Oil at $50 Will Not Solve Your Cash Crunch

In a recent interview with CNBC, Gulf Oil CEO Jon Petrowski predicts that oil prices will fall all the way back to $50 per barrel, but that gasoline prices are likely to remain on the high side. Petrowski believes that the expansion of supply will lead to falling prices and put pressure on refiners like Tesoro (NYSE: TSO  ) and Valero (NYSE: VLO  ) . Given the costs of transporting refined product, the net effect on the economy is likely to be muted, although energy prices should stay contained due to natural gas supply.

In the video below, Fool.com contributor Doug Ehrman discusses the effects of falling oil prices without a corresponding drop in gas prices, and the waterfall of ramifications that would follow.

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  • Report this Comment On July 18, 2013, at 4:17 PM, reparker56 wrote:

    Makes no sense to me - so I must be a fool! Using transportation costs as the justification for keeping gas prices high when oil prices will be cut in half make no sense. Isn't gas one of the main factors of transportation costs? So, if oil prices drop then gas prices should also drop, which would make transportation prices drop as well - shouldn't it? Seems like the prospect of much better margins is more a factor than transportation costs. What's that saying - Hogs eat, but pigs get slaughtered. I'll have a side order of OIL EXEC, with my eggs over easy, thank you.

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