a long-lasting war could also drive a global recession, reducing demand for oil. This volatility makes the direction of the industry impossible to predict.
What can locals do to save money at the pump?
While you can’t control the price of oil, you don’t need to feel helpless in the face of burgeoning gas costs. Start with the most obvious advice for saving money on gas: Find the cheapest gasoline in your local area and buy it from that station. A handful of websites and apps already track gas prices for free. GasBuddy is a well-known website for tracking gas prices in the US and Canada. The auto insurance company, Geico, also provides a helpful local gas station tracker. Enter an address, city or ZIP code plus a maximum distance area, and Geico will return a detailed list and map with regular, mid-grade and premium gas prices as well as directions to stations.
You can also check gas prices in your vicinity when using mobile navigation apps like Waze or Google Maps. In Waze, tap the fuel pump icon under the search bar to see current prices at gas stations near you. Likewise in Google Maps, simply tap the “Gas” button beneath the search bar to display prices for all gas stations close to you. Zoom out or scroll the map to find gas prices for a broader area. The Google Maps website also provides the same service via browser.
Consumers can also get money back from gas credit cards and fuel rewards programs. If you’re spending $60 to $75 every time you fill up your gas tank, there’s a benefit in receiving a percentage of that money back via gas station or credit-card reward programs. Major gas stations offer credit cards and reward programs that promise to save you money with each fill-up by giving you a percentage back.
Consider paying for gas with cash instead of debit or credit. GasBuddy also shows both credit and cash prices if there is a difference. The practice of charging less on gasoline for customers paying cash varies from gas station to station, but it can be very common.
Another way to save money on gas is to make sure you’re maximizing the number of miles your vehicle travels per gallon. First, check your tires: the US Department of Energy estimates that properly inflated tires can boost gas mileage by 3%. At current prices, that level of improved efficiency could save you almost 13 cents per gallon.
Google Maps can also boost your miles per gallon by recommending certain routes that avoid hills and traffic, resulting ideally in more constant driving speeds. Fuel-efficient routes are available on the mobile Android and iOS apps. Other fuel-tracking mobile apps like Fuelio and JerryCan provide methods for improving your fuel efficiency as well as tracking gas prices at stations. JerryCan claims that drivers using its app can improve their fuel efficiency by up to 20%, which equates to saving a whopping 87 cents per gallon at today’s prices.
Lastly, try a club membership for discounted gas prices. Costco, Sam’s Club and Walmart Plus all offer discounted gas prices to their members. Walmart+ promises 5 cents less at its fueling centers, plus access to all Sam’s Club locations. Walmart Plus memberships cost $13 a month or $98 a year. Sam’s Club memberships range between $45 and $100 per year.
