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.
You can read the full article here but I'm going to just simplify a bit.
On Thursday crude oil closed just under $34 a barrel, its lowest point for 2009. The national average price of a gallon of gas rose to $1.95 on the same day, its peak for the year. They say the price of gas is tied to oil, but it's which oil that is the question. It has more to do with an energy market turned upside-down that has left gas cut off from its usual economic moorings.
The benchmark for crude oil prices is West Texas Intermediate. 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, West Texas crude is selling for much less than inferior grades of crude from other places around the world. The severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.
Now, 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." 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.
Brent North Sea crude, which feeds some East Coast refineries — and therefore winds up at many gas pumps around America — now costs about $7 more per barrel than the West Texas crude. Historically, West Texas International crude has cost more. So nobody bothered building the necessary pipelines to carry it beyond the nearby refineries in the Midwest, parts of Texas and a handful of other places. Now that the premium oil is suddenly very inexpensive, refiners elsewhere can't get their hands on it.
So why not build more pipelines? Because investing billions of dollars over several years makes no sense when the prices could just flip a year from now to where they were before. Refiners have seen the same headlines as everyone else about job losses and consumer spending. They've slashed production just to avoid taking losses on gasoline no one will buy. Result: Higher gas prices. "Why should a refiner produce more gasoline when the stuff we produce is not being used?"
"Drivers are being ripped off even more now than before," said Stuart Pollok, who was filling up recently at a Chevron station in downtown Los Angeles. He pointed out Exxon Mobil Corp. reeled in billions in profits last year when oil prices neared $150.
Makes perfect sense. The election is over and now they can begin fucking us again. We'll waste billions on a stimulus plan that will throw money away on a bunch of horseshit like feeding wasteful industry and handing out more money so support mothers who have no job and 14 children. Build a more pipelines to support our own need for the most valuable resource in America... No way, too expensive. Are we truly that stupid?
Our government never ceases to amaze me. I say we "waste" the money on the pipelines despite the fact that prices may flip back. After we've done that we take the Walmart approach to foreign (Saudi) oil and say "We'll give you $______ per barrel, if you don't like it then fuck off, we'll just stop buying any". We fix two problems with one solution. We become self sufficient and don't have to worry about it, and we stop feeding a true evil empire who in turn feeds terrorism (it's proven). Sadly, it appears that we aren't that smart. I stick with my previous stance that the Obamessiah can fuck himself.