History is definitely repeating itself. When the price of crude oil had decreased significantly in the past, the oil companies came up with excuses as to why the price of gas at the pump is not equally going down. We’ve heard excuses that they had to take refineries off line for regular maintenance, conversion to or from gas with ethanol, etc.
The worldwide price of crude oil has fallen to a six year low and there is no sign of it increasing anytime soon. For the past several months we keep hearing about gas prices at the pumps dropping, possibly below $2 per gallon.
However, if you’ve been to the pumps lately, you would be surprised to see that the price of gas is increasing, not decreasing. Nationally, the price of gas was $2.59 per gallon last week but that’s increased to $2.67 per gallon on Monday of this week.
So what excuses are they using now?
According Stephanie Yang:
“Andy Lipow of Lipow Oil Associates said the rise in gas prices is driven by California and the greater Chicago area, where major oil refineries are having trouble processing crude oil into gasoline for the consumer.”
“BP recently shut down its largest crude-oil processing unit in the Midwest after heavy damage from a malfunction. Lipow said California gas prices are still feeling the blows from an explosion in February at an Exxon Mobil refinery in the Los Angeles area.”
“‘It’s those two regions that have brought up the national average. We actually have more than adequate supplies as refiners are operating at historically high levels,’ Lipow said.”
“Meanwhile, the rest of the industry is unable to resupply the deficiency, because oil pipelines into the Midwest are already operating at maximum capacity, he said.”
“However, Lipow said gas prices will continue their fall after a couple months, as oil companies attempt to get refineries running again and demand from the summer driving season starts to wind down.”
“‘It’s been my experience that eventually these problems are resolved and supply will return to the market,’ he said. ‘I expect that the national retail gas average price will decline by 35 to 40 cents per gallon by the end of the year.’”
That sounds as trustworthy as ‘the check’s in the mail’ or ‘I promise not to hit my brother again.’ I’ll believe a 35¢ to 40¢ drop in gas prices by the end of the year when I see it.
Also note that a 40¢ per gallon drop is still a ways away from seeing the under $2 per gallon we were told about. I’m sure if it does drop close to the $2 per gallon price that they’ll find another excuse to jack the prices back up. After all, they can’t allow the American people to actually afford to drive their cars to and from work or take family vacations, can they?