Despite Drop In Crude, Gas Prices to Linger

    April 28, 2005
    WebProNews Staff

President Bush and Prince Abdullah shook on it. Oil prices have been cliff diving like lemmings on angel dust. We are all systems go now for off-roading this summer, right? Not quite.

For many, it is difficult to understand the complex relationship between oil and gasoline. And for most, it comes as a befuddling, eyebrow furrowing shock that cheaper oil doesn’t translate to cheaper gas.

Gas prices reflect supply of gas versus demand for gas, and the answer to the previous conundrum is, simply, the US can’t make enough gasoline.

The proposals for building more refineries that President Bush outlined reflected a de facto agreement with Prince Abdullah that the price and supply of oil weren’t really the issue. Perhaps after looking at the numbers, it was clear.

Though the demand for gasoline in the US has gone up by 1/3 since 1976, there have been no new refineries built.

In fact, because of increased production capacity, the number of refineries has dropped by nearly 200, lowering the total production capacity by eleven percent.

This has driven the US to increase imports and its reliance on foreign made gasoline.

Saudi Arabia agreeing to increase oil production, the resulting crude oil price drop, and the building of more refineries stateside will help lower overall gas prices eventually. Just not by this summer.

“This problem did not develop overnight and it’s not going to be fixed overnight,” Bush said.

Looks like it’s a return to back yard kiddie pools and charcoal grills. See you at the beach in Summer ’07.