Oil is Dirt Cheap Why isn’t Gas - 2/23/09

Crude oil has fallen to new lows this year around $34 (current oil and gas prices) a barrel so why has gasoline gone up in price?

Instead of a big oil conspiracy, it has to do with the energy market turned upside down. 

The $34 barrel oil is the price for West Texas oil, that is the price set at the New York Mercantile Exchange.  The economic downturn has caused U.S. storage facilities to be filled sending the price down.

So what is the problem?  Most oil that is made into gas in the U.S. comes from overseas instead of domestic.  The price of West Texas oil is lower than what oil costs from elsewhere.  Foreign oil sells for around $10 more per barrel which does not include shipping. 

West Texas oil in the past has cost more than all other oil because of its higher quality, so no one bothered to build the pipelines for carrying it to the refineries to make gasoline.  It would not be cost effective to build pipelines now when in just a year the prices will most likely change back around.

Another factor pushing gas up is refiners have cut back production and workers to avoid taking a loss on gasoline that is not selling fast enough.

Many others believe it is a conspiracy by big oil to keep their profits high, after all the price of gas was lower during the elections. 

Industry experts believe we will see $2.50 a gallon gas by this spring.

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