West Covina, California, became the first area to hit $5.00 a gallon gasoline over the weekend. Could we be far behind? Will it be $5.00 a gallon gasoline for us by Memorial Day?
Don Good of the Good Oil Company in Winamac explains how gasoline prices could be going up so radically while consumption is going down.
“It’s fueled by things completely divorced from supply and demand,” said Good. “Our country posted, and I believe the number is like 38th month in a row, that gasoline consumption has dropped. We’re using about the same amount right now that we did in 1989 or 1990 so we’re back to those levels of consumption.”
Consumption is at such a low level that refineries are being shut down.
“We used to talk about how short refinery capacity was and now they’re looking at closing refineries because of the drop in demand.”
More oil is being found in the west that could make us look like Saudi Arabia before it’s all over.
“They’ve discovered a way to tap into what is called a Balkan Sea Oil Reserves and they predict that there may be as much oil reserves as in Saudi Arabia. So everything would tell you that gasoline prices should be dropping.”
Don Good has told us before, but it bears repeating, speculators are holding the higher price cards.
“Unfortunately, it’s the same old thing to where the traders, or the speculators, are treating this almost like the stock market. They’re looking at Iran and saying if Israel attacks Iran and shuts off the Gulf, it’s going to drive prices up. So in anticipation of that, they’re buying used provision in petroleum and it’s creating a shortage for those who need it – on paper.”
Don Good will talk more tomorrow about the explosion of gasoline prices at the pump.