What’s the deal – low oil prices, high gas prices?
If you watch the market like I do you are constantly confronted with certain market indicators. One of those indicators is of course the price of oil. When oil falls typically we see a break from the pain at the pump. When oil rises, we tend to pull back and drive less due to the higher prices.
Today the national average of gas prices is $1.96 per gallon. This increase is despite the generally lower prices of oil. So why is there low oil prices and high gas prices?
One word – production!
Refineries are cutting back. “If there’s no demand, . . . there’s really not a whole lot of point to making extra gasoline,” says Bill Day, spokesman for Valero, which is the largest independent U.S. refiner.
Chief oil analyst of OPIS (Tom Kloza) said, “If you’re losing money on something and you’re producing at 90%, you’re going to cut back,”.
Despite these production concerns we are not going to reach $4.00 / gallon gasoline just yet. Kloza said that gas prices likely to head near $2.50 a gallon during March – April. Flynn added But then they’ll stabilize and drift downward again, Flynn says.