The price differential (spread) between a barrel of WTI crude and a barrel of Brent crude has closed to less than $0.50 a barrel after soaring to around $28 a barrel in October of 2011. For U.S. consumers, the rise of WTI (domestic) crude has driven gasoline prices up in virtually all parts of the country.
For years the price of WTI was the world’s benchmark and Brent crude was priced at a discount to WTI. The two prices flip-flopped for several years, before Brent began to trade at a premium to WTI in 2010.
As the two crude grades return to rough balance, its worth repeating that WTI prices have risen more than Brent prices have fallen. Now that it is possible to transport more crude from the Bakken shale play in North Dakota and Montana to all three U.S. coasts, the increase in domestic production is levelling the field again.
The other major cause of the increase to gasoline pump prices is the price refiners and blenders have to pay for ethanol credits. We’ve been over that ground many times, but it’s worth noting again.
Gasoline prices are near an all-time high for this time of year, at a national average of about $3.67 a gallon today, according to the AAA Daily Fuel Gauge Report. A year ago, a gallon of regular gasoline cost about $3.43.
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