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.

[Simplex3]

Originally Posted by PHOG

In other news, a couple gas delivery trucks had flat tires yesterday, so I'm sure the price of gas will rise accordingly to cover the replacement costs.

[Donger]

Originally Posted by PHOG

In other news, a couple gas delivery trucks had flat tires yesterday, so I'm sure the price of gas will rise accordingly to cover the replacement costs.

Although you're being sarcastic, you're actually correct. In that scenario, local prices would go up.

[Donger]

Heh.

Originally Posted by Evil Big Cheese

A sharp rise in the cost of cheese this year is cutting into profits in the pizza industry and has prompted Pizza Hut to raise prices.

With cheese prices up by 55 percent this year, other pizza chains may follow suit.

Block cheddar cheese hit $2.06 a pound this week on the Chicago Mercantile Exchange, a 55 percent increase from the end of 2006, when it was $1.33 a pound. Cheddar is the benchmark for mozzarella and other types of cheese, which typically make up the largest single ingredient for pizza companies.

[Simplex3]

Evil Big Cheese?

[PHOG]

That's funny.

[Donger]

Demand, Refinery Woes Push Gas Prices Up

Kansas Refinery Expected To Be Closed Most Of Summer

Gasoline prices in the Midwest are driving up the national average, which could hit $3 again by the end of the week, AAA said.

Refinery problems in Oklahoma, Kansas, Indiana and Texas are being blamed for the increase.

Also there is a refinery problem in Carson, Calif., but there has been no affect on prices so far.

Gas prices jumped 8 cents in Omaha overnight, according to AAA Nebraska.

The auto club said the average price for a gallon of gas in Nebraska on Thursday was $3.29, just two-tenths of a cent lower than Michigan, which had the country's highest prices on Thursday.

On Wednesday, Nebraska Gov. Dave Heineman issued an executive order that will allow gasoline truck drivers to alter their hours of service, reported KETV-TV in Omaha, Neb.

Gas supplies in the state have been tight after flooding in Kansas last week. Industry experts said high waters submerged a Coffeyville, Kan., refinery and waters could keep the 108,000-barrel-a-day facility shut down for most of the summer.

The Kansas facility processes fuel for much of the Midwest, including Nebraska.

Truckers lined up on Wednesday at Magellan Petroleum, north of downtown Omaha. Underground pipelines carry gas there from out of state, then tankers take the fuel to gas stations. Deliveries slowed to a trickle.

"Probably (waited here) about an hour, hour and a half," said trucker John Neff of Wynne Transport SVC.

Said David Nelson of Rawhide Chem Oil, "I'm lucky, and I get paid by the hour, so it doesn't bother me to sit here."

Across the state, gas stations in Kearney, North Platte and Doniphan reported being out of gas for a short time Wednesday.

AAA Nebraska said the price of a gallon of gas jumped 8 cents since Tuesday and 31 cents since a month ago.

Refinery Problems

In central Iowa, gas prices were up as much as 35 cents a gallon this week.

Analysts said supplies are tight in the Midwest because of a high demand and the refinery flood.

"In order to get supplies to the Midwest, retailers here have to pay more to get them away from the East and West Coast. So retailers are jacking up prices to get it here to this area," said analyst Bryan Crowe with the Iowa Department of Natural Resources.

Experts said gas prices in Iowa are above the national average. They are expected to remain above $3 a gallon through Labor Day, reported KCCI-TV in Des Moine.

In five Iowa counties Wednesday, prices ranged from $3.09 a gallon to $3.23 a gallon.

Many drivers are skeptical about the reasons behind the high prices.

"I think it's just summer, and they're raising prices again because they know people are going to be out traveling and they know they can make more money if they raise them up," said Michelle Holmes, of Madrid, Iowa.

As prices dog drivers, many are doing whatever they can to keep from filling up as often.

"I set the cruise control on 65, and I don't even go over 65 anymore just to try and get the most out of it," said Chris Reeves, of Ogden, Iowa.

One driver was not complaining about gas. Joe Lynch uses an electric truck to deliver his farm-raised vegetables around Ames, Iowa.

"I like to tell folks that this vehicle has all the advantages and none of the disadvantages of a horse and buggy," he said.

In just six weeks, he's already put 950 miles on the truck. He said it costs him about 2 cents a mile to power it.

"It's a great model for a more sustainable transportation system," Lynch said.

Lynch said his electric truck only goes 25 mph, but he said it's perfect for getting around town.

[Donger]

$3.060 national average.

[Bugeater]

Originally Posted by Donger

Demand, Refinery Woes Push Gas Prices Up

Kansas Refinery Expected To Be Closed Most Of Summer

Gasoline prices in the Midwest are driving up the national average, which could hit $3 again by the end of the week, AAA said.

Refinery problems in Oklahoma, Kansas, Indiana and Texas are being blamed for the increase.

Also there is a refinery problem in Carson, Calif., but there has been no affect on prices so far.

Gas prices jumped 8 cents in Omaha overnight, according to AAA Nebraska.

The auto club said the average price for a gallon of gas in Nebraska on Thursday was $3.29, just two-tenths of a cent lower than Michigan, which had the country's highest prices on Thursday.

On Wednesday, Nebraska Gov. Dave Heineman issued an executive order that will allow gasoline truck drivers to alter their hours of service, reported KETV-TV in Omaha, Neb.

Gas supplies in the state have been tight after flooding in Kansas last week. Industry experts said high waters submerged a Coffeyville, Kan., refinery and waters could keep the 108,000-barrel-a-day facility shut down for most of the summer.

The Kansas facility processes fuel for much of the Midwest, including Nebraska.

Truckers lined up on Wednesday at Magellan Petroleum, north of downtown Omaha. Underground pipelines carry gas there from out of state, then tankers take the fuel to gas stations. Deliveries slowed to a trickle.

"Probably (waited here) about an hour, hour and a half," said trucker John Neff of Wynne Transport SVC.

Said David Nelson of Rawhide Chem Oil, "I'm lucky, and I get paid by the hour, so it doesn't bother me to sit here."

Across the state, gas stations in Kearney, North Platte and Doniphan reported being out of gas for a short time Wednesday.

AAA Nebraska said the price of a gallon of gas jumped 8 cents since Tuesday and 31 cents since a month ago.

Refinery Problems

In central Iowa, gas prices were up as much as 35 cents a gallon this week.

Analysts said supplies are tight in the Midwest because of a high demand and the refinery flood.

"In order to get supplies to the Midwest, retailers here have to pay more to get them away from the East and West Coast. So retailers are jacking up prices to get it here to this area," said analyst Bryan Crowe with the Iowa Department of Natural Resources.

Experts said gas prices in Iowa are above the national average. They are expected to remain above $3 a gallon through Labor Day, reported KCCI-TV in Des Moine.

In five Iowa counties Wednesday, prices ranged from $3.09 a gallon to $3.23 a gallon.

Many drivers are skeptical about the reasons behind the high prices.

"I think it's just summer, and they're raising prices again because they know people are going to be out traveling and they know they can make more money if they raise them up," said Michelle Holmes, of Madrid, Iowa.

As prices dog drivers, many are doing whatever they can to keep from filling up as often.

"I set the cruise control on 65, and I don't even go over 65 anymore just to try and get the most out of it," said Chris Reeves, of Ogden, Iowa.

One driver was not complaining about gas. Joe Lynch uses an electric truck to deliver his farm-raised vegetables around Ames, Iowa.

"I like to tell folks that this vehicle has all the advantages and none of the disadvantages of a horse and buggy," he said.

In just six weeks, he's already put 950 miles on the truck. He said it costs him about 2 cents a mile to power it.

"It's a great model for a more sustainable transportation system," Lynch said.

Lynch said his electric truck only goes 25 mph, but he said it's perfect for getting around town.

Yeah, I know. I've been meaning to yell at you for this. $3****ing39 down the street from me.

[CoMoChief]

3.09 in Columbia

[Donger]

$3.024 national average.

[Redrum_69]

$3.21 this morning

[Redrum_69]

Lawrence gas I bet is at least 3.25 if not hgiher..its usually 10-15 cents higher than the highest in the metro

[FAX]

I have a question for you, Mr. Donger.

I just returned from a road trip during which I travelled through 4 States. When I left Nashville, the price of regular unleaded gasoline was approximately $2.97. In Kentucky, the price went up a dime, In Indiana, the price went up another dime. In Missouri, the price went up another dime or so. And in Kansas, the price went up even more to $3.27 in some places.

Is this due to the cost of transporting the gas? Is it due to the location of refineries?

FAX

[Donger]

Originally Posted by FAX

I have a question for you, Mr. Donger.

I just returned from a road trip during which I travelled through 4 States. When I left Nashville, the price of regular unleaded gasoline was approximately $2.97. In Kentucky, the price went up a dime, In Indiana, the price went up another dime. In Missouri, the price went up another dime or so. And in Kansas, the price went up even more to $3.27 in some places.

Is this due to the cost of transporting the gas? Is it due to the location of refineries?

FAX

The reason gasoline is quite high in Kansas now is because of the information contained in post #336.

The variation state-by-state is mostly state taxation.

[PHOG]

Originally Posted by FAX

I have a question for you, Mr. Donger.

FAX

According to the poll in the married thread, wouldn't it be MRS. Donger?