It will reduce the price of the raw material, allowing refineries to make a profit at a lower sale price.
No refinery can undercut any other right now, because they are barely scraping a profit out now (because of the supply glut).
Every gallon of gas has a fixed bottom price based on crude oil prices. They also have a maximum price, or at least a strong inflection point, which appears to be about $4.00. Above that people stop driving.
That’s why gas prices have not gone up as much as oil prices have. They simply couldn’t raise the price more, not enough people were willing to pay.
Only if you assume some form of government price mandate on domestic production. Otherwise, domestic production just adds marginally to existing, global supply sources, for which there is no evidence of shortage.
That’s why gas prices have not gone up as much as oil prices have.
Pretty close to concrete truth.
Just do the math. 44.2 gallons of refined product (42 gallons to a barrel) out of barrel of oil. 19.5 of which is gasoline. So at the previous high range of $145 a barrel, 42 gallons of raw material was $3.45 a gallon.
Then take a state like NY, where federal, state, and local taxes on a gallon of gas are 62 cents. So before a single drop has been refined, and before a single expense has been incurred in refining, transporting, marketing, selling, etc... the raw cost is $4.07.