July 3 Gas Gouge Report: Gasoline prices drop while oil prices climb
UCAN News
Big Oil Curbs Gas Gouging ... for now.
Political heat, not supply and demand spurring the price cuts. Oil prices are climbing while gas prices are dropping.
The average price for for gasoline in San Diego today is $3.08 a gallon for regular unleaded (scroll down for stats), down 3/4¢ since yesterday. The price cuts are happening against the market grain, and the trend isn’t just local – it’s happening in California and the rest of the USA, too.
And as gas prices have dropped, oil prices are climbing.
On May 8, for example, the price of gasoline in San Diego was $3.50 a gallon, while the price of oil was at $62 a barrel. On June 28th, the price of oil surpassed the “nosebleed” benchmark of $70 a barrel. What this means, is that on a per gallon basis, the cost of the oil in a gallon of gas increased by 21¢.
In a market economy, that should translate into a 21¢ per gallon increase at the pumps, yet during the same time period, our gasoline prices have decreased by 42¢.
What’s happening? Heat to price.
Since early May, the heat has been on Big Oil in Congress, beginning with hearings on the largely symbolic Federal Gasoline Price Gouging Prevention Act.
Now, the Senate is considering an energy bill (ABC NEWS) that requires manufacturers to boost the Corporate Average Fuel Economy, known as CAFE standards, for vehicles by 10 miles per gallon to 35 miles per gallon by 2020. This modest provision was defeated in the House by the oil lobby and automakers, but it still represents a serious threat to oil industry income in the Senate.
The bottom line: When the heat is on, the price goes down.
The recent Congressional debates about energy legislation have served to suppress retail gasoline prices since May on a national level as U.S. refineries exercised significant pricing restraint, and made up for underproduction by refineries by importing fuel.
The oil industry has a long history of lowering prices for political reasons. The most recent example was the 2006 mid-term elections, when gas prices plummeted by 70¢ a gallon in the 60 days that preceded the November elections to a low of $2.36 in San Diego - a trend that was reflected nationally. Immediately after the elections, gas prices once again spiked.
Our call? As soon as the heat is off, the prices will rise. Just you watch.
Gasoline Statistics from UCAN’s Gas Project at www.fueltracker.com
Last Tuesday, the price was $3.1085
One Month ago, June 3, = $3.32
Two Months ago, May 3, $3.47
All-time high = Tuesday, June 8, = $3.5035
Last year, July 3, = $3.25
Two years ago, July 3, = $2.55
Three years ago this day = $2.24
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Oil to Gas price ratios
It is humorous to see your authors attempt to draw direct correlations between crude oil prices and gasoline prices at the pump on a day-to-day basis. Of course there is strong correlation but oil and gas markets have distinct market spot prices. One only needs to look at daily crude oil and gas prices to see that ratios are very far from being constant. In the long run, correlations are strong, but there is large variation from day to day.
Because there is constant variation in the ratio of crude oil to gas prices it is very simplistic to suggest a causality of a single day's variation. It is an easy study that can be done by all. Download the file at http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw14.xls and click on the relevant tabs to get your data. I'm sure your website is interested in data and not political superstition.
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