Pinnacle Activity Ticker
Oil and Gasoline: Crude Oil Supply Remains High - So Why are we Paying More at the Pump?
Pinnacle Digest writes: The price of gasoline at the pump is not correlating to the current price of crude oil. The author has come to this conclusion based on the price relationship of the 5 year historical norm.
EconMatters explains that domestic crude oil supply remains way above the 5-year average. This has not dramatically lowered the cost of fuel for Americans or the gasoline supply. Strangely, the gasoline supply is a lot tighter when compared to recent rate of production and the historical norm.
There are two main reasons why American's have less supply of gasoline during a period where America is producing more crude oil than it has in decades. The first is that there have been a few unscheduled refinery accidents/outages domestically. Refinery closures in the Atlantic Basin have led to an increase in gasoline exports from the US. Perhaps the US will one day become a net exporter of oil and gas as its manufacturing and exports dwindle amidst near record high trade deficits.
This shortage of oil at home, combined with QE Infinity are doing little to help the average consumer. Inflation continues to wreak havoc on consumers savings as the current national average sits at $3.805 per gallon for regular gasoline. This is still 8% above last year's prices and fairly close to where they were in 2008 before the financial crisis.
What voters pay at the pump is always a hot topic during any election year. EconMatters explains that interesting exchanges have already taken place between the White House, G7, and the IEA regarding a potential SPR (strategic petroleum reserves) release. There has so far been a clear divide between the oil industry experts (IEA) and politicians (White House, G7). IEA’s position was that oil markets were currently well supplied and there was no reason to release SPR. The White House obviously doesn't want to admit to causing inflation, thus finds itself in a tough spot.
With Obama’s re-election on the line, in an attempt to counter the potential effect of artificial price inflation by QE3, an SPR release might bring down oil and gasoline prices which would be the politically correct move by the White House. Time will tell if we see it happen as unintended consequences of QE3 already begin wreaking havoc on the US and global economy.