Crude oil prices hit a six-and-a-half-year low on Friday, leaving some analysts to wonder if oil's global price decline is going to halt any time soon. Yet gasoline prices for millions of American motorists went the other way this week.
First the global overview: European benchmark Brent crude ended Friday down 17 cents to $49.05 per barrel, according to Reuters. That still left Brent a bit higher for the week, breaking a six-week string of declines. The U.S. standard West Texas Intermediate hit an intraday low of $41.35 before recovering slightly.
The wire service also quoted a Goldman Sachs note to its clients, which pointed to the recent devaluation of the Chinese yuan as affecting the wider global economy, a sentiment reflected by other analysts.
"When you have the biggest customer for oil and commodities devaluing, then obviously you find your product coming under pressure and that is really how the day has panned out," Saxo Bank commodities strategist Ole Hansen told the Australian Financial Review on Wednesday.
Several other factors are contributing to oil's ongoing drop. North American production, spurred by the shale oil boom in the U.S. and Canada, remains strong. And members of the OPEC oil cartel haven't veered away from their current oil production quotas. Indeed, news that OPEC member nations increased production last month has also pressured oil prices.
A report issued earlier this month by the U.S. Energy Information Agency (EIA) noted the nation's commercial crude oil inventories (and not counting the Strategic Petroleum Reserve) "remain near levels not seen for this time of year in at least the last 80 years."
And another EIA report, published Thursday, suggested that if the recent nuclear accord between Iran and the West is implemented and Iranian sanctions get eased, it would bring more Iranian oil into an already glutted global market.
Imagine then how motorists in America's Midwest must be scratching their heads as they see the price of gasoline at the pump suddenly climbing.
They can't blame that on the global oil market, however. The cause is far more local: a partial outage of BP's Whiting refinery in Indiana, the region's largest oil refinery. The unexpected shutdown for"for unscheduled repair work" last Saturday could take several weeks to complete, and it's already raising gas prices in the region, by nearly a dollar around Chicago.
At the same time, the disruption will redirect oil produced from Canada's tar sands away from their usual delivery to the Whiting refinery, and instead to oil storage facilities in Cushing, Oklahoma, which will only add further to oil inventories there.
"With motorists facing the first wave of 30 cent a gallon increases at the pumps from the Great Lakes to the Rockies and a 15 cent a litre increase from BC's interior to Northwestern Ontario, a single refinery outage ... is understandably treated with skepticism on both side of the Canada-US border," Dan McTeague recently blogged at GasBuddy.com.
But for the rest of us, AAA reported that the national average price for regular unleaded gasoline fell for 26 straight days earlier this week, dropping the national average on Monday to $2.59 per gallon.
Chances are good that Midwest motorists will be rejoining the cheap-gas party well before it comes to end -- whenever that may be.