Wrong Angles

I have pointed out in this blog that the price of gasoline tends to lag behind crude on the way down. Some people said I was too quick to jump on the ‘something is up’ bandwagon. I think it may be time to revisit this issue…

With three months of data, here is a chart from our friends at GasBuddy.com:

3-month Crude vs. Gasoline

Notice that the light blue line (gasoline) isn’t dropping at the same rate as the light red line (crude). Why is that?

Dark red is crude/barrel on the NY Mercantile market:
high – $147/barrel
low – $89/barrel
change – $58 (down 40%)

Dark blue is GasBuddy.com USA average for gas/gallon
high – $4.11/gallon
low – $3.44/gallon
change – .67 (down 16%)

OK – you tell me. Is there something wrong or is it my math? If gasoline dropped by the same percentage that crude has fallen, we would see sub $2.50 gasoline! At $3.44, gas is STILL way above some recent price comparisons in the past 12 months. Just take a look:

12-month Crude vs. Gasoline

There were four times that crude passed the $89 dollar mark. At the end of October 2007, the average price of gasoline was $2.80. That’s still 30% lower than the all-time high.

While I am a capitalist, I must say that frankly, something smells fishy. The manipulation of this particular market is unconscionable, considering the pain it is causing the average American family.