Before 2011, the spread between West Texas Intermediate (WTI) -- the US benchmark price for oil -- and Brent North Sea (Brent) -- the benchmark price for Europe and the rest fo the world -- was typically never more than a few dollars per barrel. This year, however, the spread between prices at the two delivery points has diverged widely, reaching levels never before seen. Just last week, the spread between the two hit a record high of $27.88 per barrel.
The primary reason cited for the widening divergence between Brent and WTI crude oil over the last several months has been the ongoing conflict in Libya, which has caused a disruption in supplies of light sweet crude oil to the European market. While most US consumers would welcome the fact that oil in the US is cheaper than in Europe, the reality is that the price of gasoline has widely tracked Brent crude as opposed to WTI. Therefore, even as oil prices in the US have gone down, gas prices haven't seen anywhere close to a commensurate decline.
The question going forward is that with this morning's news that rebel forces in Libya had captured and killed former ruler Muammar Qaddafi, will the spread between Brent and WTI begin to narrow again? Optimists will argue that the Libyan uprising caused the spread to widen, so some resolution to the conflict should help to resolve the divergence. On the other hand, Libya still remains a country immersed in a civil conflict, which isn't likely to abruptly end now that the former ruler, as despised as he may have been, is out of the picture. While there may be some relief in the spread, and ultimately gasoline prices, don't expect two dollar gas anytime soon.