Oil prices have fallen to around where they were at the end of February — before President Donald Trump launched an attack on Iran.
So why are gasoline prices, while down, not at their pre-war level?
The oil being used to make gas today is oil that was bought weeks ago, says Prof. Eric Smith of the Tulane Energy Institute.
“A ship leaves the middle east and gets through the Hormuz Strait, its takes it anywhere up to a month to get to the U.S. and be unloaded, and then another couple of weeks for it to get turned into gasoline,” Smith explained.
So the gas you are buying today was made with oil pumped out of the ground in mid-May, when it cost as much as $105 per barrel.
“Sixty percentage of the value of that gasoline that’s been produced represents the cost of the crude that went into it,” said Smith.
He said since stockpiles of crude have been depleted worldwide during this disruption, it will take some time for gasoline production to catch up.
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