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.

[Dayze]

Dane travels by Helicopter.

haters gonna hate.

[notorious]

I spend around $1000/ month in gasoline for business. 4 years ago that would have been around 600.


I am just a small business........

It might help the economy out a little if they can get these nasty prices under control.

[pr_capone]

I paid 3.99 (premium) yesterday. The first time I ever paid for gasoline was about 15 and a shade over $1 per gallon.

[Imon Yourside]

Originally Posted by pr_capone

I paid 3.99 (premium) yesterday. The first time I ever paid for gasoline was about 15 and a shade over $1 per gallon.

I was paying $.80 to $.89 a gallon in my z28 back in the 80's....I miss the good ol days.

[TLO]

Originally Posted by pr_capone

I paid 3.99 (premium) yesterday. The first time I ever paid for gasoline was about 15 and a shade over $1 per gallon.

Yep. Paid 3.99 for premium yesterday also. This blows.

[Dayze]

I think it was like $1.10 when I had my Oldds 442 in HS. and I remember when it crested $1, my old man was pissed. he couldn't beleive it.

[Donger]

I remember when a Big Mac Meal was $2.50

[manchambo]

Originally Posted by notorious

I spend around $1000/ month in gasoline for business. 4 years ago that would have been around 600.


I am just a small business........

It might help the economy out a little if they can get these nasty prices under control.

OK, but four years and a few months ago, the price would have been higher than it is now. The line from Romney that prices have doubled under Obama is true but incredibly deceptive, as gas prices plummeted to their lowest level in years right before Obama took office, as a result of the economic apocalypse.

[whoman69]

I remember when I could fill up my compact for $11.

I filled up for $3.48 on Monday at a station that is usually cheaper than the other stations in town, which were $3.55 at the time. The next day it went to $3.65 and rose today to $3.69. I haven't checked the cheaper station yet since its on the other side of town where I do grocery shopping.

[Deberg_1990]

$9.99 a gallon gas posted in protest…


http://abcnews.go.com/Business/nj-pa...ry?id=17217583


Drivers in New Jersey and Pennsylvania may be in for a shock if they pull into a Lukoil gas station.

About 57 franchise owners are protesting on Wednesday against the price of gas charged by Lukoil North America, a subsidiary of the Russian corporation, OAO Lukoil. The owners have posted gas prices over $8 at their stations to draw attention to what they claim are the high prices charged to them that they must pass on to consumers.

"We are doing this because we are dying," said Khaled Kezbari, owner of three Lukoil gas stations in New Jersey. "Lukoil is charging us costs higher than the retail market. How can you compete? You cannot compete in the market like that."

Outside Kezbari's gas station in Mount Laurel, N.J., the price of gas is posted as $9.99 a gallon.

However, Kezbari, 46, said the gas station owners are not charging customers those high costs. They are only posting the prices for 24 hours in protest of the franchisees' high costs.

"It would be ridiculous if they charged that amount. We are trying to send a message to Lukoil so they know what our feelings are," he said.

Kezbari said he is charging consumers $3.79 a gallon for regular gas. He said franchisees have no choice but to pass on its higher costs to consumers. That has led to lower sales.

He said his business previously used to pump 6,000 gallons a day on average but now pumps 3,000 gallons a day.

State average gas prices in New Jersey are $3.79, according to Gasbuddy.com. But many dealers charge 10 to 20 cents a gallon less for regular, depending on where they get their gas. There are also discounts for those who pay cash.

Courtesy Khaled KezbariThis Lukoil station in Mount Laurel, N.J. is... View Full Size Courtesy Khaled KezbariThis Lukoil station in Mount Laurel, N.J. is taking part in a protest against Lukoil North America and rising franchisee costs.
The national average is $3.85 a gallon, according to the Department of Energy's weekly gas report.

The taxes, fees, rent and labor costs in New Jersey, which ban gas stations from allowing customers to operate the pumps, have also affected his bottom line.

"If I am paying 3 cents on the dollar for credit card fees, how can I survive?" he said.

Kezbari said Lukoil has slowly passed on additional costs to franchisees, including real estate taxes and building up-keep costs, so the company can make additional profit.

A spokesman for Lukoil North America provided a statement to ABC News, saying the company values "our network of independent dealers."

"We deeply regret that the NJGCA, a trade lobbyist, has apparently encouraged public misstatements and ill-conceived actions which harm consumers, rather than engage in constructive dialogue. The NJGCA's efforts appear aimed at zone pricing, a commercially reasonable practice used by gasoline marketers for many years, which is fully compliant with New Jersey statutes governing the sale of motor fuel."

Zone pricing is the practice of gasoline suppliers charging more or less to stations based on their zip codes or other market factors.

Sal Risalvato, executive director of New Jersey Gasoline, C-Store, Automotive Association (NJGCA), the trade group organizing the protest, said the owners agreed to post a high price of their choice on their signs.

"Everybody said we're going to charge something that would be offensive and send a message to Lukoil," Risalvato said.

He said this is the first time the trade group has protested in this manner, though they have been in discussions with Lukoil for the past few years.

Risalvato, who owned a gasoline service station for 23 years in New Jersey, said he is also trying to reach Lukoil dealers in New York and Connecticut.

Kezbari said his customers have so far shown their support of the franchisees. He and some of the other owners are providing a phone number to customers to the Lukoil main office.

"Regular customers say they understand and, 'We're going to call that number,'" he said.

[L.A. Chieffan]

3.79 is cheap yo, where can i go and get that?

[Frosty]

Originally Posted by L.A.Chieffan

3.79 is cheap yo, where can i go and get that?

Yeah - no kidding.

[Imon Yourside]

Donger said $4.00/gallon gas would not happen.

[Bugeater]

Originally Posted by KILLER_CLOWN

Donger said $4.00/gallon gas would not happen.

It's only 23 cents from happening here. Whoever controls the gas prices must not want our current president to get re-elected.

[Buck]

This sucks right now.