MARKETING & SUPPLY BY KEITHREID What’s driving our new oil reality—supply and demand or rampant speculation?
GETTING TO THE BOTTOM OF CRUSHING OIL PRICES
I
T WAS A MUCH SIMPLER WORLD IN THE EARLY 2000S where gas prices were concerned. As is the case today, the price of crude played the major role in the price of gasoline and at the start of the decade the price of gasoline was a very afford- able and generally stable year-to-year. Crude oil had averaged out at $28.36 per barrel in 2000 and the retail price averaged about $1.48. But prices were going up from the average price in 1999 of $17.46 per barrel and $1.22 per gallon respectively.The really big news at the time was that OPEC had established a “price basket” of seven
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crudes and was adjusting production to keep crude oil prices in a
$22 to $28 per barrel range.
Shocking, given the low $12 per barrel price (and resultantly lower gasoline prices) motorists had enjoyed in 1998, but still well below a $35 per bar- rel spike in 2000. There had been a number of such price spikes
during the summer of 2000 with regional gasoline prices in the Midwest cresting the $2 per gallon. These “disturbing” prices prompted the usual (for the day) political grandstanding among state attor- neys general and those in the Congress and Senate.
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