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?
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?Skip to next paragraph
Stefan is an economist currently working in Sweden.
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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.
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