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Oil cos. keeping crude, hoping gas prices rise?

Oil barrel, drawing, over US 20 dollar bill, partial graphic
AP/CBS

Many Americans hitting the road over Memorial Day will be thinking about high gas prices. They're just starting to slide back a little after reaching an average of $4.00 a gallon nationwide.

Pump prices lower ahead of Memorial Day weekend

But what's behind those gas prices?

The answer, CBS News Business and Economics Correspondent Rebecca Jarvis said on "The Early Show," might be found in Cushing, Okla.

Jarvis observed that, no matter where you fill up your car this weekend -- chances are -- the fuel spent some time in Cushing. Five- to 10 percent of the country's oil supply flows through the town and gets stored there.

Though it has just 9,000 people, Cushing is among the most important centers in the global oil market. 

Considered the "Pipeline Crossroads of the World," 40 million barrels of oil are stored in giant steel tanks that span more than 10 square miles.

Enbridge Energy stores more than a third of that supply.

The company's Maury Wilmoth told CBS News, "We have about 14.8 million barrels of capacity. We have that in about 90 tanks."

This vast amount of oil is stored in Cushing before being piped back out to refineries and converted into gasoline.

Wilmoth said, "There's always oil moving into and out of Cushing."

But lately, Jarvis reported, there's a lot more oil moving in, than going out.

Jarvis asked Wilmoth, "Does it feel like there's a glut in oil supply here right now?"

He replied, "We definitely are experiencing large capacity of oil storage here at Cushing."

One tank Wilmoth showed CBS News contains 250,000 barrels of oil.

With gas prices at $3.81 a gallon, why are oil companies keeping those tanks full and the oil out of the nation's refineries?

Some analysts say it's in the hopes prices will rise, and the companies will be able to sell oil for a higher profit. 

But it's not an exact science.

Peter Coy, economics editor at Bloomberg magazine, said, "Predicting gas prices is a fool's errand. Nobody can do it reliably. That said, the best predictor is what happens to crude."

In the last year, oil prices have soared. Last May, a barrel cost about $74. Today, it's $100.23.

In Cushing, they're making plans to increase the amount of crude they can store.

Enbridge will add 13 tanks to its facility over the next couple of years -- enough to hold four million additional barrels.

Wilmoth said, "And we have demand for far more than that."

Jarvis added on "The Early Show" that Memorial Day weekend is the typical peak time for gas prices. She said you may pay a little more at the pump this weekend, but analysts predict prices to fall another 35 cents over the summer.

Co-anchor Erica Hill asked if the break in high prices will come elsewhere -- like at the grocery store.

Jarvis said, "The unfortunate news on that is, while we might see some relief at the pump, a lot of companies are forecasting that we're going to be paying more at the grocery store because, not only do shipping costs factor into these prices, but also the grain prices, the cost of the food that, for example, animals feed off of has also gone up. So, you may see more prices going up again at the grocery store throughout the year, the (United States Department of Agriculture) is predicting."