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News Link • Economy - Economics USA

A Little Bit of Liberty Goes a Long Way in Your Gas Tank


Can Newt Gingrich really lower gasoline prices to $2.50 per gallon? With his pro-war foreign policy, not a chance in Hell. Lately, all the talk about government control over gasoline prices coming from both sides of the isle is nothing more than political jockeying in an election year. There are many factors contributing to higher gasoline prices, most of which have nothing to do with national supply and demand. It's all rather technical and geopolitical, but I'll try to do my best to explain.

First, the United States has increased production of domestic crudes by 15 percent over the past two years, while domestic demand for petroleum has decreased. Take note of how many refineries in the Northeast has shut down indefinitely over the past year. So, it's not a problem of oil supply. However, our infrastructure for transport and delivering these home-produced crudes has not grown with the pace of production. The U.S. oil storage hub, for example, is land-locked in Cushing, Okla. Approving large-scale energy infrastructure update projects like the Keystone XL pipeline is a start to de-bottlenecking these supply channels. President Barack Obama dropped the ball on that "shovel-ready" job in a flailing economy that is also down-trodden with high gasoline prices.

Next, the U.S. financial crude contract, which is based of West Texas Intermediate crude blend, is no longer the international benchmark for crude prices. Around the spring of 2007, due to the land-locked storage hub at Cushing for WTI, the global oil market began favoring the London-based Brent crude contract, which represents a basket of Northern Sea blend of sweet crudes, as a pricing benchmark. Also, because the U.S. has become a net exporter of diesel fuel, and we import gasoline from Europe, prices tend to follow what is going on in the international oil market. The Brent crude contract can price up to $20-$25 per barrel more expensive than the WTI contract. In spring 2007, the WTI crude contract was pricing around $65 per barrel, and the Brent contract was pricing around $75 per barrel. Today, WTI is running about $106 per barrel and Brent at $125 per bbl.


2 Comments in Response to

Comment by Bertha Anonimo
Entered on:

Ufact ... your pitch on Ron Paul is mind-boggling to everyone. He is the only baby-doctor I know that by delivering more than 400 babies became the U.S. most celebrated "economist" that can "amend the Law of Supply and Demand"! I think I have to agree with his rabid followers that by amending the Law of Supply and Demand Ron Paul will be remembered more than the world remembers famous Economist M. Keynes because of what Ron Paul is doing today in his OWN world of Economics! To confirm this, you don't have to ask his legions of followers from the "-------  -------"!

Comment by Courtney Jalospanis
Entered on:

If Gingrich can't lower the price of gasoline down to $2.50 a gallon, Ron Paul can. He does wonders in Economics. In Congress, he can even amend the Law of Supply and Demand!

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