Crude oil is getting cheaper so why isn't gas?
By CHRIS KAHN and JOHN PORRETTO, AP Energy Writers Chris Kahn And John Porretto, Ap Energy Writers
24 mins ago
NEW YORK Crude oil prices have fallen to new lows for this year. So you'd think gas prices would sink right along with them.
Not so.
On Thursday, for example, crude oil closed just under $34 a barrel, its lowest point for 2009. But the national average price of a gallon of gas rose to $1.95 on the same day, its peak for the year. On Friday gas went a penny higher.
To drivers once again grimacing as they tank up, it sounds like a conspiracy. But it has more to do with an energy market turned upside-down that has left gas cut off from its usual economic moorings.
The price of gas is indeed tied to oil. It's just a matter of which oil.
The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.
Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.
But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.
"We're going definitely over $2, and I bet we'll hit $2.50 before spring," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "This is going to be an unusual year."
On the last day of 2008, gas went for $1.62 on average, according to the auto club AAA, the Oil Price Information Service and Wright Express, a company that tracks transportation data.
The recession in America has dramatically cut demand for crude oil, and inventories are piling up. So prices for West Texas crude have fallen well below what oil costs from places like the North Sea, Saudi Arabia and South America.
That foreign oil sells in some cases for $10 more per barrel and that doesn't even include shipping.
By CHRIS KAHN and JOHN PORRETTO, AP Energy Writers Chris Kahn And John Porretto, Ap Energy Writers
24 mins ago
NEW YORK Crude oil prices have fallen to new lows for this year. So you'd think gas prices would sink right along with them.
Not so.
On Thursday, for example, crude oil closed just under $34 a barrel, its lowest point for 2009. But the national average price of a gallon of gas rose to $1.95 on the same day, its peak for the year. On Friday gas went a penny higher.
To drivers once again grimacing as they tank up, it sounds like a conspiracy. But it has more to do with an energy market turned upside-down that has left gas cut off from its usual economic moorings.
The price of gas is indeed tied to oil. It's just a matter of which oil.
The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.
Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.
But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.
"We're going definitely over $2, and I bet we'll hit $2.50 before spring," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "This is going to be an unusual year."
On the last day of 2008, gas went for $1.62 on average, according to the auto club AAA, the Oil Price Information Service and Wright Express, a company that tracks transportation data.
The recession in America has dramatically cut demand for crude oil, and inventories are piling up. So prices for West Texas crude have fallen well below what oil costs from places like the North Sea, Saudi Arabia and South America.
That foreign oil sells in some cases for $10 more per barrel and that doesn't even include shipping.
