Tech & Biz

Crude Oil is Dropping, So Why is Gas so Expensive?

by Tina Kells | February 16, 2009 at 02:13 pm

496 views | 7 Recommendations | 4 comments

People who are paying attention have probably noticed that while crude oil costs continue to decline the price at the pump has been inching upwards. This is in direct violation of the ideal of supply and demand, and indeed, contrary to the way things have happened in the past.

In the past when the price of crude oil dropped the price of gas went down with it; and when the cost of crude went up the price at the pump skyrocketed. Now, although crude costs are falling the price of gas keeps moving higher. Why?

The reason for the atypical movements of crude oil costs and gas pump prices is as simple as the failing US economy. American oil producers have built up huge oil reserves which is forcing them to flood the domestic market. Meanwhile, in the rest of the world, production cut backs have driven the supply of crude down.

This odd arrangement has resulted in an apparent decrease in the cost of crude oil with a divergent corresponding increase in the cost of gas. It seems that depression weary gas consumers can't win; when times are good gas prices are high and now, due to some bizzaro world economics, when times are bad the cost of gas is high as well.

Something smells funny, and it isn't bad gas.

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.

"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."

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Roy C

at 20:23 on February 16th, 2009

I heard that the problem is the refiners. We have fewer and fewer of them and they have simply shut down causing the fuel price to go up.

There needs to be an investigation of this.

Edmund Jenks

at 07:06 on February 17th, 2009

Well, they (the oil companies) will not be allowed to drill and refine locally, taxes will be going up, and driving will be down as "Stagflation" settles in after the new "Stimulus Bill" gets signed into law today (passed after it the 1,100+ pages of the Bill were admittedly not read by any of the Senators who voted to pass it) ... why not make hay while the sun shines?

George Metz (not verified)

at 11:06 on February 17th, 2009

"This is going to be an unusual year." Quite an interesting quote as the way I see it, this is business as usual. I think this shows the the price of fuel at the pumps in fact has nothing to do with the price of crude, the refineries, or anything tangible. It boils down to profit on the behalf of the distributors.

I feel confident saying this as a 20 year gas station owner. We make pennies on a gallon, sometimes even loosing money these days. I will agree with the gentleman above, this needs to be investigated but we all know it never will be.