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.

[R8RFAN]

Originally Posted by JASONSAUTO

I have a 79 coupe deville with a 425 and a th400 trans.

Drove it to training camp this year and got just over 20 mpg. That car is the size of two or three cars made today. Why don't theselittle cars get better mileage?
I don't like conspiracy theorists but something is fishy
Posted via Mobile Device

My thoughts exactly... Some of it comes from all that emissions bs on them now too...

[Bugeater]

Originally Posted by R8ers

My thoughts exactly... Some of it comes from all that emissions bs on them now too...

The comfort and safety features on today's cars also add weight. None of those listed are going to be very pleasant to drive, and they're all probably grossly underpowered when compared to today's cars as well.

[SAUTO]

Originally Posted by Bugeater

The comfort and safety features on today's cars also add weight. None of those listed are going to be very pleasant to drive, and they're all probably grossly underpowered when compared to today's cars as well.

Dude a1979 cadillac coupe deville.

What car out today weighs more than that ****er?
Big block and a four barrel carb.
Posted via Mobile Device

[R8RFAN]

Originally Posted by Bugeater

The comfort and safety features on today's cars also add weight. None of those listed are going to be very pleasant to drive, and they're all probably grossly underpowered when compared to today's cars as well.

Chevy Aveo weight 2568

Horsepower @RPM	108@6400
Fuel Economy Cty/Hwy	27/34

Ford escort (can't find weight)
Ford's first "World Car", the Escort, was introduced in the North American market for the model year 1981. The Ford Escort (a totally different version) had been available in other parts of the world as a rear wheel drive car from 1968-1980. The North American launch of the Escort coincided with the European release of the MK3 Escort. Ford Motor Company needed a new subcompact car to replace the outdated Pinto. The first Escort, and Mercury's version called the Lynx, was powered by a carbureted 1.6L 4 cylinder sporting a 2 barrel carburetor that produced 69 horsepower. The engines were SOHC (single overhead cam) designs and called the CVH, which stood for "Compound Angle Hemispherical" combustion chamber. This was "basic transportation" and needed more power under the hood. These cars were all front wheel drive, had independent 4-wheel suspension, rack & pinion steering, and a choice of a 3-speed automatic or 4-speed manual transmission. They were available as a 2-door hatchback or a 4-door wagon. Initially, there were a lot of recalls and build-quality problems. These engines suffered many head gasket failures due to having an aluminum cylinder head on an iron block. The fix was stretchable (one time use only) head bolts and a new cylinder head gasket design.



The point is they have been able to increase horse power as both sport a 1.6L engine.... but the MPG has decreased....

Remember that CRX or the Geo Metro with the 3 cyl engine? Why do they not make something like that now in mass production?

[WV]

Originally Posted by R8ers

Remember that CRX or the Geo Metro with the 3 cyl engine? Why do they not make something like that now in mass production?

Or remember the Subaru Justy! Unfortunately they do mass produce cars like this, but only in Europe.

[Bugeater]

Originally Posted by JASONSAUTO

Dude a1979 cadillac coupe deville.

What car out today weighs more than that ****er?
Big block and a four barrel carb.
Posted via Mobile Device

Most of those cars listed get twice the hwy mpg you got with that Caddy. But I'll admit it's not bad for a tank like that.

[Bugeater]

Originally Posted by R8ers

Chevy Aveo weight 2568



Ford escort (can't find weight)
Ford's first "World Car", the Escort, was introduced in the North American market for the model year 1981. The Ford Escort (a totally different version) had been available in other parts of the world as a rear wheel drive car from 1968-1980. The North American launch of the Escort coincided with the European release of the MK3 Escort. Ford Motor Company needed a new subcompact car to replace the outdated Pinto. The first Escort, and Mercury's version called the Lynx, was powered by a carbureted 1.6L 4 cylinder sporting a 2 barrel carburetor that produced 69 horsepower. The engines were SOHC (single overhead cam) designs and called the CVH, which stood for "Compound Angle Hemispherical" combustion chamber. This was "basic transportation" and needed more power under the hood. These cars were all front wheel drive, had independent 4-wheel suspension, rack & pinion steering, and a choice of a 3-speed automatic or 4-speed manual transmission. They were available as a 2-door hatchback or a 4-door wagon. Initially, there were a lot of recalls and build-quality problems. These engines suffered many head gasket failures due to having an aluminum cylinder head on an iron block. The fix was stretchable (one time use only) head bolts and a new cylinder head gasket design.



The point is they have been able to increase horse power as both sport a 1.6L engine.... but the MPG has decreased....

Remember that CRX or the Geo Metro with the 3 cyl engine? Why do they not make something like that now in mass production?

Probably because very few people would actually buy them.

[R8RFAN]

[R8RFAN]

Originally Posted by Bugeater

Probably because very few people would actually buy them.

let gas get to 4 bucks a gallon and see how many are sold....

[Bugeater]

The EV-1 came out when gas was about $1/gal.

[Bugeater]

Originally Posted by R8ers

let gas get to 4 bucks a gallon and see how many are sold....

Yeah, if those prices were sustained we'd all be reconsidering what we drive. And I'll admit that as much as I hate high gas prices, there's a little part of me that enjoys knowing that these tools that drive ginormous SUVs are getting their asses reamed.

[SAUTO]

Originally Posted by Bugeater

Most of those cars listed get twice the hwy mpg you got with that Caddy. But I'll admit it's not bad for a tank like that.

I was comparing my car to the cars produced today. Not the ones on the list. If that car can get 20 mpg the average 4cyl car made today should get 50 imo
Posted via Mobile Device

[Bugeater]

Originally Posted by JASONSAUTO

I was comparing my car to the cars produced today. Not the ones on the list. If that car can get 20 mpg the average 4cyl car made today should get 50 imo
Posted via Mobile Device

Eh, there's only so much they can do before they start compromising safety, power, and comfort.

[007]

Hell, I want to get back to where you could actually work on your own engine and not have to contort you body to get to anything.

[jd1020]

Originally Posted by R8ers

let gas get to 4 bucks a gallon and see how many are sold....

The US will start looking like Vietnam.