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.

[jd1020]

I wonder how many companies that have a "higher net profit margin" would trade that "higher net profit margin" for a "lower net profit margin" and make 15+ billion more?

I think I would have to turn down that trade and keep my "higher net profit margin."

[Donger]

Originally Posted by Mr. Flopnuts

So they spend roughly $500 billion in order to make that $48 billion?

Net profit margin is calculated by dividing net income (which is revenue - costs) by revenue (x 100).

[Mr. Flopnuts]

So we don't really know what they spend to make that money.

[Donger]

Originally Posted by Mr. Flopnuts

So we don't really know what they spend to make that money.

Yes, we do. They are a publicly-traded company.

[Buck]

Originally Posted by penguinz

Donger will be in soon to tell you that is not accurate information.

I went to the a different USA gasoline on the day that I posted this that was right down the street in San Diego (not listed on here, that is my local zip code of La Mesa, San Diego is about a mile away). It was $4.43 a gallon. It was a ****ing madhouse. I've never seen such large lines for gas in person and all because it was cheap at $4.43!

[stonedstooge]

Originally Posted by Buck

I went to the a different USA gasoline on the day that I posted this that was right down the street in San Diego (not listed on here, that is my local zip code of La Mesa, San Diego is about a mile away). It was $4.43 a gallon. It was a ****ing madhouse. I've never seen such large lines for gas in person and all because it was cheap at $4.43!

Donger says that's a lie. According to his portfolio there isn't any gas that high in the United States at this time.

[CaliforniaChief]

The state ought to waive the "winter-mix" requirement today. Also, the Governor/legislature should temporarily suspend regulations that prevent importing fuel from other states. At least until November 1st or until the waiver is granted.

Of course, Moonbeam is controlled by the leftist environmentalists who, along with the CTA and public employee unions, are pile-driving this state right into the ground.

[whoman69]

Looks like they're using California as a testbed to see if people will pay such high prices for gas.

[Dayze]

A guy I work with just bought a new Titan. Doesn't tow anything, doesn't live on a farm, lives in an apartment. His choice which fine.m but he better not get my shit when I make fun of him when gas prices are eating him alive. Dumbass.

[Otter]

I ran down to the super market today and lines were crazy. They had their middle entrance blocked so they could regulate traffic with enter and exit lanes only.

Never seen anything like it before. Barry bet free up some oil from the reserves or something.

[Bowser]

Obama reads ChiefsPlanet!!




SAN FRANCISCO/HOUSTON (Reuters) - The unprecedented price spike that added more than 50 cents a gallon to California pump prices last week ended as quickly as it began, market analysts said, and consumers should see prices fall dramatically in the coming week.

Political outrage, however, was still heating up as Senator Barbara Boxer joined calls for a federal investigation into possible market manipulation.

Prices started pulling back slightly on Monday afternoon, according to online filling station tracker Gas Buddy, after the American Automobile Association website reported they had hit a record of $4.668 per gallon on Monday morning.

California Governor Jerry Brown's decision on Sunday to allow an immediate switch to "winter-blend" fuel was a big factor in driving wholesale prices down by 60 cents a gallon on Monday, market participants said.

"Retail prices will come down as hard as they went up," said David Hackett, president of Stillwater Associates, an energy consultancy in Irvine, California. "It went up 56 cents in a week, it will come down that fast."

The price spike alarmed consumers and politicians across a state that is famous for its love of the automobile. Senator Barbara Boxer on Monday called for a Department of Justice investigation into possible price manipulation in gasoline trading markets. Senator Dianne Feinstein on Sunday made a similar request to the Federal Trade Commission.

Reuters reported on Friday that oil traders said the price spike had "many hallmarks of a classic short squeeze." Multiple trading sources said that refiner Tesoro Corp. was caught short of supplies and forced to scramble to buy fuel from other companies.

Spot market prices jumped by almost $1 a gallon in a matter of days, though trading sources said they saw no signs of collusion or deliberate withholding of supply.

Both Feinstein and Boxer cited the Reuters report of a possible short squeeze in calling for federal regulators to investigate. Boxer, in her letter to the Department of Justice, asked it to "immediately investigate whether any of these traders colluded to manipulate and drive up gas prices at the expense of Tesoro and California consumers".

BITTER MEMORIES

Californians have bitter memories of the supply shortages and price spikes that hit the electricity market more than a decade ago and were later found to have resulted from market manipulation led by the now-defunct Enron Corp.

Jason M. Jones, a music producer who was gassing up his Volvo in Santa Monica on Monday, said he was fearful of further price gyrations. "I feel they're taking advantage of the situation in Santa Monica," he said.

California gasoline prices are traditionally among the highest in the country. The state is largely cut off from national pipeline networks and refinery centers, and requires more expensive, cleaner-burning gasoline in the summer.

The recent price surge was initially set off by a series of refinery mishaps, including an August 6 fire at a big Chevron refinery in Richmond and an October 1 power outage at Exxon Mobil Corp's Torrance facility near Los Angeles.

The Torrance plant is now back online, helping to alleviate supply constraints. Brown's order to allow winter-blend gasoline to be sold immediately, well ahead of the normal October 31 transition date, was also a big factor in relieving supply concerns.

"I think prices will come down pretty quickly," said James Hamilton, an economics professor at the University of California, San Diego. "The measures Governor Brown adopted are exactly the right ones."

SLUGGISH PRICES BOTH WAYS

Hamilton acknowledged that some academic studies show it can take a "little bit longer" for prices to come down than it takes for them to go up. But he detected sluggishness in both directions, suggesting some Southern California retailers may have been wary of angering customers by increasing too fast.

"A few stations didn't raise prices as quickly as others, and that created shortages at those stations," he said.

Southern California bore the brunt of the supply disruptions last week and faced the highest prices in the state, with $5 per gallon spotted in some areas.

At one station in West Los Angeles, Rick Lee, a restaurant and club manager in his 40s, said he had not yet noticed a fall in prices. "For now I'm just putting in $40 at a time and not filling up my tank in anticipation that prices will go down or that someone will bail us out," he said.


http://news.yahoo.com/california-gas...004934596.html

[Buck]

As of last night, the cheapest gas within a 5 mile radius of my home was $4.63

[BlackHelicopters]

We are just a few more Hezbollah drones away from $7-10 a gallon gas.

[BigMeatballDave]

Has anyone else seen a sizable decrease in prices lately?

Currently 3.28 in my area. It's dropped .50 over the past month.

[Bugeater]

Originally Posted by Dave

Has anyone else seen a sizable decrease in prices lately?

Currently 3.28 in my area. It's dropped .50 over the past month.

No it hasn't. /Donger