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Are large oil companies price gouging you at the pump?

Industry experts explain the economics behind rising gas prices in the U.S.

CHARLOTTE, N.C. — The national price for a gallon of gas is hovering around $5, according to AAA, and industry experts said surpassing the $5 threshold is only a matter of time. 

As high prices frustrate drivers, some are wondering if big oil companies are price gouging just to make extra money right now.

It's more complicated than you think.

THE QUESTION

Are big oil companies illegally price gouging consumers for a gallon of gas?

OUR SOURCES

THE ANSWER

This is false.

No, big oil companies are not price gouging consumers for a gallon of gas. 

WHAT WE FOUND

First, it's important to understand the definition of price gouging. North Carolina law says it's when a company or business charges too much for a product during a time of crisis, like a hurricane or pandemic.

Data from the EIA showed prices for gas have steadily increased over the last several months. They're nearly $2 higher than a year ago.

Credit: EIA

Big oil companies like Chevron and Exxon Mobile have gas stations charging nearly $5 a gallon. 

"Oil companies are price takers, they're not price setters," De Haan said. 

De Haan compared the high prices consumers are seeing at the pump to the high prices they're seeing in the real estate market.

"Your home is worth 50%, maybe 30% more than it was a year ago, especially in Charlotte's very hot market," De Haan said. "Does that mean you're gouging if you sell for $100,000 more than you paid for it? Well, you're just selling at the market price. And that's determined by supply and demand."

De Haan said the global oil supply has been impacted by the pandemic and by the war between Russia and Ukraine. Oil supply has been down for months and production takes a while to ramp up.

"There's not enough oil supply in the market," De Haan said. "There's still a lot of people filling their tanks, a lot of buyers. And so prices are higher."

While it's true that oil companies set prices at the pump, De Haan said executives are reacting to a strained global market. He said if consumers want to see lower prices, they can start by lowering their consumption of gas.

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