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Wednesday
May022012

Lower Gas Prices: This Summer's Coming Blockbuster?

With the month of May upon us, now is the time of year when we start to hear about the upcoming Summer Blockbuster Movie season.  While there are plenty of big movies on tap for this Summer (The Amazing Spider-Man, The Avengers, The Dark-Knight Rises, etc) the biggest blockbuster may be lower gas prices.

As shown in the chart below, gasoline futures have seen a sizable drop over the last several weeks and are now down more than 9% from their peak levels at the end of March.

With the price of WTI crude oil still well over $100 per barrel, why is the price of gas dropping?  The key lies in the price of Brent crude oil prices, which gasoline prices are more closely correlated to.  While WTI crude oil prices haven't moved much in the last few weeks, Brent crude oil prices have seen a much larger decline.  This can be illustrated by the spread between the price of each crude oil, which is down more than 35% since April 4th.  Following today's decline, the spread is now back below 13 for the first time since January.   No matter how you look at it, current prices for gasoline are high, but if the recent trend of lower prices continues, it could provide a strong boost to the consumer.

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