Why are gas prices going up when the price of crude oil is going down?
- Submitted By:
John, Kayla, Tim
U.S. refineries are pulling out all the stops to supply U.S. markets. They produced more gasoline last year than any year in history – even though U.S. demand for gasoline was down last year, and has continued to be down this year. According to the Lundberg Survey, gasoline prices have followed crude oil prices down, as crude oil prices have stabilized. Some analysts feel that “the downward trend should continue as long as crude oil doesn't fluctuate.”
World demand for crude is increasing as the economies of the world begin to recover, and the world’s excess oil production capacity is shrinking. Buyers of crude oil also are clearly concerned about the instability of major oil producing nations in North Africa and the Middle East. The price of crude is the biggest factor behind rising gasoline prices because it is the biggest cost component in making gasoline. In the past, gas prices have tracked the price of crude oil consistently:
However, Patrick Vahid, a senior trader at Sonic Futures, notes that while:
"Historically, oil and gas 'have always moved in tandem,' with gas prices following on oil moves within three to six months…They do face different supply-and-demand forces, however, and are sometimes pulled in opposite directions."
Ask A Follow-Up Question
Have a question about the oil and natural gas industry? Fill in the form below, and we'll do our best to get your question answered in future updates to the site.