Such an increase in oil prices does not automatically herald a rise in gasoline prices, especially if it mainly erases a discount that benefited refiners in one region of the country. Moreover, gasoline and crude oil as commodities move in separate markets, linked but not in lock-step. Over the medium-to-longer term they must clearly be connected, but in the short term each responds to distinct forces of supply, demand, inventories and expectations.
Starting in 2011, West Texas Intermediate (WTI) crude, the main US oil benchmark, traded at an increasingly deep discount to Brent, a North Sea grade that was Europe’s main oil benchmark, and more recently the world’s. For decades, these two crudes had traded near parity, plus or minus a buck or two a barrel. Several factors changed that. The biggest was the rapid growth of production from unconventional sources in the middle third of North America: shale oil and upgraded oil sands crude. From West and South Texas to North Dakota and Alberta, Canada a wave of new oil overwhelmed existing pipeline capacity, some of which was pointed in the opposite direction to carry imported crude into the mid-continent.