cc by taberandrew

You may have noticed that the price of gas has been going on an upward creep following its dramatic collapse last autumn. The climb is happening despite a continuing drop in the price of oil. There are estimates that the price of a gallon at the pump may even reach $2.50 before spring, which may be better for consumers than predictions we heard last winter, but may not spell good news for attempts to revive the economy.

What's the reason behind the seeming discrepancy? It's not an Al Gore-led conspiracy (at least, we don't think it is). Apparently, the price of oil that is quoted in most places is from oil drilled by in west Texas by West Texas Intermediate (WPI) which, in a weird market price inversion, is now cheaper than the oil that reaches our refineries from places like Venezuela and Canada. The refineries, for their part, don't see demand increasing any time soon and have cut their production levels. That limits supply and, voilà, we get higher prices. While we don't enjoy paying more for gas than we have to, perhaps a moderate rise from current levels may keep some folks from needlessly buying vehicles the size of container ships to commute in.

[Source: Associated Press]


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