PEORIA MAGAZINE July 2022

ECON CORNER

W elcome back to Peoria Magazine’s Econ Corner, a recurr ing feature i n wh i ch we pose questions to experts about various economic issues and how they affect our lives and careers here in central Illinois. Dr. Joshua Lewer, Chairman of the Department of Economics and McCord Professor of Executive Management Development at Bradley University, returns to provide this month’s analysis. Peoria Magazine (PM): The price of a gallon of gasoline has topped $5 in central Illinois, no small factor in fueling inflation that is putting a real hurt on many Americans. Not uncommonly, citizens blame the federal government for contributing to the problems at the pump — and elsewhere — or look to that same government to fix them. But oil is traded on global markets, and fuel prices are up just asmuch if notmore inEurope. Are there act ions the federal government could take that would have a measurable, positive impact on fuel prices?

Dr. Lewer (DL): Oil is an interest ing commodity to follow with respect to price action. While it is true that the price of oil is determined by global forces of supply and demand, one thing that most people do not know is that Americans still pay a discount for their oil compared to the rest of the world. Take a look at the figure on page 89 from the Federal Reserve. Ever since 2009 when the fracking revolution added significant production and capacity here in the United States, West Texas Intermediate (the price the U.S. pays for oil) diverged from Brent (the price Europe and the world pays for oil). This discount continues today as WTI prices are about 2% lower than Brent. With national gas prices topping $5 per gallon, everyone wants to know: What can be done about today’s elevated energy prices? In the short run, the answer is to encourage, not discourage, conventional oil and gas production. Elon Musk recently tweeted, “Hate to say it, but we need to increase oil & gas production immediately.” U.S. oil

An Interview with Dr. Joshua Lewer Chairman of the Department of Economics and McCord Professor of Executive Management Development at Bradley University

INTERVIEW BY MIKE BAILEY

88 JULY 2022 PEORIA MAGAZINE