Tuesday, February 17, 2009

Oil Price vs. Gas Price

The reason for the obvious discrepancy between the trends in the cost of a barrel of crude oil and a gallon of gas, it turns out is due to a discrepancy between where our gas comes from and where the crude oil used as the national benchmark is produced.
The price of a barrel of crude oil often quoted in the media comes from West Texas Intermediate. It is set at the New York Mercantile Exchange, according to the Associated Press.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.
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.
Vince agrees: http://www.rightsidenews.com/200902163689/editorial/what-we-are-not-told-about-oil-prices.html

I was listenting to AM1070 news radio yesterday and the expert they interviewed said the reason for gas going up steadily, while oil prices have been steady around $34-40 for the past week, is that refineries have forced the price up, by cutting back on production. From the usual 90% to a low 80%. So much for getting cheap gas from cheap oil

Oil prices have become extraordinarily volatile because the March contract expires Friday. That means anyone in possession of a contract must find a place to store the oil in a few weeks.
That has become more difficult each week, with U.S. crude storage hitting 82-week highs, yet some traders say there is no rational for the volatility of this market.
Crude prices fell another 11 percent last week.

Or read all about it, and get really educated here: http://www.wikinvest.com/concept/Oil_Prices

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