How Countries Like Iraq—Not the U.S.—Will Help Determine Gas Prices to Come
How Countries Like Iraq—Not the U.S.—Will Help Determine Gas Prices to Come
If you think your gasoline fill up was expensive today, just be glad you don’t live in California, where on October 8 the price of gas hit an all-time average high in the state of $4.67 a gallon. (And if you do live in California, well, at least you’ve got sunshine and this.) The Golden State’s sky-high gasoline prices—nearly a dollar a gallon more than the current U.S. average of $3.81—is an outlier. A power outage last week at a refinery in Southern California cut the supply of gasoline in a state market that was already fragmented and volatile, the latest in a series of refinery disruptions. Indeed, while gas prices in California jumped 50 cents in just a week, action in wholesale markets indicate that pump prices should be dropping just as dramatically as refineries return to action.
Still, gas prices throughout the U.S. have remained high throughout much of 2012, even if they never quite reached the $5-plus a gallon range that some analysts warned about earlier in the year. There’s a simple reason for that trend: oil is expensive. Brent crude—a trading benchmark that includes oil in Europe—is currently at $111 a barrel, and has remained in the triple digits for most of the year. That’s despite the fact that the global economy has remained sluggish, which would usually depress the demand for oil, and with it, the price. But 2012—in part because of the tightening embargo against Iran, which has taken millions of barrels off the market, and in part for reasons no one quite understands—has been different. The question going ahead is whether expensive gas is simply the new normal.