Gas prices are high because ....

Interesting article on the reason for high gasoline prices in the European Tribune by Jerome a Paris. He starts off by explaining why the benchmark price for Light Sweet Cushing Oil has become non-representative of world oil prices since the 70's. (Cushing is a town in Oklahoma of about 8,000 people which "is famous as a price settlement point for West Texas Intermediate on the New York Mercantile Exchange (NYMEX) and has been cited as the most significant trading hub for crude oil in North America." The oil price most quoted in the U.S., West Texas Intermediate (WTI) is essentially set at Cushing.

A further problem is the political instability in Nigeria. That instability has been forcing world crude prices up, but Cushing, OK is far enough inland that it does not use Nigerian crude. Unfortunately, the U.S. East Coast does. That means that the WTI index is not capturing prices that effect oil supplies on the East Coast - or in Europe for that matter.

The solution would seem to be to switch to an oil price index that captures world prices better, but the difficulties of switching a large number of contracts covering varying periods of time from WTI to some other index have made that a non-starter. So gasoline prices are rising, while the index that is supposed to explain that rise has remained pretty constant over the last year or so. (Jay Leno last night said that gasoline prices in California are approaching $4.00 per gallon.)

That's what I got out of Jerome's discussion. It seems reasonable to me, assuming the facts are correct. I don't vouch for the facts, but Jerome has seemed reliable to me. So go read his article and see if it gives you an idea regarding what might be happening.

Oh, and I would consider this explanation before I would automatically adopt the conspiracy theory that the oil companies are just gouging us. If that were the case, I don't think they would let prices get this far out of hand. That would be just looking for government crack-downs, and they really don't want that. Oil company executives may be greedy and unscrupulous as a group, but one thing they are not is stupid.