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Why are gas prices so high when the price of oil is low?
Question:
Oil was trading around the $35-$45 a barrel mark for over a month (February – March). Why was the price of gas per gallon going up without a significant jump in oil prices?
Answer:
At the time gas was going up and oil was trading around the same price and sometimes lower, inventories were changing at refineries. Refineries were switching from winter to summer operations. This matters because the type of gasoline is different for the seasons no matter if you live in Colorado (where winter lasts until April) or Florida (where it’s summer all year).
Also, the price of oil we all see trading on the NYSE is West Texas sweet crude. It is typically the most expensive type of oil, but at the time it was trading lower than the usually cheaper Middle Eastern and other OPEC oils. This caused the price of gas to be higher than what it appeared it should have been.
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