Last week the government officials announced they had approved an increase in gasoline prices effective Saturday, February 14th at midnight. Ouch! Even Cupid was hurt with this announcement.
This is the third consecutive increase in gasoline prices during the last 30 days. According to the posted prices at the service station a couple of blocks from my house, the last increase of prices was:
- Super Diesel: Decreased from $2.05 to $2.01 per U.S. gallon = $0.04
- Regular Gasoline (91 Octane): Increased from $2.14 to $2.24 per U.S. gallon = $0.10
- Premium Gasoline (95 Octane): Increased from $2.31 to $2.47 per U.S. gallon = $0.16
They said the previous increase was due to the Gaza War and we took their word. Now the Gaza War is over, but still the gasoline prices went up. No argument was given, except that gasoline inventories had dwindled and therefore, the price for gasoline on the spot market had gone up. Period.
I think that’s a lot of bull, pardon my French. 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. 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 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.
The price of gas is indeed tied to oil. It’s just a matter of which oil. Domestic oil extracted in the United States has been going down. 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.
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.
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.
“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.
Others see the conspiracy reaching higher.
“It got really low during the elections and now it’s going back up,” said Christel Sayegh, a 23-year-old graphic designer in Los Angeles. “They do that every election, though, right?”
Panama gasoline prices are structured based on the Gulf of Mexico area prices. So that means we get hit by the problem of high crude oil imported from outside the U.S., instead of prices of domestic crude. I don’t know if this theory holds any water or not. What I do know, is that when to have to fill up my car, I have to pay a dime more for every gallon the beast consumes. And I don’t like it one iota. Good Day.
Source: Crude oil is getting cheaper – so why isn’t gas? – Yahoo! Finance