Since gas is extracted from crude oil through a process called refining, and crude accounts for more than half the cost of gas, the oil market remains a major factor in high gas prices. But at around $112 a barrel Tuesday, the price of crude is well below its recent high of roughly $130 in early March, which followed economic sanctions against Russia—the world’s third-largest oil producer—for its invasion of Ukraine. So, why are gas prices still stuck at record highs? One reason is behind the scenes: U.S. suppliers can’t produce enough gas to keep up with increasing demand—partly because of a reduction in refining capacity. U.S. refining capacity is down by 1 million barrels of crude oil a day since the summer of 2020, tumbling to 17.94 million daily barrels on May 6, according to data from the Energy Information Administration (EIA). Fire, storms, and declining demand early in the pandemic forced six refineries to go offline in 2020, the EIA said, dropping the total number to 129. And, while gas prices temporarily dipped in April following the government’s move to release oil stored in strategic reserves, the highest level of gas consumption since the pandemic has helped send prices back to record highs, said Patrick De Haan, head of petroleum analysis for gas price website GasBuddy. “Refiners just can’t keep up with demand,” De Haan said. “This is pushing on both gasoline and diesel at the pump. It’s been acute in the last six weeks because temperatures are getting warmer. People want to go places.” Have a question, comment, or story to share? You can reach Terry at tlane@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
