Gasoline at $4 Coming to a Pump Near You, Unfazed by Rising Tab

[Donger]

http://www.bloomberg.com/apps/news?p...d=afOlUzd30YOo

Pretty alarmist, IMO, but possible.

Spoiler!

April 23 (Bloomberg) -- Whether it's $50 to fill up your Prius or $130 for the Ford Expedition, $4-a-gallon gasoline is coming to a pump near you.

Fuel prices are rising at a pace not seen since Hurricanes Katrina and Rita knocked out a third of the U.S. oil refining industry in 2005. Gasoline consumption is climbing twice as fast as last year and will accelerate when summer travel begins late next month.

``What we're surprised by is the increased demand,'' said James Mulva, chief executive officer at ConocoPhillips, whose refineries from California to New Jersey produce 56 million gallons of gas a day, enough to meet 14 percent of the country's needs. ``Even though the price of gasoline is up, the demand is up,'' he said in an April 12 interview in Houston.

Population gains and U.S. economic growth are causing an increase in fuel purchases, according to Orlando, Florida-based AAA, the nation's largest organization for motorists. The U.S. economy will expand at a 2.4 percent annual pace in the second quarter, up from 1.8 percent in the first three months, according to the median estimate of 74 economists surveyed by Bloomberg. Gasoline use is rising almost 5 percent above the five-year average.

Americans are resigned to higher prices, says David Pursell, a principal with Pickering Energy Partners, a consulting firm in Houston.

``Last year, we had pump prices well over $3 for the summer and gasoline demand was up,'' Pursell said in an interview. ``Would $4 gasoline cause demand contraction? I think it will, but I also thought $3 gasoline would.''

Pump Prices

Gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.

Pump prices in the U.S. may increase to $4 a gallon from a nationwide average of $2.87 today, especially if hurricanes threaten Gulf of Mexico refineries, says Peter Beutel, an analyst at Cameron Hanover Inc. in Stamford, Connecticut, who helps industrial consumers manage energy costs.

``Hurricanes are always the huge wild card,'' said Beutel. ``We're all praying for a year like 2006 rather than 2005.''

The June-to-November Atlantic Ocean hurricane season may produce 17 tropical storms, with nine reaching hurricane force and four becoming major hurricanes whose winds exceed 111 miles per hour (179 kilometers per hour), London-based forecasters at Tropical Storm Risk said. Some of the storms will strike the Gulf Coast this year after a benign 2006, AccuWeather.com predicted.

Inflation Risk

Higher pump prices will make winners of refinery owners such as ConocoPhillips, San Antonio-based Valero Energy Corp. and Royal Dutch Shell Plc of The Hague. Shares of Valero and Sunoco Inc., whose only business is refining, are rebounding after a decline at the end of last summer.

The increase in fuel costs threatens to quicken inflation and restrain consumer spending in the U.S. An appreciation to $4 a gallon would add more than $10 for a driver who fills the 12- gallon tank of a Toyota Motor Corp. Prius. The owner of an Expedition, a Ford Motor Co. sport-utility vehicle with a 34- gallon capacity, faces an increase of almost $40.

Many Americans have no choice but to drive more, says Christopher Knittel, an economist who studies fuel consumption at the University of California in Davis.

More Commuters

``We live farther from our jobs than we did in the 1970s, and with the rise of dual-income households, we now have two people who drive those distances every day,'' Knittel said.

Consumers also do more driving for things such as taking children to soccer practice, which they are unlikely to quit, he said. The U.S. population has increased 1 percent a year in the past decade to 301 million in 2007, adding to demand for gasoline, economists said.

Rising fuel prices make it less likely that Federal Reserve policy makers, who have cited inflation risks for the past year, will cut interest rates to spur economic growth. Before the hurricane-induced peak in 2005, U.S. gasoline topped out at $1.42 a gallon in March 1981, or $3.21 when adjusted for inflation, according to the Energy Department.

Economies in Europe and Asia are less likely to be hurt by gasoline prices because fuel already is subject to high taxes designed to encourage conservation. A gallon of unleaded costs about 3.25 pounds a gallon ($6.49) in the U.K., and in Japan it's 130.3 yen per liter ($4.16 a gallon).

$4 Barrier

U.S. consumers will get little relief on gasoline prices from Europe this year, unlike 2005, when oil companies shipped more across the Atlantic after the hurricanes. Europe's gasoline inventories in February were 114.2 million barrels, down 11 percent from two years earlier, according to the International Energy Agency in Paris. The drop in Europe was almost twice the 5.7 percent decline in U.S. supplies in that time.

``Just as we used to think $3 a gallon was an impenetrable barrier, now it's $4,'' said Peter Morici, a professor at the University of Maryland School of Business in College Park and former chief economist for the U.S. International Trade Commission. Gasoline at $3.50 is likely, Morici said, and a conflict with Iran or any event that disrupts crude supplies may push it to $4.

Pump prices rose 33 percent in the past 11 weeks, the fastest rate of gain since a six-week, 34 percent rally to the record $3.069 in September 2005, Energy Department data show.

Bodman's `Worry'

U.S. Energy Secretary Samuel Bodman in an interview last week said the national average pump price could break the record this summer. While his agency's official forecast is for gasoline to peak next month at about where it is today, hurricanes, refinery closures or crude oil supply cuts may send prices higher, he said.

Higher prices are ``a legitimate worry,'' Bodman said. ``We have trouble spots all over the world'' that could boost crude oil prices. ``We're in a very tight situation.''

Spending on fuel in the U.S. consumes half as much household income as in the early 1980s, which means gasoline would need to reach almost $6 a gallon to have the same effect on the economy as in 1981, according to the Federal Reserve Bank of Dallas.

Storage tanks at U.S. refineries, terminals and ports hold enough gasoline to cover almost 22 days of domestic demand, 8.2 percent less than the five-year average and the lowest for this time of year since the 1980s, Energy Department figures show.

Shortages

Valero-owned filling stations in Denver and Colorado Springs, Colorado, ran dry after a Feb. 16 explosion and fire shut the company's McKee refinery in Sunray, Texas. A day earlier, a blaze at an Exxon Mobil Corp. plant in Nanticoke, Ontario, slashed output, resulting in shortages and higher prices across eastern Canada.

The McKee shutdown strained supplies so much that ConocoPhillips postponed maintenance at its Borger, Texas, refinery north of Amarillo to prevent shortages in the region.

``Refineries are becoming more complex,'' Mulva said in the Houston interview. ``What we're finding is it's more difficult keeping reliability up with more sophisticated pieces of equipment that are highly integrated.''

Tesoro Corp. of San Antonio, the second-largest refiner in the western U.S., said first-quarter refinery use dropped because oil companies delayed until this year maintenance that could have been done in 2006. The portion of U.S. refining capacity that was in operation in the first quarter declined to 87.3 percent from 88.9 percent a year earlier, according to Energy Department data.

`Refineries Blow Up'

``Prices will depend entirely on whether we have a couple of refineries blow up,'' said Philip K. Verleger, an economist who runs a consulting firm in Newport Beach, California. ``It's almost impossible we'll get to $4 a gallon if all the refineries run well this summer. But if something happens and there are problems, then anything's possible.''

The average share gain for Valero, Tesoro and six other oil-refining companies is 26 percent this year, outperforming the 4.1 percent gain for Exxon Mobil and a 4.7 percent increase for the Standard & Poor's 500 index.

The shares will continue to rally, said Paul Carlson, who helps manage $3 billion at HGK Asset Management in Jersey City, New Jersey.

``Refiners are doing very well these days,'' said Carlson, whose holdings include ConocoPhillips, the second-biggest U.S. refiner. ``There will be lots of demand for any new refining stocks.''

`Back in Favor'

As recently as August, investors were selling oil refiners on concern an economic slowdown would slash fuel demand in the U.S., the world's largest energy market. During seven weeks last August and September, Valero shares fell 29 percent, wiping out $12 billion in market value.

``Refining is very much back in favor,'' said Douglas Ober, who helps oversee $2.3 billion at Baltimore-based Adams Express Co. ``Even with higher prices, we haven't seen any substantial cutback in demand. They're cranking out as much of this stuff as they can, and we're throwing it in our tanks as fast as we can.''

The margin earned from processing crude oil into fuels rose to $24.68 a barrel on April 11, the highest since right after the hurricanes in September 2005. The margin has since retreated to $22.12 a barrel, still about double the five-year average.

``It'll be a fairly tight gasoline market all through the summer,'' said Robert Hinckley, an analyst at Rochdale Securities in New York.

[Discuss Thrower]

Pickens on CNBC saying Oil'll be back at $80-95/bbl in within 18 months.

Marthafockers I'mma be riiiiiiiiiiiiiiich

[KC native]

Originally Posted by Discuss Thrower

Pickens on CNBC saying Oil'll be back at $80-95/bbl in within 18 months.

Marthafockers I'mma be riiiiiiiiiiiiiiich

T Boone Pickens is trying to keep his natural gas investments relevant. He always talks his book.

That being said, his price target is about right IMO (well the $80 portion. Prince Alwaleed, a Saudi, doubts we ever get back to $100 a barrel) . I'm hesitant to agree with his time frame though.

[Discuss Thrower]

Originally Posted by KC native

T Boone Pickens is trying to keep his natural gas investments relevant. He always talks his book.

That being said, his price target is about right IMO (well the $80 portion. Prince Alwaleed, a Saudi, doubts we ever get back to $100 a barrel) . I'm hesitant to agree with his time frame though.

What's your reasoning for the price to take longer than just over a year to increase?

[Eleazar]

We're still below $2 in Florida, which is fine by me.

[KC native]

Originally Posted by Discuss Thrower

What's your reasoning for the price to take longer than just over a year to increase?

Soft demand and ample supply.

The Chinese debt bubble is probably going to become an issue over that time frame. Europe is fighting deflation still. OPEC refusing to cut production.

[ShowtimeSBMVP]

1.99 today in MD.

[scho63]

Anyone who believes oil is going back to $90-100 in the short term is delusional

[scho63]

Originally Posted by Discuss Thrower

Pickens on CNBC saying Oil'll be back at $80-95/bbl in within 18 months.

Marthafockers I'mma be riiiiiiiiiiiiiiich

He is trying to "talk" oil up and convince himself it's going higher as he is losing millions with oil and nat gas this low.

With so many of the "experts" suddenly claiming oil is going back up to $80-$90-or $100+ when not one of these buffoons saw the collapse, that ought to tell you something.

Two gigantic oil projects are coming online this year in 3-4 months that are going to add HUGE supply to the market and the fact that billions have been spent over the last 3-4 years to get them operational means they have NO CHOICE but to start pumping oil!

Sorry my friends but oil is low for the foreseeable future UNLESS there is a nuclear dirty bomb or some other catastrophic global event of epic proportions, then all bets are off.

[Imon Yourside]

Originally Posted by scho63

He is trying to "talk" oil up and convince himself it's going higher as he is losing millions with oil and nat gas this low.

With so many of the "experts" suddenly claiming oil is going back up to $80-$90-or $100+ when not one of these buffoons saw the collapse, that ought to tell you something.

Two gigantic oil projects are coming online this year in 3-4 months that are going to add HUGE supply to the market and the fact that billions have been spent over the last 3-4 years to get them operational means they have NO CHOICE but to start pumping oil!

Sorry my friends but oil is low for the foreseeable future UNLESS there is a nuclear dirty bomb or some other catastrophic global event of epic proportions, then all bets are off.

ba ba ba ba ba...i'm loving it.

[Donger]

Originally Posted by scho63

Anyone who believes oil is going back to $90-100 in the short term is delusional

I think it really depends on what happens to our production (and China and Europe's demand). If it holds, yes, I'd agree. The fundamentals have certainly changed.

[BigMeatballDave]

1.86 yesterday. 2.13 today.

Price-gouging ****s.

[scho63]

Another good day for US Citizens!

===========================================

Oil tumbles; U.S. crude prices near six-year low on record stockpiles

http://finance.yahoo.com/news/oil-dr...032210488.html

NEW YORK (Reuters) - Oil slumped on Wednesday, with U.S. crude prices at near six-year lows, after the government reported record-high inventories in the United States that raised anxieties about the global oil glut that had pressured the market since last summer.

The U.S. Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, their highest since the government began keeping records in 1982.

A Reuters poll on Tuesday had forecast a build of just above 4 million barrels for the week to Jan. 23. The American Petroleum Institute, an industry group, had estimated a far bigger growth of nearly 13 million barrels.

Oil prices, lifted by a weaker dollar in the previous session, tumbled anew on the stockpile data.

U.S. crude's front-month contract (CLc1) settled down $1.78, or almost 4 percent, at $44.45 a barrel. It sank to as low as $44.08 before the close, marking a bottom since April 2009. Open interest in the front-month remained near record highs for a fifth straight day, according to Reuters data.

Benchmark Brent crude (LCOc1) closed down $1.13, or 2.3 percent, at $48.47, after a session low at $48.29.

The spread between the two crude oils (CL-LCO1=R) was its largest in a month, with Brent fetching a premium of about $4 a barrel due to the weaker fundamentals in U.S. crude.

Traders expected oil prices to come under further pressure in coming days despite the EIA report citing positives like a near 3 million barrel drop in gasoline stocks and almost 4 million barrel decline in diesel and heating oil inventories.

"The sub-90 percent refinery utilization is causing oil supplies to back up, and the downward pressure on prices should continue," said John Kilduff, a partner in New York energy hedge fund Again Capital.

"Refined product demand continues to be the sole source of strength for the market, but it is not enough to overcome the tidal wave of crude oil supplies for now."

Fast-growing U.S. shale output has pushed oil prices almost 60 percent lower since June, with losses accelerating after the Organization of the Petroleum Exporting Countries said it would not cut production in a bid to preserve its market share.

Goldman Sachs analysts said in a Tuesday note that they expected U.S. crude, also known as WTI, to remain near $40 a barrel in the first half of this year.

[Valiant]

Originally Posted by Discuss Thrower

It can (will?) lead to layoffs for American oil workers and will torpedo alternative energy companies too.

It will also open up other places to hire as prices drop on all products that use crude. Then people can afford more items and spend more money. Well as long as other companies do not join in on doing what gas stations are doing and keeping the prices higher than they should to maximize on profits. It was either the star or one local station interviewing some experts and stations I saw on a video. Saying stations are not dropping the price anywhere from 1-5 cents per gallon with prices so cheap.

[The Franchise]

I paid $1.90 today......in ****ing California.

[Valiant]

Originally Posted by Discuss Thrower

Pickens on CNBC saying Oil'll be back at $80-95/bbl in within 18 months.

Marthafockers I'mma be riiiiiiiiiiiiiiich

Well yeah, they need to keep speculating so they can inflate prices now..