Price Spread Between WTI, Brent Crude is Reflected at the Pump
State-by-state list shows changes in gas prices
WASHINGTON (Feb. 13, 2012) — The price of West Texas Intermediate (WTI) crude oil increased today, although a technical glitch at the NYMEX Globex electronic trading system prevented a settlement price from being reported as of press time. Based on parallel trading platforms, WTI is expected to settle near $100.90 per barrel, which would be up $2.23 on the day and above $100 per barrel for the first time since January 19.
Crude prices were pressured higher today as Greek lawmakers approved austerity measures necessary for the country to receive the second round of bailouts needed avoid defaulting on its debt obligations. While rioters took to the streets of Athens to protest the measures, the euro strengthened on the news and market focus shifted to Wednesday’s meeting of finance ministers who will decide whether to approve the second bailout.
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Crude oil futures are priced in U.S. dollars. When economies strengthen overseas, the dollar weakens and the price of oil becomes relatively less expensive. Oil futures subsequently become a more attractive investment, which exerts upward pressure on prices, as was the case today.
Oil prices last week moved slightly higher as familiar 2012 themes continued to influence prices: downward pressure from anemic demand and euro zone debt concerns, weighing against upward pressure from positive economic reports and geopolitical tensions with Iran. News last week that Greece was nearing an austerity deal was seen as bullish for the euro zone economy as a whole and was a primary driving force for higher oil prices on the week. Oil price movement, including early last week, highlighted the price difference or “spread” between WTI and Brent crude (the European benchmark), which has recently widened again.
Prior to 2011, a spread of more than a few dollars between these two products would have been noteworthy. In 2011, with WTI crude oil (delivered in Cushing, OK) “landlocked” and thus insulated from rising global prices, the spread between WTI and Brent widened to a high of nearly $30 per barrel to begin September, before closing to less than $10 to end the year. As tensions with Iran have added uncertainty to future crude supply, this spread has widened again to more than $18 today.
This widening spread can also be seen in the price of gasoline at the pump in the U.S. Areas in the center of the country that use gasoline from refineries with access to the relatively cheaper crude products have seen prices hold steady or even move lower in recent weeks, while areas having to rely on refiners using more expensive products have seen prices move higher. States like Ohio and Michigan have seen prices fall by 18 and 17 cents respectively over the last month, at the same time that states like Connecticut and North Carolina have seen prices rise by these same respective amounts. A full state-by-state list of month-over-month price changes is linked in the box above.
Also impacting prices is the fact that refiners — especially those processing more expensive crude products — have responded to dismal demand for gasoline nationwide by planning production decreases, resulting in upward pressure on prices paid by motorists. According to last Wednesday’s weekly Department of Energy report, gasoline demand for the four weeks prior averaged 18.116 million barrels per day — the lowest level since April 25, 1997.
At a national level, the price of gasoline at the pump has continued to rise. The current national retail average price for a gallon of self-serve regular gasoline is $3.51. Today’s price is three cents more expensive than one week ago, 12 cents more expensive than one month ago, and 38 cents more expensive than one year ago.
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