There has never been as much oil sitting in storage tanks in Cushing, Oklahoma, as there was last week. That is, perhaps, until next week. The oil tanks in Cushing are an important gauge of supply and demand for oil. There is plenty of it and it keeps coming.
It’s normal for the United States to be holding about 24 days worth of crude oil supply this time of year. As we head into April, the country has a full month’s worth, according to the Energy Information Agency. Despite the price collapse, oil production continues while demand has remained steady.
The result of these market forces has not been a sustained sharp drop in prices at the pump. While drivers are enjoying cheaper gasoline compared to what we were paying over the past several years, it’s not as cheap as it was a month ago even though oil prices hit six year lows this month.
It sets the stage for further price drops at the pump in the weeks ahead. The national average fell below $2 a gallon as recently as January before prices spiked. The political uncertainty in the Mideast and the talks regarding Iran’s nuclear program can be volatile for global energy prices, but they haven’t been thanks to the massive amounts of oil sitting in tanks waiting to be refined.
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Last week the Federal Reserve set the stage for raising borrowing costs in the months ahead. In the meantime, American drivers could see a drop in energy costs.
Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.