Smart SpendingSmart Spending

Gas prices shouldn't be high, but they are -- here's why

The rest of the world isn't keeping up with US production.

By Money Staff May 16, 2014 12:25PM

This post comes from Javier E. David at partner site CNBC.


CNBC on MSN MoneyAs the summer driving season nears, retail gas remains stubbornly lodged near $4 per gallon. According to the Energy Information Administration, gas prices rose for 12 straight weeks through late April, and were 20 cents a gallon higher than the same point last year.


Buying gas © moodboard/CorbisSo what gives?


"The world's not swimming in crude or gasoline yet," said Francisco Blanch, commodities strategist at Bank of America-Merrill Lynch, in an interview.  "Despite all the crude and gasoline production in the U.S., international markets are not tagging along."


International developments matter, analysts say, because gas prices are linked to internationally priced Brent crude. Turmoil in Ukraine and spotty supply from the perenially unstable Middle East has conspired to keep oil above $100 per barrel.


In a research note this week, analysts at Goldman Sachs called crude oil fundamentals "stable but tight," adding that most developed-economy stockpiles "remain at low levels" amid lower-than-expected output from hotspots like Libya and Iraq.


That backdrop explains why prices at the pump have defied the gravitational pull of a litany of mitigating factors such as a more fuel-efficient U.S. car fleet, rising domestic production and a still-fragile recovery that should blunt demand.


BofA-Merrill points out that domestic oil and gas production has driven gasoline imports to near zero, while the U.S. is churning out nearly 10 million barrels a day. Despite all this, there has been little relief at the pump due largely to factors outside America's control.


The International Energy Agency said in its most recent report that OPEC will need to increase its own production this year to sate rising demand. Meanwhile, the energy watchdog said non-OPEC production is also falling short of expectations.


'Shale boom may not be helping'

"In the U.S. and Canada, yes, there is a big shale revolution going on…but the rest of the world is not producing enough to feed itself," said BofA's Blanch. "That's why oil prices abroad are elevated and why gasoline, which is pegged to oil prices, are so high."


The EIA expects crude oil prices to fall this year, which should keep a lid on gas prices. Still, the agency expects average gas prices to rise by 3 cents during the June—August period compared with the same quarter last year.


The latter may come as another blow to consumers, many of whom are hard pressed to see material benefits in the U.S. shale surge when retail energy costs are still so high.


"For now, the shale boom may not be helping consumers directly by pushing [gas] prices lower," said Blanch. Still, the oil and gas renaissance can alleviate energy inflation while creating economic benefits, like more jobs, he added.


More from CNBC

1000Comments
May 16, 2014 1:46PM
avatar
BULL $HIT!!!!!!  CORPORATE GREED IS MORE LIKE IT.  AND GAS AND OIL COMPANIES WANT TO SHIP OUR NEW FOUND GAS AND OIL OVERSEAS TO MAKE MORE MONEY.  THE COMMON PERSON IS THE ONLY LOSER WITH OUR NATIONS NEW FOUND RICHES!!!
May 16, 2014 1:44PM
avatar
For years all we heard was if we went and got our own oil then the prices would be reasonable. Well, guess that didn't work so now it's because they are not producing enough oil. What I really see here is the greed of corporate world and their desire to continue to ring in the profits.
May 16, 2014 1:58PM
avatar
Who the hell do they think they are kidding? They can make more money selling it overseas and screw the people where it's coming from. It's not rocket science.  Earlier this year they blamed it on the refineries switching from the winter blend production to the summer blend. Well we hear that one every year, like they have no clue that summer or winter is coming.   Do they really think we're that stupid?
May 16, 2014 1:45PM
avatar
The truth really is: "It's all in the name of corporate greed!!"
May 16, 2014 1:54PM
avatar
this is all b. s.  the prices are controlled right here in the u.s. and they are raising the prices an keeping them high because nobody says anything. they try to blame it on opec country's so we will not look at who is really behind the pricing.
May 16, 2014 1:57PM
avatar
Once again the same old excuses, spinning slightly different each time. The fact remains the prices are reflective of speculation and profit-taking on Wall Street. There is NO regulation on this industry within these ranks; the president and congress turn a deaf ear. What we have left is NO representation in government, foreign oil production is the scape goat and we will continue to be screwed.
May 16, 2014 2:02PM
avatar
It is legal government rape, and they do not care about us at all.
Thank you for working for american interest.  Not.
our government is such a joke.
May 16, 2014 1:55PM
avatar
ONE OF THE BIGGEST ISSUES IS THAT OF THE "CUSTOM" BLENDS THAT THE REFINERS HAVE TO MAKE. CA AS AN EXAMPLE HAS MANDATED THE USE OF TOXIC ADDITIVES TO LESSEN POLLUTION.  MUCH OF THIS IS CRAP JUST LIKE THE MANDATED ALCOHOL TO BE BLENDED --THEY --THE ECO NUTS - SAY THAT IT IS CLEANER--YET WHEN CAR AND DRIVER TESTED THE CAR THAT RAN THE SAME COURSE TWICE --ONE WITH THE ETHANOL BLEND AND ONE WITH PURE GAS. THEY USED THE SAME EQUIPMENT THAT THE EPA DOES AND FOUND THAT THE PURE GAS POLLUTED LESS AND GAVE BETTER MPG'S. SO WHY ARE WE DOING THIS? THE ETHANOL BLEND ALSO ROTS ENGINE COMPONENTS RESULTING IN MORE REPAIRS. SO WHY ARE WE DOING THIS?
May 16, 2014 1:54PM
avatar
If we would stop selling our oil over seas, we could lower the price at the pump in the US.
May 16, 2014 1:54PM
avatar

In the U.S. and Canada, yes, there is a big shale revolution going on…but the rest of the world is not producing enough to feed itself," said BofA's Blanch. "That's why oil prices abroad are elevated

ABROAD?? Guess that is a misnomer......gas prices are high because of market GREED

 

drink the koolade

May 16, 2014 2:01PM
avatar

BULL MANURE-----And I say based upon the annual Bonuses a few at these Oil Corps receive in addition to their 7-8 figure salaries!


Nice excuse but it fails to Cut the Mustard!!!!!!!!

May 16, 2014 1:43PM
avatar
Watch how fast everybody backs off of Putin when his valuable oil becomes more in demand by the EU this winter.
May 16, 2014 2:03PM
avatar
Same old lies.  Every Spring and Fall we get a huge jump in gas prices, due to re-formulation.  Of course they all have to stop and start at the same moment, and refineries just happen to go into maintenance mode.   Gas jumps, driving decreases, the economy slows.   Two weeks ago the lowest octane regular was at or above $4.50.  Driving decreased, this morning I saw the lowest octane at $3.99.  Still expensive.  We are tired of getting screwed with no alternative public transportation.
May 16, 2014 1:59PM
avatar
And this president and his EPA are not helping matters any..
May 16, 2014 2:07PM
avatar
There is always some BS explanation to keep the prices high on everything. How about all the greedy people in the world go outside and play a nice little game of hide and go !@#$ yourself.
May 16, 2014 2:04PM
avatar
well yes oil companies keep making billions, and why not would they raise the gas prices .  the summer vacation season is starting, and as noted price increases will be seen through June until August.  Come on, think we can't see what is going on
May 16, 2014 1:45PM
avatar
So there you have it. No need for the Keystone Pipeline, its not going to help anyone in this country one bit and could wreak environmental catastrophe.
May 16, 2014 1:56PM
avatar
aren't you the same people who've been complaining about climate change all week?
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More