Exxon Mobil Corporation (XOM), Goldman Sachs Group Inc (GS): This One Chart Shows the Insanity of Gas Prices

The tragedy of exports
With new calls for energy independence in the U.S., many Americans don’t understand why gas prices remain so high. The reason is simple: With prices for refined products largely set by international markets, it has become more lucrative to export gasoline than to keep it for domestic consumption and reduce local prices. Valero Energy Corporation (NYSE:VLO) and Phillips 66 (NYSE:PSX) are massive exporters of gasoline and other refined products, and the differential between U.S. crude prices and those in international oil markets has only made those exports grow.

Meanwhile, it’s also important to understand that while unconventional drilling techniques have opened up new supplies, the techniques generally involve higher costs to extract oil. That in turn supports refined-product prices that are higher.

Could volatility go the way of the Fed?
One other factor to consider is the action taken by the Federal Reserve to inject liquidity into the financial markets. As long as money is cheap, the Fed’s low interest rate policy makes it easier for traders to take positions in the oil markets. What will be interesting to see is whether the coming end of quantitative easing will calm down gasoline-price swings. That might not bring relief at the pump, but it might at least make price movements more predictable.

The article This 1 Chart Shows the Insanity of Gas Prices originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Goldman Sachs.

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