WTI might be misleading oil benchmark

The pricing of gasoline is based on a different index, so why do financial websites focus on the WTI?

By , Guest blogger

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    A unicyclist rides pass a gasoline pricing sign in Portland, Ore. The author argues that Brent crude may be a more reliable index than the WTI, even though financial websites tend to focus on the latter.
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In the Energy Information Administration's latest "This week in petroleum" there is one interesting detail. During the latest year (or year to August 26), the price of the most commonly quoted form of oil, the West Texas Intermediate (WTI), is up only 13% (from about $75 per barrel to about $85), while the price of crude gasoline is up 50% (from $1.95 per gallon to $2.94). The price of crude gasoline has thus seemingly increased by a third relative to the price of crude oil. Since gasoline is based on oil, how is that possible?

I am not entirely sure and there are probably several explanations, but one explanation that is consistent with recent price history is that the pricing of gasoline isn't based on WTI, but rather on Brent crude. Typically, the price difference between WTI oil and Brent oil is small, but the latest year it has increased to more than 30%. If this is the explanation then one should really question why WTI is the price that financial web sites focus on, since it seems that Brent is more important.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on stefanmikarlsson.blogspot.com.

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