Wednesday, August 1, 2007

Crude Oil Prices are Up and Gas Prices are Down, Hmmm!

The following excerpts from a article explains why oil prices are up and gas prices are down. It is all in refining and seasonal effects.

Over the last two months, U.S. crude has gained nearly 25 percent, and is now just pennies away from its all-time high. Yet gasoline futures have lost 7 percent over the same time. Retail gasoline prices have fallen even further, declining 11 percent from the all-time high set in May.

Usually oil and gas prices move in tandem. Yet this time around, analysts say the disconnect is all about refining. If refineries keep churning out gas, and crude doesn't spike too much further, some say motorists could see gas prices under $2 a gallon by winter. That seems a little optimistic to me.

"It's a seasonal play," said Peter Beutel, a former trader and now an oil analyst at the consultancy Cameron Hanover. "People buy gasoline ahead of the [summer] season and sell it during the season."

That play was more pronounced this year as lots of maintenance and a series of accidents kept refineries from producing normal amounts of gasoline during the spring.

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