Oil Prices Falling, As Gas Prices Rise

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Tuesday, September 6, 2011

Even with U.S. crude oil prices falling, gas prices are not doing the same. Turns out, it's not that simple.

Consumers informed enough to know how to follow the wholesale prices of gasoline, know there is a disconnect between crude prices and gasoline prices. Yet, it is still common to hear high gas prices blamed on high priced crude oil.

By her own admission, Trista Aguilar doesn't follow gasoline prices closely, but she says she can't help but notice prices aren't falling as fast as they rise. It is a common complaint among consumers. Even casual market observers can see crude prices, at least U.S. traded crude prices, falling of late. But there doesn't seem to be a corresponding drop in prices at the pump.

For example: West Texas Intermediate Crude Oil was $114 a barrel April 29th. Tuesday, it was $86. That's a $28 difference, or about one third less.

It used to seem crude and gasoline prices moved in sync. Dave Dayvault is chief financial officer of Wichita-based Abercrombie RTD, Inc., an energy exploration company, and has chaired the Kansas Independent Oil and Gas Association. Dayvault says there are five groups at play in affecting gasoline prices. Crude oil producers, refiners, wholesalers, retailers and the government. Right now, he says, if there's anyone to blame it would be refiners.

I put in calls to a couple of refiners today in McPherson and Kansas City for comment, but didn't get return calls. In fairness, oil man Dayvault says there have been times when refiners' margins were so slim they barely made money at all. This just doesn't seem to be one of those times judging from the pain at the pump. A method of finding hidden oil pockets is causing concern across the country, and is now doing the same here in Kansas. The method is known as "fracking," and involves drilling deeply into rock and then injecting water filled with chemicals to open seams.

Critics say it could contaminate water resources like the Ogallala Aquifer. Its defenders say over sixty years there have been no documented contamination cases. The Kansas Independent Oil and Gas Association testifies Friday before a statehouse committee.

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