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You may have seen the price of gas approaching two and a half bucks a gallon now that crude oil is $42/gal.  A few years ago it was over $4.25 in Fairbanks when crude hit $110  a drum.  The question for many is this: will a reduction in crude oil on the commodity market drop gas at the pump by the same proportion.  It doesn’t seem to.  Gas is a refined product of commodity crude.   It really is its own product though, with a different seasonal demand than other petrol derivatives such as fuel oil.  (Fuel oil demand tends to be strong in the winter when heating usage increases; gas demand tends to be strong in the summer when people have vacation time and choose to travel).

There are associated costs with gas such as transportation costs to and from refineries (as crude on the commodities exchange is virtual in a sense and not subject to weight, movement, and other cost difficulties).  In addition, oil petroleum reserves can create differences in costs per gas.   Nonetheless, with gas being at almost a decade low, retail markets try to figure out where there may be an increase of revenues due to lower gas prices applying less pressure on households’ discretionary budgets.  Certainly restaurants and lodging vendors expect and increase of revenues for auto vacationers.  I haven’t heard how airline vendors calculate cash flow differences.

The trend of lower commodity crude spot prices effects more than American drivers though.  It can apply pressure to geo-political relationships.  Venezuela has been driven down into a trench of debt.  Russia has potential political problems with their national revenue revolving to a large part on oil. And of course Mideast tranquility will be effected.  Keep an eye on those pump prices- and the nightly news!

 

 

 

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