Global oil prices affect our gas prices because global oil prices affect local oil prices (and gas it made from oil). Global oil prices affect local oil prices because oil is a (mostly) fungible [1] commodity and it's (mostly) easy to move around. If oil from Canada became more than a little bit cheaper than oil from Texas, the Texas refineries would buy Canadian oil and have it shipped down. The increased demand for Canadian oil and decreased demand for Texan oil would cause Canadian prices to go up and Texas prices to go down, until the difference between them was very close to the transportation costs. Likewise, if Canadian oil were more than a little more expensive than Texas oil, the Canadian refineries would start buying their oil from Texas, and the prices would equalize that way too. As it turns out, this is the same reason Gold (And silver and platinum and copper and so on) has very close to a single global price, except all of those things are even more fungible and even easier to move around, so there's even less regional variation in their price.
[1]: Fungible means that every barrel of oil is commercially equivalent. I say oil is mostly fungible because there's quite a bit of nuance in various grades of oil, but in broad strokes, you can make the same stuff from any grade of oil, it's just harder with some grades than others, which keeps price stability between the various grades - if one grade gets too expensive, the consumers of crude oil will make due with a different grade. Gold is more fungible - 14k gold is 14k gold. Dollar bills are fungible - you don't care which one the cashier gives you as change. Fine art is not at all fungible.
Eh, I just read about oil on the internet but my understanding is that oil is not at all fungible. Refineries are constructed and operated with specific grades of crude in mind. Though they can can process other grades with a few years of process tweaks, it comes with an efficiency (ie. profit) hit.
Our gulf coast refining capacity is built with heavy sour crude coming from Central and South America in mind, but most of our indigenously extracted oil is light sweet. It's more profitable to just trade for the crude our infrastructure is built for than to refine the wrong crude, but this does expose us to the global market prices.
This is mostly right, but it’s more a range of potential grades a refinery is set up for, but you can get to those grades by blending, in which case it could be cheaper to buy a heavy and light cargo to get to a medium grade than buy a medium grade cargo…
The feedback across years is still a short enough time periods for markets to adjust.
Oilfields generally last a long time as there is little incentive to drill a lot of holes and add hundreds of millions in equipment to empty one in 5 years or less. Instead companies extract oil across decades so when a new oil filed gets tapped regional prices shift, refineries adapt, until regional prices quickly match global ones long before the well is dry.
Fracking is something of an exception, but it’s still dependent on having refineries to process the stuff.
Except Canadian oil is in fact generally cheaper than Texas oil. There's a price differential there because it's difficult to ship oil out of Canada. Similarly there aren't enough export ports for US oil so US oil prices are lower than global oil prices.
That doesn't exactly explain it. Plenty of states in the oil business derive either significant tax revenue from it or subsidize it for local consumption. As far as I can tell, the US does neither (actually, it pays subsidies for the exploitation).
[1]: Fungible means that every barrel of oil is commercially equivalent. I say oil is mostly fungible because there's quite a bit of nuance in various grades of oil, but in broad strokes, you can make the same stuff from any grade of oil, it's just harder with some grades than others, which keeps price stability between the various grades - if one grade gets too expensive, the consumers of crude oil will make due with a different grade. Gold is more fungible - 14k gold is 14k gold. Dollar bills are fungible - you don't care which one the cashier gives you as change. Fine art is not at all fungible.