Gas Prices Climb Suddenly Even As Oil Production Grows — Experts Blame Increased Demand

By @TrishaMarczakMP |
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    The price of gasoline on Feb. 20, 2013 in Plymouth, Minn. (Photo/Jo Erickson)

    The price of gasoline on Feb. 20, 2013 in Plymouth, Minn. (Photo/Jo Erickson)

    (MintPress) – Thought an increase of oil production in the U.S. — and world — would lead to lower gas prices? Think again.

    Prices in the U.S. have risen drastically in recent weeks, climbing up to nearly $4 in frack-heavy states like Colorado — a surprise to consumers who were sold on hydraulic fracturing, commonly referred to as fracking, under the premise that it would help them out financially at the pump.

    Demand has gone up worldwide, but consumers are still questioning why the recent spike has taken hold, especially as Americans are compromising their health and environment in the wake of the U.S. fracking boom.

    In North Dakota, the second-largest oil producer in the nation, the scenario is no different. Home to the oil-rich fields of the Bakken, gas prices have soared to $3.74. According to the American Automobile Association (AAA), prices are expected to increase at least 5 percent through early April.

    In 2012, the U.S. produced 790,000 more barrels of oil per day than it did the previous year, setting a record for the nation. This year, the U.S. Energy Information Administration predicts it will rise by another 815,000 barrels a day.

    Just days ago, Philadelphia Energy Solution’s CEO Phil Rinaldi told the Boston Globe that domestic supplies of oil added pressures on foreign sources to keep prices down.

    “It allows us for the first time in a very long time to have some genuine diversity of supply,” he said. “The shale plays are game-changers.”

    But ask the average consumer at the local gas station if the rhetoric matters in the face of spiked prices and they’ll echo the same sentiment of disgust.

    Graeme Stewart, a native Canadian now living in North Dakota, is living with prices that have risen drastically — in the very state that has been transformed from the fracking industry.

    “People have basically been driven off their land, and given the price for their land (at a rate) they can’t refuse,” he told Mint Press News. “Since then, who knows what’s the groundwater is like — they’re shooting water and chemicals down into the earth.”

    Even in the midst of that sacrifice, North Dakotans are subject to spikes at the pump, without explanations from the oil industry as to the significance of the timing.

    The reasons for the rise in prices in complex, but partially has to do with the shift in supply and demand. While the U.S. Energy Information Administration indicates oil production has increased throughout the world, rising 2.3 percent since 2010, demand has also grown. During that same time, the global economy grew by 7.7 percent, according to the International Monetary Fund (IMF).

    This may be, but it doesn’t answer the question on the minds of Americans at the pump: Why now, and why the sudden climb?

    One reason gas prices haven’t skyrocketed completely can be attributed to countries’ investments in conservation methods, according to James Hamilton, an economics professor at the University of California, San Diego.

    “Ongoing conservation, for example, in the form of continued improvement in fuel economy, has been a key factor keeping the oil price from rising more in the face of world income growing much faster than world oil production,” Hamilton wrote.

    Despite the growing demand that has largely led to the increase of costs at the pump, there’s still holes in the argument that was used to sell America on widespread fracking practices that have compromised groundwater supplies. In Colorado, fracking operations have led to more than 2,070 spills since 2008.

    As the U.S. prepares to handle the decision regarding approval of the Keystone XL Pipeline, intended to stretch from Alberta, Canada to the Gulf of Mexico, gas prices are likely to be brought up — and promises about prices at the pump are likely to be questioned.

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    • Also, most oil producing nations treat their resource’s
      As a national resource and have lower prices.

    • Actually, American automotive use of gas has never been lower today then it has in the last 26 years.

    • Actually, American automotive use of gas has never been lower today then it has in the last 26 years.