Many motorists are having a hard time understanding why gasoline prices are continuing to rise when news reports say there is a world oil glut and that the price per barrel paid for crude oil is continuing to fall.
Oil industry analysts report that a reduction in production capacities at U.S. refineries and a reduction in the gallons of gasoline reaped from each barrel of crude are the main culprits behind the high price at local pumps.A major fire that put a large refinery in Louisiana out of commission is a big factor in the reduced capacity. Several southern California refineries have also been affected by partial shutdowns.
Drought conditions that have lowered the Mississippi River and allowed encroachment by salt water near the river's Gulf of Mexico outlet have also affected production. Many refineries have had to drop production because they are unable to get sufficient amounts of fresh water to properly cool refining operations.
Adding to the problems are new federal regulations further limiting the use of lead as an octane booster in gasoline. Without the use of lead, more crude oil is required for producing higher octane gasolines.
The requirements also affect the ability of U.S. companies to import refined gasoline because European brands do not meet the guidelines.
If oil companies seem less than upset over the dropping crude oil prices, an event that usually translates into lower profits, there is a reason for that also.
The fact that pump prices remain higher for gasoline means there will be no appreciable impact on revenues from that source and, because prices are presently high for chemicals created from by-products produced in the refining process, the oil companies are receiving added benefits.
So, as America motors into its peak driving months, it appears highly unlikely that there will be any relief for motorists from the sag in world-wide crude oil prices which peaked at $18 per barrel in April and are now running about $15 per barrel.
In this instance, it is a situation where more (crude oil) means less (gasoline) while still meaning more (oil company profits). And motorists pay more at the pump.