I have recently read two articles trying to explain why gasoline prices are going up while the reported prices for a barrel of oil conntinues to go down. There are two explanations being given for this:
1) In California, gasoline prices are going up due to the fact that California uses a different blend of gasoline than other parts of the country due to State of California environmental regulations. Because of this, consumers in California are prone to short term disruptions in gasoline production. Recently, it has been reported that production of gasoline for California has been reduced due to planned refinery shut downs for maintenance. In addition, it has been reported that California refineries have been increasing production of cheaper grades of gasoline that do not meet California's strict emission standards and could be sold out of state, according to weekly statistics tracked by the California Energy Commission. The refineries were also producing less California-grade gasoline.
2) The price of gasoline nationwide has also been going up because of a disconnect between the price of West Texas Intermediate oil, which is a high quality oil pumped from Texas oil fields and which has served for years as the reported benchmark for oil prices as reported by the media, and the price of lower quality oil from other oil producing nations such as oil from the North Sea, Saudi Arabia and South America.
Because of a recent increase in oil inventory of West Texas Crude oil, the price of a barrel of oil of this oil is up to $7 a barrel cheaper than the cheaper grade of oil from other foreign sources, which is used to make gasoline for most of the eastern part of the country. Usually, West Texas crude oil is more expensive due to its higher quality. Therefor, even though the reported price of a barrel of oil has gone down, the actual price per barrel of oil used to make gasoline for most of the country, has actually gone up. The problem is that there are no pipelines to transport the now cheaper West Texas crude to other refineries across the U.S.
In addition to the above, other pundits believe that the oil companies have lowered the production of gasoline in anticipation of further decreases in consumer demand for gasoline, which have lowered inventories of refined oil products and led to price increases at the pump.
What is clear, is that no one really seems to be able to understand what is really happening.
Want information about buying or selling real estate in the South Bay of Los Angeles or the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com
Comments (2)Subscribe to CommentsComment