West Texas crude in 2011 averaged 14% LESS than North Sea Brent. Thank Ethanol.
With all the talk of high gas prices, it's interesting that nobody is talking about the big change in West Texas Intermediate oil versus North Sea Brent.
Historically, WTI sold at a premium to NSB of about 6% to 8%. Around 2005 that premium began to shrink. This shrinkage of the premium just happened to coincide with the our production of ethanol on a significant scale. Then in 2011 the risk of dusruption in supply began to be a factor in the price of oil. Since our ethanol production was completely unaffected by Mid-East political risk factors this magnified the impact of ethanol on the price of oil, in particular our domestically produced oil. Throughout 2011 West Texas Intermediate has averaged about 14% less than North Sea Brent (the proxy price of oil produced around the world).
That's a total price swing of 20%-22%. If only we had started increasing our production of Methanol from Natural Gas to add to the ethanol and further reduce our gasoline consumption! (This would have required auto makers to make all their cars be Flex Fuel capable. Cost about $250 - $350 per car.) But this sort of coordinated action would have required an energy policy with energy security being a high priority!
Oh well, I guess we can spare that decrease in economic growth that rising gas prices will exact in the coming years - starting with 2012. (yeah, RIGHT! Like a starving man can stand going on a diet!)