After the execution of Osama bin Laden, I heard a report which may not have been connected, but it seemed to be. I think it was ABC News which reported gleefully that gasoline prices were about to plummet 25 cents to levels we haven’t seen since, well, March. The jubilant tone of the report gave the unmistakable impression that President Obama had vanquished Public Enemy No. 1 and, could it be? Gasoline prices, the one thing that could harm him in the 2012 reelection bid, were about to fall!
True enough, crude oil prices did fall from about $100 to just above $80 per barrel, prompting prognosticators to predict a corresponding drop in gasoline prices. Surely the politics gods had smiled on the President and the Democrats!
However, today the price of crude oil futures was over $100 again and average national gasoline prices had fallen less than a penny. It is true that refineries are about to ramp up production, which is one of the factors that led to the rosy predictions of falling crude prices, but now we have another problem.
It seems that, in addition to the murderous tornadoes that sliced across the South two weeks ago, we are now faced with near-record flooding of the Mississippi River and its tributaries, which are threatening oil refineries in Louisiana with Katrina-like shutdowns. Thirteen percent of the nation’s domestic fuel production comes from the 11 threatened refineries. Hence the return to $100-a-barrel crude.
According to this article, futures traders have given up on $80-a-barrel crude prices and are thinking of $100 as “the new $80” and the bottom of the trading ladder.
Yikes!
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