Are Gasoline Prices Still High Relative to Crude Oil Prices?

The downdraft in crude oil prices picked up steam in the last few months, with Brent prices dropping into the low $30s, the lowest level since early 2004 (Figure 1). Throughout the steep decline in crude oil prices, as one would expect, gasoline prices also dropped. However, gasoline prices at the pump in the U.S. through the summer of 2015 remained surprisingly high relative to crude oil prices (farmdoc daily, August 28, 2015; October 8, 2015). The most likely explanation was that the combination of an improving U.S. economy and sharply lower crude oil prices spurred gasoline demand and pushed the production capacity of the U.S. refining industry to the limit. The purpose of today’s article is to examine whether the pressure on gasoline prices has abated in the last six months.

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