Crude Oil and Gasoline Prices: Like Déja Vu All Over Again


"Like in baseball, we are back to the basics in the petroleum markets."

It's that time of the year again to watch the boys of October get out their big bats and hit for the fences. "You can observe a lot by watching" is one of Yogi Berra's favorite quotes and is applicable to what is happening with crude and gasoline prices today.

October is a crucial month to watch the petroleum industry as well. Refineries in the U.S. and Canada are busy switching over from summer grade to winter grade gasoline, as well as increasing their heating oil production for the upcoming winter.

This year will be an instant replay of this time last year with the price of crude oil and gasoline going down hard. Gasoline prices will lead the way once again with crude oil prices to follow. The chart below was prepared by James L. Williams with WTRG Economics and shows the correlation between demand and price.

Overall consumption of crude oil has been a downward slide tracking the current recession, as well as resistance by the public to the skyrocketing price of gasoline.

U.S. crude oil prices averaged $32.36 a barrel from January 1973 through June 2009 with the world oil price averaging $35.50 a barrel during that same time. The median oil price for that period was $30.04 a barrel. A jump to $40 a barrel would not be far a stretch.

Like in baseball, we are back to the basics in the petroleum markets. Baseball is a great game, and almost every kid has at one point played baseball. One of the fundamentals in baseball is throwing the ball for distance, strength, and accuracy.

The same analogy is applicable to forecasting crude oil and gasoline prices—practice, practice, practice.

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