Will gas prices continue to fall? How low will they go?

Gas prices are trending down in the United States, in part, because of decisions taken by the Biden administration. Whether or not these efforts will lead to a substantive and extended decrease in the price of the gallon remains to be seen. Compared to this time last month, prices have fallen across the country by an average of $0.47. Stocks of oil, however, remain at historic lows.

The pandemic took a serious toll on the US oil industry.

In 2018, the US became the largest producer of oil but the closure of oil refineries in 2020 caused them to drop down on the list of top producers. These closures have contributed to the global surge in crude oil and gasoline prices and now refiners are working to increase capacity. Refining capacity has risen from 16.13 to 16.5 million barrels a day over the last year, according to the Energy Information Administration.

The historic prices are a result of supply side shortages around the world.

Many European countries, including Germany and Italy who imported around forty percent of their energy resources from Russia have been especially hard by economic sanctions imposed in the wake of the invasion. These shocks are being felt across the block and President of the European Commission Ursula Von der Leyen has urged Member States to decrease their gas consumption by fifteen percent in order to ensure supply lasts throughout the year. US oil companies have decreased exports slightly compared to the rates captured last year. In July 2021, 3.2 million barrels were exported, last week only 3.19 million barrels were sent to foreign markets. If these trends continue prices may continue to fall, but once the cold weather begins and demand increases even further there is no knowing whether the trend will stick around.

How has the Biden adminstration brought the price of oil down?

The federal government has taken various steps to increase the global supply of oil in the wake of the Russian invasion of Ukraine. However, some of the movese seem to undermine the US’ own foreign policy strategy in order to achieve the goal of increasing supply.

Oil shipments from Venezuela arrive in Europe

One of the more subtle moves that has been made by the Biden Administration was to allow the European Union to restart a debt relief for oil program with Venezuela, which was halted two years ago. The US has an imposed an embargo on Venezuela, which is far reaching enough that even companies that do business with the country can be sanctioned. The first shipment, provided by Italy energy giant Eni, brought more than 650,000 barrels of oil to Europe in late June. The United States loosened its stance in an effort to increase the supply of oil to Europe with the long-term goal of expanding supply to lower prices globally.

The Spanish company Repsol will also begin supplying oil to Europe from Venezuela in the coming weeks. When the agreement was originally reached in early June, it was estimated that shipments would begin in early July, but the company has yet to make any announcements. It seems that all parties are trying to restart the agreement with minimal media coverage as it weakens the idea of sanctions. Sanctions are a form of economic warfare, and like traditional warfare, all sides are likely to incur damage. Energy markets have seen soring prices precisely because of their own economic dependence on Russia.

The Biden administration also removed Carlos Erik Malpica Flores from the list of sanctioned individuals. Malpica Flores served as national treasurer and vice president of Venezuela’s state oil company. US officials said that this move was made in order to encourage Nicolas Maduro to return to the negotiating table with his political rivals. However, the meeting with Madura in March came as the Russian invasion of Ukraine, which sent prices skyrocketing and could be seen as a concession to the regime.