Low oil prices are not translating into low gas prices
By Paul Davidson, USA TODAY — 15 February 2009
– The economy is in tatters. Oil prices are plunging. So why are gasoline prices closing in on $2 a gallon again?
The national average price for a gallon of regular gasoline was $1.97 Sunday, according to the Oil Price Information Service (OPIS) and AAA. That’s up 22% since pump prices hit a five-year low of $1.61 on Dec. 30.
Oil prices, despite a Friday rally, have fallen about 16% over the same period.
A big reason for the disparity: refiners. Beset by weak consumer demand and losses on gasoline sales, oil refiners have scaled back production since late December. The average utilization rate at U.S. refineries was 81.5% as of Feb. 6, the lowest in 17 years, not including hurricane-related slowdowns, according to the Energy Information Administration. As recently as early December, refineries were running at 87.4% of capacity.
Refineries typically shut some units for maintenance this time of year. But many are trimming output because demand is anemic. That tends to rile consumers who view low gas prices as a small silver lining in a dismal economy. But go easy on the poor refiner, analysts say.
“If you’re losing money on something and you’re producing at 90%, you’re going to cut back,” says OPIS chief oil analyst Tom Kloza.
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