By on March 25, 2008

barrel.JPGCitigroup says $3.29 a gallon for gasoline is cheap. Why? (Read: are they nuts?) As Bloomberg reports, due to complexities of current supply and demand, gasoline may actually cost less than the oil it is refined from. Last week on the New York Mercantile Exchange, wholesale gasoline cost 50.4 cents less per barrel than crude oil– for only the fifth time in 20 years. Credit speculation on the differential between crude prices, gasoline futures and heating oil futures. Traders call this differential the 3-2-1 "crack spread," in which three barrels of oil is refined into two barrels of gasoline and one of heating oil. On March 17, the 3-2-1 sank to $7.395 and the straight gasoline-to-crude spread dipped below zero. Both rebounded later in the week, but, "Everything that we knew about crack spreads has fallen apart with the gasoline supply glut and the shortage of diesel," said Francisco Blanch, London head of global commodities research for Merrill Lynch. "I have been a bit reluctant to make calls on this thing. It's so volatile." Nevertheless, gas pump prices are expected to increase with summer driving demand and limits on production by profit-hungry refiners.

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4 Comments on “Are Oil Speculators on Crack?...”


  • avatar
    Busbodger

    Nah, this is just their way of getting us used to the high prices so when the Chinese and Indians hit the road we won’t be quite in such a shock… VBG!

    Get us used to it and when it hits $8+ a gallon like in Europe we’ll keep on driving.

  • avatar
    factotum

    Gas is still cheaper than bottled water and iced mochas. Noticed over the holiday weekend that higher gas prices aren’t having much effect on drivers: 80 mph in the fast lane is the norm, my family included. QOTD idea: at what price will gas change the way you drive?

  • avatar

    Diesel prices have slowed down trucks and cargo ships.

  • avatar
    Busbodger

    Drove to Chattanooga at 60 mph the whole way on cruise (relatively empty HWY 111). Speed limit varies from 55 mph to 70 mph and frattic isn’t dense enough that it is unsafe to go at a dfferent pace.

    My ’99 CR-V was loaded with 2 adults, 2 kids, 1 medium sized dog, luggage and gifts.

    MPG = 26 mpg, window sticker rated it at 25 mpg back in ’99. 156K miles.

    Benefits: vehicle was quieter, better mileage (a little), vehicle was more comfortable. Time to get there was about the same. Made maybe 10 minutes difference.

    An article in the local newspaper had an AP article that reported that alot of independent truckers were driving slower. GOOD! The 80 mph trucks really make the pace on the interstates around here. I have to drive at least 75-80 mph to feel safe.

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