Kelly Presses Energy Information Administrator on Rising Gasoline Prices

To watch Kelly’s exchange with the witness, click here. For a transcript, see below:

Sen. Kelly: Thank you Mr. Chairman, and I’ve got a similar question for Mr. Nalley. First of all, thank you and thank you to the EIA for your testimony on rising energy prices.  I want to focus also on gasoline prices. 

This is affecting real people in my state, who have real jobs, as Senator Marshall mentioned. 

Triple A has ranked Arizona as one of the top 10 most expensive retail gas markets in the nation. As of today, the average price of regular unleaded gasoline in Arizona is $3.69, yesterday it was $3.62. Went up seven cents in 24 hours. This is more expensive than the national average of yesterday, $3.41 per gallon. 

Energy analysts say the main reason is that crude oil consumption is exceeding global production, which was disrupted last year, we all know that. Although domestic oil consumption is returning to pre-pandemic levels, global production hasn’t caught up. 

Whatever the explanation, the impact it’s having is that hardworking families in my state who commute to work and drop their kids off at school every day are seeing their costs go up, and they need some relief.   

Mr. Nalley, in your testimony, the EIA predicts crude oil prices, currently $81 a barrel, will drop about $10 per barrel next year as global production increases. So when will this drop in oil prices translate into lower gasoline prices for Arizonans?  

Mr. Nalley: Typically, there is about a 30 day lag once you see the drop in crude oil prices, it’s about 30 days before you actually see that in gasoline markets.

Sen. Kelly: And as a percentage decrease, are they, do they tend to be about the same?

Mr. Nalley: Well, the cost of gasoline at the pump is about 50% of its price of crude oil. 

Sen. Kelly: So if we see let’s say a 12 percent decrease in the price of crude oil, would you expect a 12 percent decrease in the price of gasoline? 

Mr. Nalley:  I think roughly, yes, I’d probably need to pull out a calculator but that’s about right.

Sen. Kelly: My state receives most of its gasoline from refineries in California and Texas. If you remember to last February, Texas had the polar blast that knocked out refineries and increased gasoline prices. Do you feel that Texas is better prepared this winter than they were last winter for this kind of event?

Mr. Nalley: Well I think what Texas experienced was unusual, pretty rare, but I believe Texas put in some new rules and regulations in place to protect against that.

Sen. Kelly: Do you feel those new rules and regulations have resulted in change in their refinery infrastructure?

Mr. Nalley: I think we’d have to get back to you on that, I don’t know that I have enough information to answer your question, Senator.

Sen. Kelly: Alright, I’d appreciate that. And finally can EIA project how gasoline prices might be impacted if refineries are knocked offline again this winter? Do you do any analysis or try to make any predictions, if we see what we saw last February in Texas? 

Mr. Nalley:  Can we do it, if an event occurs, sure, yeah, we can take a look and always try to figure out what the impact would be in that situation in terms of our regular ongoing product that we put out. If it was such a situation like the Colonial Pipeline situation where we were able to do some real time analysis and try to figure out how to, what the impact was there.

Sen. Kelly: Well, I would appreciate it, if you would have the opportunity to do that analysis if you do if you could get back to my staff.

Mr. Nalley:  Absolutely.

Sen. Kelly Thank you Mr. Nalley, and I yield back the remaining time.