With Republican leaders promising an end to high gas prices in the near future and President Donald Trump declaring the United States to be the “largest oil producer in the World, by far,” many consumers are wondering when fuel prices will return to more comfortable levels.
On a recent episode of “1819 News: The Podcast,” Tuscaloosa native and U.S. Senate candidate Rodney Walker, owner of Patriot Fuels USA Inc, explained how gas prices work and why they’ve skyrocketed since the start of the Iran conflict.
“Fuel cost me basically double per tractor-trailer load than it did before. I'd like for everybody to understand a little bit about that,” he began.
“Sometimes people think, ‘Oh, that the gas station is making a lot of money’ or ‘Oh, the oil man's making a lot of money,'" he continued. "Let me tell you something. If oil in America is less than $70 a barrel, then our people that owns oil wells here can't afford to pump it out and pay their bank notes. So $70 a barrel is like their break-even, or turn-it-on-or-turn-it-off, point.”
Walker said the oil price isn’t set locally at the pumps but rather in global stock markets.
“The oilmen don't control the oil price. All the people that's buying stocks and hedges and different things, options on that, that's the people that control the oil price,” he continued. “Let me give you an example. It was $58 a barrel just like two weeks ago on Thursday. When the conflict happened that weekend on Friday or Saturday night in Iran, the oil shot straight up. This past weekend — it comes on on Sunday afternoon; in other words, about 6:00, the market opens up — it went from $84 a barrel to $124 a barrel. That is how your price is set on your gas pump out here."
“The people that are controlling that are the people who are buying and selling those options on the market," Walker added. "Like, in other words, you could buy them, or I could buy them, or whatever. But people like me have to buy policies that basically protect that or hedge it to keep it from outrunning the cost that we're selling it for. But most people don't understand; they don't understand that the world sets the price of the fuel.”
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