how increasing US oil and gas production affects gas prices

As gas prices soared last year, Sheila Michoff said she organized her life to fill up less.

“I would consciously think about where I was going,” said Michoff, who paid up to $6.25 a gallon last July in her hometown of Redding, California. “I’d plan my stops to make sure all my errands were in one area.”

Now that national averages are back down to $3.71 , Michoff admits that she’s not paying as close attention to her gas receipts. But, like many, she says she has no idea what causes cost fluctuations at the pump.

Supply and demand are some of the biggest factors in gas costs, as seen last year when oil constraints drove prices up. Other factors that impact prices include:

• Retailers: According to the American Petroleum Institute, less than 1% of convenience stores that sell gas are owned by big oil companies—nearly all are independently owned. These retailers adjust prices to stay competitive in their local markets.
• Refining costs: Crude oil goes through a cleaning and separating process called refining before it reaches your local station. When the price of this process goes up, due to factors like maintenance costs or supply chain disruptions, so does what you pay at the pump.
• Taxes: Government gas taxes vary across regions. In Michoff’s home state of California, the gas tax increased by $0.04 per gallon over the Fourth of July weekend.
• Distribution and marketing: The cost of transporting gas from refineries to stations is another piece of the pricing puzzle. This is most often accomplished through pipelines, boats, trucks and trains. Additionally, marketing costs from refineries, distributors, wholesalers and retailers impact what you pay.
• Crude oil: Gasoline is made from high grade crude oil. It plays the largest role in the cost of fuel. Along with global demand, geopolitical instability and supply chain issues can affect crude oil prices.

Demand for gas isn’t slowing down, so additional supply is needed to keep prices affordable. The Organization of the Petroleum Exporting Countries (OPEC) predicts global demand for oil will grow to 110 million barrels a day by 2045, increasing by 23%.

Chevron is helping meet rising demands by expanding production across the U.S., including a 16% increase in the Permian Basin in 2022.

By 2026, production at our U.S. Gulf of Mexico facilities—which boast some of the lowest carbon intensity operations in the world—is expected to increase by nearly 50% to approximately 300,000 barrels per day.

We’re working to keep up with global demand and help drivers like Michoff fuel an affordable, reliable, ever-cleaner energy future.