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.

[xbarretx]

Originally Posted by Donger

As has been said, this unusual present rise is due primarily to two factors: the weak dollar and speculation. The market justifies the price, as you know.

I realize that high gasoline prices will hurt Americans and I've speculated (perhaps in this thread) what price will force Americans to alter their driving behavior to the point that US demand falls. I think we are very close to that now.

or force Americans to force the govt to implement changes.

think of all the gas guzzlers on the road...not to mention the utility vehicles business use for daily operations as well as the trucking industry.

so changing driving habits means not driving. the fallout in the housing is and will lead to credit fallout because the US consumers do not have blank cheques for credit.

people cant simply unload those vehicles or stop using them b/c it means they lose more money getting another vehicle and businesses cant stop shipping and daily operations b/c they will go out of business thus causing unemployment to rise to levels making us belief were in 1930's again.

the analysts want to paint a happy picture and outlook but the monies people spend on energy must come from somewhere. Assets = liabilities’ + owners equity. the equation must balance (sorry had to throw that in there )

so driving habits isnt the answer we need realistic efforts being put into energy alternatives...and not in the next decade or two...we need them to have already been started or be started.

Edit - habits arent the only answer, only a part of it

[xbarretx]

p.s. i do know that rambling about such items is nothing less than beating a dead horse. im only asking this stuff, to get others take on what needs to happen and what would, could, etc...

its as good a conversation as any i guess.

it will be even better when we have interest rates that rival those from the 80's

[InChiefsHeaven]

I don't know that there is any quick solution that can be provided, most especially by the government. We are now paying for the lack of drilling for our own oil...all that environmental crap sounded really good when gas was 1.25\gal. Now, even if they allowed us to drill all the oil that we have at our disposal, it would take years to realize a real savings. Not to mention the cost of facilities.

We've screwed ourselves and now we're paying for it.

[xbarretx]

Originally Posted by InChiefsHell

I don't know that there is any quick solution that can be provided, most especially by the government. We are now paying for the lack of drilling for our own oil...all that environmental crap sounded really good when gas was 1.25\gal. Now, even if they allowed us to drill all the oil that we have at our disposal, it would take years to realize a real savings. Not to mention the cost of facilities.

We've screwed ourselves and now we're paying for it.

by govt, i meant more stringent fuel economy standards. cars getting 15 MPG HWY is reeruned. people buying those types of vehicles "now" are a few lambchops short of a mixed grill...if ya know what im saying

i say let gas continue to skyrocket....bring on a recession and get it all overwith so those speculative buyers in oil can lose all there investment.

[Donger]

Happy Thanksgiving.

http://apnews.myway.com/article/20071121/D8T20S6G0.html

Oil Prices Rise Above $99 a Barrel

SINGAPORE (AP) - Crude oil prices rose to a new record above $99 a barrel Wednesday, lifted by worries about inadequate supplies as the Northern Hemisphere enters winter and on news of refinery problems.

The declining U.S. dollar and speculation that the Federal Reserve will again cut interest rates also boosted prices. Some investors put their money into oil contracts as a hedge against the dollar, betting that oil gains will offset dollar weakness.

"The market is now really looking at $100 a barrel as the next target to hit," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The fact that we are having this surge in pricing in this short trading week underscores the strength of this bull run for oil."

Light, sweet crude for January delivery rose as high as $99.29 a barrel in electronic trading after the New York Mercantile Exchange closed, breaking the previous intraday record of $98.62 on Nov. 7. Midafternoon in Singapore, oil was trading at $98.64 a barrel.

Energy futures got a boost on news of problems at two oil facilities Tuesday. A Valero Energy Corp. (VLO) refinery in Memphis, Tenn., that processes 180,000 barrels of crude a day has shut down for 10 days of unplanned maintenance. Also, a Royal Dutch Shell PLC (RDSB) plant that converts bitumen from Alberta's oil sands region into 155,000 barrels a day of synthetic crude oil was temporarily shut down due to a fire.

Beyond these temporary concerns, investors are anxious that as global demand for energy grows, fueled by China and India's rapid development, oil supplies won't be able to keep up.

Currently, oil producers are turning out about 85 million barrels a day, while the U.S. Department of Energy says consumption is between 85 million and 86 million barrels a day.

"The long-term underlying trend is that demand is powering forward and the supply situation looks tight," said Jeff Brown, managing director and chief economist at FACTS Global Energy in Singapore.

Oil prices also got support after the Fed said it thinks U.S. economic growth will slow next year to between 1.8 percent and 2.5 percent, less than the Fed's previous projections. It also projected that U.S. inflation should fall next year to between a 1.8 percent and 2.1 percent increase.

That could mean the Fed will cut interest rates further, and that could weigh on the dollar. The euro hit a record against the dollar Wednesday, rising as high as $1.4856.

"When the U.S. dollar hit a record low, oil also surged ahead. It's been an inverse relationship," Shum said. "Also, the Fed indicating worries about the U.S. economy has caused worry that the Fed will cut interest rates."

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Oil product prices also rose. December heating oil futures were up 1.74 cents at $2.7075 a gallon after closing in New York at $2.6901 a gallon, a record settlement. Gasoline prices added 2.05 cents to $2.4720 a gallon.

Traders were also closely watching for the release of Wednesday's petroleum inventory report from the U.S. Energy Department's Energy Information Administration.

Analysts surveyed by Dow Jones Newswires, on average, predict that crude oil inventories rose by 800,000 barrels last week, while refinery use grew by 0.4 percentage point to 88.1 percent of capacity.

Gasoline likely grew by 700,000 barrels, the analysts predicted, while inventories of distillates, which include heating oil and diesel fuel, fell by 400,000 barrels.

Natural gas futures rose 1.3 cents to $7.49 per 1,000 cubic feet.

[chasedude]

That $4 a gallon is not looking so alarmist anymore Donger.

[Donger]

Originally Posted by chasedude

That $4 a gallon is not looking so alarmist anymore Donger.

No, it still is. Crude would have to start selling at around $150 for that to happen.

[chasedude]

Originally Posted by Donger

No, it still is. Crude would have to start selling at around $150 for that to happen.

As the American dollar loses more and more value it's becoming more apparent now. I never thought the increasing demand of oil consumption and the devalue of the dollar could coincide to create such a monster problem.

[Donger]

Originally Posted by chasedude

As the American dollar loses more and more value it's becoming more apparent now. I never thought the increasing demand of oil consumption and the devalue of the dollar could coincide to create such a monster problem.

I still say that crude is going to drop, although having it rise this time of year is unprecedented.

[xbarretx]

Originally Posted by Donger

I still say that crude is going to drop, although having it rise this time of year is unprecedented.

im staying out of this round Donger

Let gas get as high as it wants, prices continue upwards i will continue to buy even less i have literatly cut my gas bill in half by car pooling, and planning my trips or just buy not driving the higher they are the harder they fall. Gas is due for a large correction..gas this high would only be due to a shortage..and there ARE NO LINES. whoops said im staying out of it

...unless you own stock in walmart....the time to sell stocks in retail is now. this seasons back Friday is going to be disgusting

[chasedude]

Originally Posted by Donger

I still say that crude is going to drop, although having it rise this time of year is unprecedented.

I hope Crude Sweet does drop, I hope, I hope, I hope.

[Donger]

I was wrong. I can't believe it is this high....

Oil crosses $100 threshold

http://money.cnn.com/2008/01/03/mark...ex.htm?cnn=yes

NEW YORK (CNNMoney.com) -- Oil prices, after taking an initial dip on a weekly government report on inventory levels, crossed the $100 threshold Thursday and continued a six-year, five-fold spike driven by surging demand and limited supply.

U.S. light crude for February delivery crossed $100 a barrel around 11:30 ET on the New York Mercantile Exchange before slipping a few cents. Oil had traded down 63 cents just prior to the report's release.

On Wednesday, oil briefly touched $100 for the first time - although that amount was paid by one trader who bought one contract - before settling at the end of the day at a record $99.62.

The latest market mover was an inventory report showing a drop in U.S. crude supplies.

In its weekly inventory report, the U.S. Energy Information Administration said crude stocks fell by 4 million barrels last week. Analysts were looking for a drop of 1.7 million barrels, according to a Dow Jones poll. It's the seventh straight week crude inventories have fallen.

Distillates, used to make heating oil and diesel fuel, rose by 600,000 barrels while gasoline supplies gained by 1.9 million barrels. Analysts were looking for a 600,000 barrel decline in distillates supplies and a 1.3 million barrel increase in gasoline stockpiles.

Oil prices initially fell after the report. One trader said the drop was not as big as some of the previous inventory reports.

"The market was expecting a bigger draw," Ray Carbone, president of Paramount Options, said from the floor of the NYMEX. "This is a market that's slightly exhausted, you're going to need something to really push it."

What $100 oil would cost you

The inventory report is just the latest mover in a market that is hyper-sensitive to news. Oil prices have surged five-fold in the last six years, going from under $20 a barrel in early 2002. In 2007 alone, crude jumped nearly 60 percent.

Most analyst blame the runup on rising demand - mostly from developing countries and the U.S. - that eats up any new gains made in oil production.

Oil companies have posted record profits for the last few years. While their budgets for finding new oil have increased, most of the windfall has been returned to shareholders in the form of dividends and share buybacks.

The companies - and oil industry analysts - say vastly increasing spending on oil and gas exploration won't do any good, as there's only a limited amount of equipment and manpower available for the task. Plus, many analysts say new, big oil fields are getting harder to find, especially in countries friendly to Western oil firms.

The bad boys of oil

This tight supply and demand scenario has also attracted a ton of investment money, although its effect on prices is debated. Some say investment money has a minimal effect, accounting for a premium of maybe $10 or $15 a barrel, and is generally good for the market as it provides liquidity.

Others say investors are making a bundle off Americans who must pay record gas prices at the pump, and are adding $30 or $40 to the price of a barrel.

Tight supply and demand also exaggerates the effects of geopolitical tensions, as there is less spare capacity to make up for a disruption in supplies.

The falling U.S. dollar has also played a role, since investors buy oil and other commodities as a hedge against a lower dollar.

This combination of factors has led many analysts to believe oil prices are, on average, only headed higher.

"Why aren't we over $100? Give it time," said Carbone.

Wednesday's surge of over $3 was fueled by violence in oil-rich Nigeria, the prospect of more interest rate cuts and a lower dollar, a halt in Mexican imports and talk of the expected drop in U.S. crude stockpiles.

Adjusted for inflation, oil is at or near the prices of the early 1980s. At that time, following the Iranian revolution and the outbreak of the Iran-Iraq war, oil traded in the high $30-a-barrel range, the equivalent of between $92 and around $103 a barrel in current prices, depending on the contract cited and the inflation calculation used.

Retail gasoline prices have not risen as fast as oil prices over the last few months, largely due to weak demand.

But with oil prices so high, gasoline is beginning to catch up. The national average price for a gallon of regular Thursday was about $3.05 a gallon, a penny less than last month but about 30 percent higher than the same time last year, according to the motorist organization AAA.

"Unfortunately, we also continue to believe that new record high prices will be paid by consumers for gasoline in the year ahead," AAA spokesman Geoff Sundstrom said in a statement Wednesday.

[Valiant]

Originally Posted by Donger

I was wrong. I can't believe it is this high....

Oil crosses $100 threshold

http://money.cnn.com/2008/01/03/mark...ex.htm?cnn=yes

NEW YORK (CNNMoney.com) -- Oil prices, after taking an initial dip on a weekly government report on inventory levels, crossed the $100 threshold Thursday and continued a six-year, five-fold spike driven by surging demand and limited supply.

U.S. light crude for February delivery crossed $100 a barrel around 11:30 ET on the New York Mercantile Exchange before slipping a few cents. Oil had traded down 63 cents just prior to the report's release.

On Wednesday, oil briefly touched $100 for the first time - although that amount was paid by one trader who bought one contract - before settling at the end of the day at a record $99.62.

The latest market mover was an inventory report showing a drop in U.S. crude supplies.

In its weekly inventory report, the U.S. Energy Information Administration said crude stocks fell by 4 million barrels last week. Analysts were looking for a drop of 1.7 million barrels, according to a Dow Jones poll. It's the seventh straight week crude inventories have fallen.

Distillates, used to make heating oil and diesel fuel, rose by 600,000 barrels while gasoline supplies gained by 1.9 million barrels. Analysts were looking for a 600,000 barrel decline in distillates supplies and a 1.3 million barrel increase in gasoline stockpiles.

Oil prices initially fell after the report. One trader said the drop was not as big as some of the previous inventory reports.

"The market was expecting a bigger draw," Ray Carbone, president of Paramount Options, said from the floor of the NYMEX. "This is a market that's slightly exhausted, you're going to need something to really push it."

What $100 oil would cost you

The inventory report is just the latest mover in a market that is hyper-sensitive to news. Oil prices have surged five-fold in the last six years, going from under $20 a barrel in early 2002. In 2007 alone, crude jumped nearly 60 percent.

Most analyst blame the runup on rising demand - mostly from developing countries and the U.S. - that eats up any new gains made in oil production.

Oil companies have posted record profits for the last few years. While their budgets for finding new oil have increased, most of the windfall has been returned to shareholders in the form of dividends and share buybacks.

The companies - and oil industry analysts - say vastly increasing spending on oil and gas exploration won't do any good, as there's only a limited amount of equipment and manpower available for the task. Plus, many analysts say new, big oil fields are getting harder to find, especially in countries friendly to Western oil firms.

The bad boys of oil

This tight supply and demand scenario has also attracted a ton of investment money, although its effect on prices is debated. Some say investment money has a minimal effect, accounting for a premium of maybe $10 or $15 a barrel, and is generally good for the market as it provides liquidity.

Others say investors are making a bundle off Americans who must pay record gas prices at the pump, and are adding $30 or $40 to the price of a barrel.

Tight supply and demand also exaggerates the effects of geopolitical tensions, as there is less spare capacity to make up for a disruption in supplies.

The falling U.S. dollar has also played a role, since investors buy oil and other commodities as a hedge against a lower dollar.

This combination of factors has led many analysts to believe oil prices are, on average, only headed higher.

"Why aren't we over $100? Give it time," said Carbone.

Wednesday's surge of over $3 was fueled by violence in oil-rich Nigeria, the prospect of more interest rate cuts and a lower dollar, a halt in Mexican imports and talk of the expected drop in U.S. crude stockpiles.

Adjusted for inflation, oil is at or near the prices of the early 1980s. At that time, following the Iranian revolution and the outbreak of the Iran-Iraq war, oil traded in the high $30-a-barrel range, the equivalent of between $92 and around $103 a barrel in current prices, depending on the contract cited and the inflation calculation used.

Retail gasoline prices have not risen as fast as oil prices over the last few months, largely due to weak demand.

But with oil prices so high, gasoline is beginning to catch up. The national average price for a gallon of regular Thursday was about $3.05 a gallon, a penny less than last month but about 30 percent higher than the same time last year, according to the motorist organization AAA.

"Unfortunately, we also continue to believe that new record high prices will be paid by consumers for gasoline in the year ahead," AAA spokesman Geoff Sundstrom said in a statement Wednesday.

Why?? Any reason they can find they will raise the price even if it is nominal..

[Donger]

Originally Posted by Valiant

Why?? Any reason they can find they will raise the price even if it is nominal..

If I had to venture a guess, it would be pure investment speculation. Supply and demand are still getting closer, but not enough to keep the price this high. Hopefully, they'll start taking more profits and the price will fall. If not, this spring and summer is going to be ugly.

[Bugeater]

You know what? **** it. Let it climb way the **** up there and price some of these mother****ers on the streets out of driving. Maybe then I'll actually be able to drive somewhere without tearing my ****ing hair out.