BP's Earnings Show Why Gasoline Prices Could Keep Falling

Gasoline prices have been falling sharply in the past month, and the latest comments from BP show why they could keep going down.

The main reason for the price decline comes at the refinery level, where crude oil is turned into gasoline. Refineries have been making too much gasoline even as people in the U.S. and elsewhere are using less of it. In some cases, refineries are actually losing money on the gasoline they produce, because the wholesale price they sell it for doesn’t make up for the cost of producing it.

“We’ve seen an oversupply as we moved into late August, September and now October,” he said. “And that’s why you’ve seen the gasoline and diesel cracks moving down pretty significantly.” Cracks are a measurement of margins that refiners make. “Retail gasoline will definitely move lower in the next week or two,” he wrote in an email to Barron’s. He predicts that “gasoline will flirt with being a glut from now into midwinter.”

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