Tag Archives: Brent

03.16.2012 | High and Low Gas Prices

Why is the average price of a gallon of regular gasoline in Wyoming close to $3.36 and New York, $4.00?

Location and regulation.

Wyoming produces oil, it refines it, and, its taxes are among the lowest in the country. Also because of good location and less regulation, Texas, Oklahoma, Louisiana and Alaska have cheap gas.

By contrast, as a non-producer and high taxer, New York has relatively expensive gas. Sharing the #1 spot, California has high gas taxes while Indiana, Illinois, West Virginia and Michigan are close behind.

Here are some handy maps to see taxes, prices, and a list of producing states.

The Economic Lesson

Typically, when the world price of a commodity is higher than the domestic price, a country prefers to be an exporter. Using Brent Crude as a benchmark, the world price is higher than domestically produced West Texas Intermediate (WTI). However, logistics make exporting WTI at a competitive price relatively tough.

Today’s prices are approximately $125 for Brent and $105 for WTI. This explanation explains oil prices further and names other types including Nigerian Bonny Light and Algerian Saharan Blend.

An Economic Question: How might the price at the pump affect retail sales?

Posted by: adminEcon
Tags: Brent, California, gasoline prices, gasoline taxes, New York, oil production, supply, Texas, West Texas Intermediate, Wyoming
Comments (0) Add a Comment

07.28.2011 | The Power of the Market: Part 2

World oil demand has hit a new high. But not from everyone.

Called the “New World” and “Old World” by economist Ed Yardeni, you can see through his graphs, the divide in world oil demand. China, India, Brazil and other emerging economies want increasingly more while the U.S., Japan and Western Europe do not.

Still though, with total demand moving upward, so too is the price per barrel. Well beyond its recent June 24 low of $105.52, you can see here, that the price of North Sea Brent is close to $118. Interesting that on June 23, the International Energy Agency (IEA) announced its member nations would begin releasing 60 million barrels from their strategic petroleum reserves (SPR) to offset potential price increases from a Libyan disruption.

Are 2 million barrels a day for 30 days making a difference? Or, is the market too powerful? You can decide.

The Economic Lesson

The SPR release shifts the supply curve. Emerging economies have moved the demand curve. When demand moves further to the right than supply, price rises.

You can read more about oil here and here.

An Economic Question: Dr. Yardeni suggests that when world oil demand is up 2.5%, world GDP will rise by 5%. Why might he have connected the 2 numbers?

Posted by: adminEcon
Tags: Brent, demand, International Energy Agency, oil, strategic petroleum reserves, supply
Comments (0) Add a Comment

02.24.2011 | An Oil Surprise

As the turmoil in the Middle East unfolds, if you want to sound knowledgeable about oil, you could just say $147, contango and floating storage.

As you can see on this graph, it was mid-July, 2008, when the price of oil peaked at slightly more than $147 a barrel. A plunging line that went below $40 during 2009 followed the 2008 peak. Most people were surprised by the plunge and also by the peak.

Meanwhile, only last July, the supertankers that were carrying “floating storage,” started to download their cargo because oil prices appeared to be declining. The reason they had initially loaded the oil could have been “contango.” Very simply defined, contango just means that traders expect a higher price in the future.

Now, floating storage could come in handy. As the oil that is stored oil tankers around the world, floating storage could be used to compensate for any Libyan oil shortfalls. In addition, extra Saudi Arabian production could equal 4 times a day what the world gets from Libya. So, if we need it, the oil is right there.

Conclusion? The future price of oil will be a surprise.

The Economic Lesson

When you hear a price for oil, it probably refers to Brent or West Texas Intermediate. The origin of Brent is the North Sea while West Texas is the U.S. This explanation explains oil prices further and names other types including Nigerian Bonny Light and Algerian Saharan Blend.

The $147 was for Brent.

Posted by: adminEcon
Tags: Brent, contango, crude oil, floating storage, West Texas Intermediate
Comments (0) Add a Comment