Five Reasons Pump Prices Are So High in Illinois

Why are pump prices SO high right now – especially here in Illinois? There are a myriad of reasons, many of which have nothing to do with Russia’s invasion of Ukraine and the subsequent U.S. ban on Russian energy imports. Here the top five reasons pump prices are at record highs.

  1. First and foremost, oil demand is off the charts. U.S. oil demand recently hits an all-time record for this time of year of 22 million barrels per day. Global demand is near pre-pandemic record highs as well.
  2. Oil supply is unable to meet current demand. The Environmental, Social and Corporate Governance (ESG) movement has driven new oil and gas investment down 50% since 2011. Coupled federal policies aimed at discouraging oil and natural gas development, this has kept U.S. production below pre-pandemic levels.
  3. OPEC+ has also failed to meet its recent production quotas and it’s been widely reported that the cartel’s spare capacity could be exhausted by the end of the year. Coupled with stagnant U.S. production, this has left the global market undersupplied. This directly impacts pump prices, which are driven largely by the global market.
  4. At the regional level, Illinois’ gasoline tax burden – totaling 78 cents per gallon when state, federal and local taxes are added up – is the second-highest in the country. This explains why gasoline is so much cheaper across the border in Missouri, Wisconsin, Indiana and Kentucky.
  5. Russia’s invasion of Ukraine – and subsequent bans on Russian energy imports – has piled on top of the aforementioned factors to send pump prices soaring past the $4 threshold. The removal of barrels from the world’s second-leading oil producer and exporter has sent an already undersupplied global market into disarray. Notably, pump prices would soar to unthinkable levels should European nations such as Germany ban Russian energy imports. However, most European nations are so overly reliant on Russian oil and natural gas that they will likely NOT impose formal sanctions on Russian energy.

President Biden has suggested price gouging is to blame for rising pump prices, but a September Associated Press fact check debunked that claim.

Oil is a globally traded commodity and oil companies have no control over the price of oil or gasoline prices. If they did, they certainly would have never let oil prices go negative like they did last spring when the Covid-19 pandemic sent oil demand plummeting.

Although Illinois has the potential to produce more oil than it’s currently producing, Illinois producers also have no control over pump prices. Illinois produces between 20,000-21,000 barrels of oil per day and the world consumes 100 MILLION barrels per day. However, increased United States production can help lower pump prices and improve our energy security. Even Tesla founder and CEO Elon Musk has called for increased U.S. oil and natural gas production to deal with this crisis, indicating that not even he believes this issue can be resolved by Americans simply going out and buying electric vehicles.

The United States will need to increase all forms of domestically produced energy to blunt the impacts of this crisis. Fortunately we are in much better shape than the European Union, which is dangerously reliant on Russia for its energy needs and also overly dependent on weather-reliant alternative sources that have left it vulnerable to Vladimir Putin’s aggression.