Saturday, July 30, 2011

Disconnect Between Crude OIl & Gas Prices

Retail gas prices remain very elevated as seen in the chart below from Chartfacts.com. Beginning around May when oil prices plunged, gas prices remained relatively steady. Only falling as oil continued dropping below $100. According to the chart, the average price of gas needs to fall $0.30 to equal the fall in oil prices.

Supposedly a lot of the price difference is caused by the price of Brent crude being higher than the Nymex/WTI quoted version. The main culprit for the price difference is the congestion and glut in Cushing, OK. Evidently they've built more pipelines coming into Cushing than ones leaving. Nice!

Basically America has increased oil production to such an extent that now consumers aren't even getting the advantages. Brilliant! So while Congress is busy debating the debt ceiling our energy policy continues to be less than desirable.

Wonder how many Congress members read the announcement from Chesapeake Energy (CHK) on the Utica Shale discovery? Policy discussions should center around how best to use all these new assets to reduce our dependence on foreign oil, lower the cost of oil, and put thousands of people to work. Instead we're focused on how best to pay our massive debts. Ridiculous!



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