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Oil falls, yet the price of gasoline is hanging up there, in the stratosphere. What's going on here? Well, as is often the case in the oil and gasoline markets, the reasons are many.
First, the price of oil is falling on concerns that both the global economy and the U.S, economy will slow to a crawl (if not worse) due to the current credit crisis, says economist David H. Wang.
Oil, which fell $3.96 to $91.76 per barrel Tuesday at midday, has declined more than 30% since hitting a record high of $147.27 per barrel in July.
"The financial crisis suggests that emerging market oil demand growth will slow, and that's the primary reason you're seeing the price of oil decline," Wang said. "Strong demand for oil in China and India really boosted oil's price in the last three years. You lower that China-India demand and you have a different oil market."
Now, what about gasoline prices? Here, U.S. motorists will face a wide range of prices, depending on where they live in the U.S., economist Peter Dawson told BloggingStocks Tuesday.
"The biggest factor short-term for gasoline is Hurricane Ike, which shut down a fuel pipeline and refinery capacity in Texas," Dawson said. "This will reduce the supply of gasoline in the South, so price increases of 50 cents or more in the Southwest and Southeast will not be unusual."
According to AAA, the national automobile club, the national, average price for regular unleaded gasoline Monday was $3.84. There were also reports of price gouging following damage caused by Hurricane Ike.
However, Dawson cautioned that there will be areas where prices will climb more than 50 cents, such as high-cost cities, and of course in hurricane-damaged areas of Texas. Conversely, there will be areas that will see less than a 50-cent jump, like areas that are very close to refineries, such as New Jersey.
Longer term, Dawson said he expects prices of gasoline to fall as refineries in the Southwest are repaired.
"If U.S. consumers continue to reduce their gasoline consumption, as they have for most of the year, prices will drop in three to four weeks to the $3.50-$3.60 range for regular unleaded, probably even lower, by the end of the fall," Dawson said. "The lower gasoline price trend was simply disrupted by the summer's hurricanes."
Oil and Gasoline Market Analysis: Two other factors affect U.S. gasoline prices: 1) the U.S.'s inadequate refinery infrastructure -- a new refinery hasn't opened in the U.S. in more than 20 years; and 2) the U.S.'s low fuel economy standard. Most economists agree that increasing required fuel efficiency for U.S. vehicles would take some pressure off gasoline prices.
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Reader Comments (Page 3 of 3)
10-07-2008 @ 8:01PM
Joe SixPack said...
You people are a bunch of whiners. In this country, companies are allowed to make a profit, even a big one. That's what our country is founded on: freedom, opportunity, and capitalism.
You people are probably the same pathetic, underachieving losers who complain when Microsoft makes a profit. If you don't like it, go live in Russia and stand in line for 3 hours to get a roll of toilet paper. That'll REALLY give you something to complain about... right before you're kidnapped and executed for doing so.
10-07-2008 @ 10:28PM
Kevin said...
Does any one know how long the turnaround is from the time oil is purchased on the open market until it is refined into gasoline and delivered to the pump?
10-10-2008 @ 8:47AM
Nelson said...
William you hit the nail on the head. I saw these crooks here in Florida outside changing there prices daily 2 3 times and now the barr is dropping daily and the price at the pump does not move. Oh I guess Obama will make it better yeah ok I have some swamp land I need to get rid of.
10-16-2008 @ 10:05PM
Joe SixPack said...
I bet you are the same people who are complaining that the gov isn't bailing out Idiot Q. Dipstick for overspending on his friggin house! Well guess what: letting you go bankrupt is not going to destroy the global economy. Letting Fannie and Freddie go bankrupt will, so that's obviously a much better use of the money.
Instead of sitting at your computer in your dirty boxers picking chips off your chest and complaining about how "the man" is ruining your life, how about you suck it up for once and take some responsibility for your own actions? Probably because it's much easier for you all to post comments on someone's blog than to actually get a real job or a decent education and make something of yourself.
And for those who took shots at the author of this article, the author didn't set gas prices. He didn't force you to buy that gas guzzler that you can't afford the payments on. The author of this article didn't hold a gun to your head and make you sign a mortgage agreement without researching what an ARM is. He's writing an article to educate you that not everything is a government conspiracy to fleece you out of your hard-earned $7 an hour.
Yet you all jump on him because he's not screaming greed and corruption with everyone else. Well maybe if you stop screaming for a moment and try to think intelligently, you'll realize that some people worked hard and achieved the American Dream. They didn't get a knock on the door and have it handed to them on a silver platter.