One thing people tend to care about a lot when oil gets really expensive is what happens at the gas pump. Gas prices broadly follow the cost of crude, but there’s a lot more that goes into how much a fill-up sets you back. I called up Oil Price Information Service (OPIS), a group that follows fuel costs, and asked them to send me some data in order to show how closely those two variables have tracked each other over the past few years.
This chart shows the relationship between a gallon of unleaded gasoline and a one-month oil futures contract on the NYMEX, as expressed by month-over-month percentage change in price. That might seem a little cumbersome, but in order to honestly put two variables on one graph you can’t use the prices themselves (thanks for the help on this, Feilding and Jackson):
What you see if that gas-price increases haven’t kept up with the recent spike in the cost of oil. The reason, of course, is simple: Oil is a commodity that trades on an open market and is therefore susceptible to all sorts of shocks, like the explosion at a refinery in Big Spring, Texas earlier this week. That probably doesn’t weigh on the mind of the person who owns your local convenience store nearly as much as what the guy at the gas station across the street is charging.
So the optimistic take-away is that gas prices don’t have to rise just because oil prices do. Although, that is really only a short-term argument. The long run, unfortunately, is a whole other matter.