Gas for cars is priced as though crude oil is much higher than $110 per barrel, says one energy expert.
“The prices for gasoline and diesel — even when you’re looking at $110 crude, is just sky-high. Basically it’s pricing as though crude oil is $200 a barrel,” Daniel Dicker, founder of The Energy Word, told Yahoo Finance.
A big component of the energy puzzle has to do with refineries, which operate on margins. The refining business, says Dicker, is far behind and “they really can’t catch up at this moment.”
“We haven’t had a major refinery build in this country in 60 years,” he said. “In bad times, refineries are just terrible. I can recall Valero (VLO) trading in the teens. Now it’s trading at $125 a share.”
“It’s not the kind of business that drives new investment in it, so the old investment is there trying to make up in a moment when there’s absolutely zero supply and they’re running as fast they can.”
JPMorgan analysts predict the national average of gasoline could hit $6 per gallon — and go even higher by August.
Oil was trading higher on Wednesday as U.S. gasoline stockpiles fell ahead of the summer driving season.
On Wednesday, West Texas Intermediate (CL=F) futures inched above $110 per barrel. Brent (BZ=F) crude was also trading slightly higher, above $113 per barrel.
Ines is a markets reporter covering equities. Follow her on Twitter at @ines_ferre
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