Oil Prices Vs. Gas Prices - a Disconnect? A Conspiracy?
Editor's Note: Its Election Day, and October average oil prices are out, so I've updated the table below.
So you've probably noticed that gas prices are dropping a lot, and that it seemed to start around a month ago. If you're like me, always looking for cause-and-effect relationships in stuff, you might be wondering what the cause of this drop in gas prices is. Initially, I assumed it was that crude oil prices were raising and falling, and that gas was following suit.
Being a computer guy, I keep a gas price/mileage/economy journal in my Treo with a neat little program that calculates all that stuff automatically -- just enter in the odometer mileage, amount of gas pumped to fill up the tank, and the total price paid for the fill-up, and it does the rest. It can easily break down the price per gallon of gas, and Excel can easily average those values to get the average price of gas over a month.
Crude oil price statistics are all over the map, mostly because the price of a barrel of crude oil changes depending on what sort of oil it is (where it comes from), but it seems that different reporting organizations use different criteria too. (When you hear "Oil is $60 a barrel today" on your local 24-hour newsradio station, you have to wonder where they get that data and what sort of oil they're talking about.) Anyway, the Illinois Oil & Gas Association, of all places, has a pretty nice history of average crude oil prices for a given month, and though I don't know exactly what type of oil they're pricing, I'm going to assume they're using the same type and data month after month.
So this weekend I put these data points together, and got the following table:
| Month | Price per Gallon of Gas | Price per Barrel of Oil |
| Jan | $2.52 | $58.30 |
| Feb | $2.69 | $54.65 |
| Mar | $2.77 | $55.42 |
| Apr | $3.16 | $62.50 |
| May | $3.53 | $62.94 |
| Jun | $3.42 | $62.85 |
| Jul | $3.40 | $66.28 |
| Aug | $3.27 | $64.93 |
| Sep | $2.93 | $55.73 |
| Oct | $2.59 | $50.98 |
And after seeing this, what is my gut reaction?
Well, between January and March, Oil prices actually dropped around $3 a barrel, yet Gas prices rose about $.25 a gallon. Between April and May, Oil rose a mere $.44 a barrel, yet Gas rose $.37 a gallon.
September Oil prices are around the same as February, yet gas was $.24 a gallon more per gallon.
Overall though, the general trend seems to be that Gas prices generally follow Oil prices in the grand scheme of things. It seems, however, that there is something of a disconnect on a micro-level, where the small fluctuations of the price of each don't seem to follow each other. Hmmm. I guess I am a little suspicious of this, but I can't put my finger on why.
It has been suggested/reported (by the New York Times, The Washington Post, and several bloggers in high places) that large investment hedge funds are (temporarily) pulling out of oil futures, which is lowering the price of crude oil, (and hence gas), at the request of the Bush administration, so the voting public won't be so pissed off at the (Republican) incumbents in Congress and elsewhere. If it weren't for the fact that this scheme requires cogent thought on the part of the President, this makes total sense to me.
Anyone have any other thoughts?
