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No easy fix to higher gas prices in United States

Refineries in the country can only take on so much shale oil and, once at capacity, the rest of it heads to the export market.

By Daniel J. Graeber
A partisan debate in the United States is growing louder as consumers start to feel the pinch from higher gasoline prices. File Photo by John Angelillo/UPI
A partisan debate in the United States is growing louder as consumers start to feel the pinch from higher gasoline prices. File Photo by John Angelillo/UPI | License Photo

May 24 (UPI) -- Calls to tap into U.S. oil reserves to stave off spikes in retail gas prices make sense only to a point because of refinery limitations, an analyst said.

GasBuddy, which provides real-time fuel price information at the retail level, reports a national average retail price for a gallon of regular unleaded gasoline at $2.98, up nearly 20 cents from one month ago and 60 cents higher than this time last year.

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A spike in crude oil prices, triggered in part by U.S. sanctions pressures on Iran and a downturn in production from Venezuela, one of the top oil exporters to the United States, has led to steep price hikes at the pump.

Senate Democrats in a letter to President Donald Trump called on the administration to pressure the Organization of Petroleum Exporting Countries to do more to mitigate supply-side pressures. Sen. Lisa Murkowski, R-Alaska, responded by saying the domestic industries may be a better option.

"I was stunned to hear my colleagues encouraging more production from the likes of Iran and Saudi Arabia, rather than right here in America, as the solution," she said.

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Thanks in part to shale basins in the country, the United States is on pace to become the world leader in crude oil production, passing Russia at some point in the near future. U.S. exports of its light, sweet crude oil is also on the rise since former President Barack Obama ended a 40-year ban on domestic shipments.

Patrick DeHaan, the senior petroleum analyst for GasBuddy, told UPI that domestic refiners can use U.S. shale oil to blend with heavier oil like that imported from Canada to produce products like gasoline.

"However, there's so much light crude in the market that refiners are nearing their limit to refine it in order to yield a balanced slate of products, leaving the only avenue for the onslaught of light products for the export market, thus unable to stay in the U.S. to keep our dependence on foreign oil in check," he said.

In other words, refiners are exporting the domestic oil they can't use. Federal data show the four-week average for crude oil exports for the week ending May 18 was 2.1 million barrels per day, up 183 percent from the same time last year.

Gasoline production, meanwhile, declined last week by 410,000 barrels per day.

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President Trump was a recent critic of OPEC, blaming the production group for inflating the price of oil with its policy of constraining production in order to drain a market surplus. That surplus pushed the price of oil to historic lows in early 2016 and brought consumer gasoline prices with it.

Senate Democrats in their letter to Trump said the rise in fuel prices could be negating the impacts of federal tax cuts steered by his administration.

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