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.

[Donger]

Sigh. Okay.

We use petroleum to fuel our vehicles because it is the most economically attractive and physically efficient method. Period.

[tmw4h5]

Originally Posted by Donger

Sigh. Okay.

We use petroleum to fuel our vehicles because it is the most economically attractive and physically efficient method. Period.

Are you kidding?
You're joking, right?

[Donger]

Originally Posted by tmw4h5

Are you kidding?
You're joking, right?

No. If you have an alternative, please present it.

[mikey23545]

Originally Posted by Donger

Sigh. Okay.

We use petroleum to fuel our vehicles because it is the most economically attractive and physically efficient method. Period.

Why is this so ****ing difficult for people to understand?

If any other fuel was even close to being as energy-dense, portable and relatively plentiful, companies that like to make lots of money WOULD BE ALL OVER IT!

Someday, increasing scarcity of oil and technological breakthroughs in other fields will make switching over the economical thing to do...That time has not yet come, despite the constant flow of propagandistic bullshit erupting from politicians seeking ever more power over your life...

[Frosty]

Originally Posted by Donger

No. If you have an alternative, please present it.

Dude, please. Everyone knows that the oil companies bought up all the patents for the alternative fuels and other oil saving science.

[tmw4h5]

Originally Posted by Frosty

Dude, please. Everyone knows that the oil companies bought up all the patents for the alternative fuels and other oil saving science.

Actually, not that far-fetched of an idea.

BP-Dupont takes Gevo to court.
Patent encumbrance of large automotive NiMH batteries.

In terms of alternative fuel sources -- as of right now, none will be as economically efficient as oil.
That is, until we actually invest time and money into perfecting the methods in which we use them. Oil has not always been this efficient , it took years and years and years of work, technology, etc.
The same is and will be true for what we decide to use next.

Solar energy is the most powerful, yet we need to work on ways of capturing and maintaining that energy for longer periods.
Hydrogen is another fantastic alternative and we've seen a number of companies work on improving this technology.
The possibilities with wind might not be the greatest, but it's something we should at least explore.
Natural gas is another alternative that has yet to be explored fully.
More money should be invested into biofuels as well.

We shouldn't rely solely on one energy source -- we should explore every option and utilize every option possible to maintain cost efficiency.

The point is that complaining about gas prices being too high, yet doing absolutely nothing to explore other options is senseless.
At what point do we reach a cost that is simply too much? At what point do we say that gasoline is no longer affordable? At what point do we say that oil simpy cannot reach global demand due to the limited amount left?

We should be proactive rather than reactive.

[Donger]

Originally Posted by tmw4h5

In terms of alternative fuel sources -- as of right now, none will be as economically efficient as oil.

Heh.

[Donger]

Originally Posted by tmw4h5

I will agree with you about right now, but why are we not doing more to explore other options?

Electric cars and hydrogen cars are fantastic alternatives, but they need to have money invested into the technology to improve the overall technology and to make it more cost efficient.

Are you for exploring other fuel sources or are you wanting to focus solely on oil?

We are exploring other options. There will probably come a tipping point when fueling our vehicles with petroleum products becomes cost prohibitive enough to force a shift to some other technology, but we aren't any where near that yet. Which is what I wrote you earlier.

[InChiefsHeaven]

tmw4h5

START ANOTHER THREAD FFS!

[Frazod]

GAS IS BACK DOWN TO $4.00 A GALLON!!!!! WOO HOO

[Munson]

I filled up yesterday at $4.09/gal. F*** expensive gas prices!

Having just moved to San Diego, I was amazed at some of the huge price differences in gas stations. Its not uncommon to see a 10, 15, or 20 cent per gallon difference, even if you go right across the street. I had to drive a few miles out of my way just to avoid some of the grossly overpriced stations.

[Tombstone RJ]

Originally Posted by Munson

I filled up yesterday at $4.09/gal. F*** expensive gas prices!

Having just moved to San Diego, I was amazed at some of the huge price differences in gas stations. Its not uncommon to see a 10, 15, or 20 cent per gallon difference, even if you go right across the street. I had to drive a few miles out of my way just to avoid some of the grossly overpriced stations.

drive across the border and see how much gas is in Mexico. I bet it's lots cheaper.

[Munson]

Originally Posted by Tombstone RJ

drive across the border and see how much gas is in Mexico. I bet it's lots cheaper.

Nah. I don't need shitty quality gasoline. Plus, I prefer not to get kidnapped.

[Donger]

Crude in free-fall today. Down $4.28/barrel right now (4.17%) at $98.26.

Gasoline at $3.79, down $0.12 from last month.

[Radar Chief]

Originally Posted by Tombstone RJ

drive across the border and see how much gas is in Mexico. I bet it's lots cheaper.

You really want to try burning that dog water in your rig?