Another gasoline myth, shattered.
It goes like this: When the price of crude oil rises, the price of gasoline leaps immediately. But when the crude price turns downward, the gasoline response takes longer to materialize.
According to the myth, the gasoline price moves in step with crude on upturns but not downturns because of an evil urge of gasoline sellers to take advantage of their customers.
This reasoning gushes from those fretful energy experts television reporters interview at gasoline pumps when prices jump.
If the myth were true, gasoline prices should now be leaping because crude prices are setting records. They're not. In fact, US gasoline prices are falling. In fact, gasoline price drops this year have sometimes preceded those for crude.
Until the middle of May, US spot prices of gasoline and crude roughly tracked each other. The Gulf Coast price of conventional gasoline peaked May 19 at $1.45/gal then drifted downward, according to the Energy Information Administration.
The spot price of West Texas Intermediate crude at Cushing, Okla., continued to rise. It reached $42.33/bbl on June 1 then fell to below $36/bbl by the end of the month.
While crude was falling, gasoline bounced from $1.11/gal in mid-June to a recent high of $1.30/gal on July 9.
Since then, gasoline has resumed its myth-wrecking behavior by falling while crude heads the other way. By Aug. 3, the Cushing crude price had reached $44.13/bbl, and the Gulf Coast spot gasoline price had slumped to $1.21/gal.
It's easy to see why. The world market for crude remains tight, while the US gasoline market has softened.
US consumption of gasoline flattened in June and July, while refinery production and imports surged. Gasoline inventories in July moved from the low to the high end of the 5-year range.
Of course, facts like these won't obliterate the myth, which has embedded itself in American consciousness. People want to believe the worst about those who sell them gasoline.
Recent market patterns, though, should dispel a myth that may be developing in the oil industry that consumption and prices can increase forever.
(Author's e-mail: firstname.lastname@example.org)