Oil Prices Are Mortal but $4 Gas Still Not Vulnerable

"Crude oil inventory is going up, but gasoline inventory is still going down, and that's the important thing for the American consumer," Larry said. "We need to focus not on how much crude we have but how much refined product we can make and gasoline is not going to get cheaper."

In fact, Larry said that the inventory build is a story about how much more gasoline the U.S. is producing, more so than a headline of demand destruction throughout the system caused by high gas prices.

The Energy Information Administration revised domestic production numbers significantly higher this week, and as many as 6 million of the 9 million barrel build in crude can be explained as a function of greater domestic production and expectations going forward, Larry said. A 3-million barrel build would be slightly high, still, but much closer to the market expectation of 2.5 million barrels in inventory.

The Obama administration simultaneously talks about the Strategic Petroleum Reserve while it also approved another step in the Iranian sanctions process on March 30 specifically based on an analysis that there is plenty of crude on the global market. Meanwhile, the Saudis are still pumping at a 30-year high. In fact, as inventory builds, there is not much room for U.S. demand to grow without crude tightening.

"You need to focus not on how much crude we have but how much refined product we can make and revisions to domestic production don't solve the problem of the need for crude going forward," Larry said. In fact, even as the domestic inventory hit an atypically high level for this time of year, crude imports are rising.

"There doesn't appear to be demand destruction in crude," added Phillip Silverman of money manager Kingsview Capital.

Some oil market experts contend that the most obvious conclusion to reach amid all of the oil market noise -- and as Secretary of State Hillary Clinton sought this week to gain assurance from the Saudis that they won't pull back on production even if the SPR spigot is opened -- is that there is no reason to tap the SPR in the first place.

"Members of OPEC will say, 'Why release when there is plenty of oil in the U.S. and imports are climbing too, with the Saudis shipping more oil here," Larry said, adding, "This inventory data could be a tipping point for the Saudis to say, 'If you release from the SPR, we will have to do something.'"

Silverman said the inventory build puts handcuffs on Obama when it comes to selling the SPR to Congress.

Summit Energy analyst Smith isn't so sure.