Wednesday, November 16, 2011

Price of gasoline and crude oil continue to diverge

The retail price of gasoline and the price of crude oil continue to diverge, with crude rising to $100 and gasoline down to $3.40. These two price trends have been diverging for almost a month now, suggesting that the rising price of oil is more of a speculative move than the result of actual demand for oil products.
The open question is which will occur first: a) speculators exhaust the near-term upside for crude, or b) expensive crude eventually forces gasoline to become more expensive even if it happens to reduce demand for gasoline which will in turn reduce demand for crude.
It will be interesting to see how supply and demand and price balance out through the coming Thanksgiving holiday travel period.


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