Just days before a national election, crude oil prices and gasoline prices took a severe tumble from near-record highs. What gives?
One need not ask why, only why not. Demand is down. The U.S. is producing more crude.
Prices on a recent Twin Cities weekend swing were at $3.669 on Friday in the Brainerd lakes area. Driving through Royalton, the price had already dropped to $3.499. A few miles further, and the price was at $3.399.
Pump prices on U.S. Highway 10, on the south side of St. Cloud were at $3.299. Wow, what a difference!
However, as one neared the Twin Cities, prices rose to the $3.529 mark and held steady. Even the price at Costco, a membership discount station, the price held at $3.509.
A Sunday afternoon return trip through St. Cloud revealed an even lower pump price of $3.259. Cars were backed up. Drivers were waiting to take advantage of the lower gasoline prices. They were like kids on the last day of school before Christmas break.
What contributed to the pump pricing moving south?
Politics? Sure, why not?
“During Tuesday night’s debate, Mitt Romney accused President Obama of presiding over a decline in oil and gas production from federal land and waters,” CNN Money reported.
Was he right? Yes and no. Oil production rises and falls in line with demand. Oil companies are not anxious to sell oil at Monday’s rate of $89.89 a barrel for light crude oil. They’d rather sell at $99 or $101 a barrel. At the higher price, they are able to make greater profits. However, at the higher prices, political pressure is generally channeled to those in office and that pressure is transferred back to suppliers. It’s a game of give and take.
Don’t expect the price to free fall. It’s only temporary.
Here’s an interesting note: Overall, oil production in the U.S. was up in 2011. It was higher than when President Obama was inaugurated in 2009. Higher? Yes, higher. Yet, the price at the pump has risen steadily during the last four years, all the while, the United States has gone through one of the deepest recessions in history. Interesting.
In fact, the United States has been in the middle of one of its biggest energy booms since the North Slope of Alaska hit. “From 2008 to 2011 U.S. crude oil production has jumped 14 percent, going from 5.1 million barrels per day at the start of 2008 to nearly 5.8 million barrels per day currently, according to the Energy Information Administration.
What’s the explanation? Politics, perhaps? Really.