Today was an extraordinary day in U.S. oil markets. Retail gasoline climbed to its highest level ever - - $3.209 gal for the national average - - but the huge bulk wholesale markets plunged. The overheated pipeline markets - - where large slugs of refined products trade each business day - - saw drops of 15-20cts gal in some cases, far outpacing the 9.5cts gal drop in gasoline blendstock futures.

   The left and right coasts saw the smallest decreases. Wholesale gasoline dropped by only about 5cts gal on the West Coast and by about 10cts gal on the East Coast. The Gulf Coast saw a nearly unprecedented drop of 19.5cts gal and the interior of the country dropped 12-17cts gal. Remember, these are spot price drops, where the volatility is as severe as desert temperatures. Tomorrow will be a key day, what with the Department of Energy releasing new data on inventories, production, and demand.

   Conspiracy theorists will tie today’s drop to hearings on The Hill, but today is quite typical of the manic moves that characterize commodities’ markets. But Tuesday’s  action certainly points to some relief in the painful heartland states that find pump prices as much as 66cts gal above last year’s numbers.

   I’ve been on the soap box all Spring saying that Americans will respond to the increases by driving less, although the scope of the response is debatable. No one buys gasoline at a value indexed to the national retail average. All purchases, like politics, are local. The local numbers in the Washington D.C. to New York & Boston corridor aren’t all that dramatically different from a year ago. But the prices in many other states, including counties where incomes have not risen dramatically this century, are high by any historical measure.

   Here’s how much more you would pay in some of the hardest hit states on May 22, 2007 versus May 22, 2006, for example:

   Alabama – 33.6cts gal more

   Arkansas – 48.4cts gal more.

   Georgia   - 34.3cts gal more

   Iowa        - 61.6cts gal more

   Idaho       - 34.6cts gal more

   Illinois     - 56.9cts gal more

   Indiana    - 56.5cts gal more

   Kansas     - 64.8cts gal more

   Kentucky - 44.4cts gal more

   Michigan  - 59.9cts gal more

   Minnesota- 59.1cts gal more

   Missouri  - 54.6cts gal more

   Montana  - 47.6cts gal more

   N. Dakota- 54.6cts gal more

   Nebraska  -62.0cts gal more

   N.Mexico -49.8cts gal more

   Ohio        - 47.7cts gal more

   Oklahoma-64.8cts gal more

   S. Dakota- 57.2cts gal more

   Wisconsin-48.5cts gal more

   Wyoming -42.2cts gal more

    I haven’t listed these year-on-year differences to slow down the massive flight of coastal residents looking to relocate in the Dakotas or the Oklahoma panhandle. But I do believe - - please don’t accuse me of geographically political incorrectness --  that people in these states might respond differently than road warriors in southern California,  New York, or Texas. At the very least, you might expect more sacrifice than one would expect in say, Staten Island.

       I’ll localize the impact of fuel prices even more.  Our retail department recently charted county-by-county gasoline prices and compared them to local income averages. The results are quite staggering, or “granular” as the data czars prefer to characterize them.

   Clay County, Kentucky consumers are spending about 14.75% of their income on gasoline these days. At the other extreme are Hunterdon County, New Jersey residents who are only outlaying about 2.7% of their income.   If you’d like to view some of this data, contact my noble manservant and OPIS Retail Director Fred Rozell at frozell@opisnet.com

    (Final footnote: as a N.J. resident, I hereby attest that the lower gasoline prices here are dramatically offset by the highest property taxes in the country, as well as a stiff state income tax, heavy auto insurance bills, and many other generally unpleasant levies inflicted upon the public in the garden state).

                                   *                           *                           *

  One other footnote:  I concentrate on North American oil markets, so I don’t pretend to be expert in matters concerning the Middle East, Europe, South America, Asia, or Africa. However, I would like to weigh in on recent press coverage that attributes strong crude prices to “problems in Nigeria.”

   I am reminded of the movie, Casablanca.   Humphrey Bogart turns to Ingrid Bergmann and utters the simple but precise “We’ll always have Paris.”  

   Speculators in oil might be more prone to watching Booty Call, various Chris Farley film festivals, or black and white art house showings of the Police Academy classics.

    But wherever they lurk, those who speculate and cheerlead the markets toward higher oil prices can always whisper to one another under the hush of the crowd and say:

     “We’ll always have Nigeria.”