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.

[Imon Yourside]

Originally Posted by InChiefsHell

All I know is, I like filling up the car for less than 30 bucks...I do a happy dance at the pump and everything.

I still long for the days of $0.89 gas but hey this will do nicely considering inflation.

[GloryDayz]

I've heard tales that say it's on a slight rise again. Have not been able to verify. Time to panic!

[morphius]

Originally Posted by GloryDayz

I've heard tales that say it's on a slight rise again. Have not been able to verify. Time to panic!

It is up 12 cents on the kcmo side over the weekend.

[Raiderhater]

Originally Posted by morphius

It is up 12 cents on the kcmo side over the weekend.

It was $1.61 on Truman yesterday both going into work and at lunch. Three and a half hours later on my way home it was $1.79. WTF?

[Donger]

Originally Posted by Raiderhader

It was $1.61 on Truman yesterday both going into work and at lunch. Three and a half hours later on my way home it was $1.79. WTF?

At the same station? If so, likely they are running low of supply and have an issue with the next delivery.

[Raiderhater]

Originally Posted by Donger

At the same station? If so, likely they are running low of supply and have an issue with the next delivery.

Same two or three stations along that strip.

[KC native]

Originally Posted by Raiderhader

Same two or three stations along that strip.

The only thing you need to run a gas station is a pair of binoculars.

Once your neighbor raises/lowers the prices then you do.

[morphius]

Originally Posted by KC native

The only thing you need to run a gas station is a pair of binoculars.

Once your neighbor raises/lowers the prices then you do.

Is that Quicktrip there, these were along State Line and were 1.79 as well. The other stations on the road follow their lead, they are just slower to drop, but seem to raise every bit as quickly.

[redfan]

1.79 up by Hilton kci as well

[Pablo]

Originally Posted by GloryDayz

I've heard tales that say it's on a slight rise again. Have not been able to verify. Time to panic!

I'll be goddamned if I pay $23 to fill up my tank instead of the $22 I've grown accustomed to!

[Coach]

http://www.usatoday.com/story/money/...llon/21865975/

John Hofmeister attracted national attention in 2010 when he predicted that average U.S. gasoline prices would soar to $5 a gallon in 2012, thanks to rising crude oil prices. His forecast fell short, as the cost of filling up flirted with $4 in 2012, but never went higher.

Now, with national gasoline prices currently averaging $2.05 a gallon, their lowest level since early 2009, the former president of Shell Oil 06is issuing another warning, telling motorists that their joy ride may end sooner than they think.

"The next round of high prices is likely to start later this year, as crude rebounds to the $80s and $90s, perhaps pushing to the $100 level by late in the year or early next," Hofmeister told me the other day after a trip to Calgary, where he was promoting natural gas as a transportation fuel.

"The triggering mechanism will be global demand growth relative to how much capital constraint gets baked into future plans for production this year and next. If new production capital is deferred and demand growth continues at 2% or more, we'll see capacity constraints during 2016, an election year of course, drive prices higher. Whether we reach $4 a gallon or push past, it's too early to tell."

Moreover, Hofmeister still sees $5 gas on the horizon.

"Over the next several years, as demand growth approaches 100 million barrels a day and the industry production falls short, yes, I believe later this decade we'll see $5 a gallon and possible shortages of fuel in some parts of the world," he said.

Hofmeister paints a gloomier picture of gasoline prices than many analysts, including the U.S. Energy Information Administration, which predicts U.S. gasoline prices will average $2.33 this year and $2.72 in 2016. But he also feels that the perception of a "glut" in world oil production now is overstated, with supply outpacing demand by only 1 million barrels a day or so.

Some of his former peers in the oil sector share his sentiments regarding the oil oversupply, and its impact on oil prices.

"Most of us in the industry are surprised that it's fallen as hard and fast as it has," Ryan Lance, CEO of ConocoPhillips, said at a Center for Strategic and International Studies. "I don't know that I have a real good answer to that question, other than it doesn't feel like the fundamentals would support that kind of fall."

Like Hofmeister, Lance said oil prices could rebound faster than anticipated, as they did in 2009, following the Great Recession.

"People were worried about the global economy, and prices went to $30, $40 a barrel, and just a matter of months later, it was back to $100 a barrel," he said. "And that's the kind of volatility we're in, when we see these imbalances that are created, even though they are relatively small in absolute terms."

Still, Hofmeister sees a solution to end the roller-coaster pattern to oil and gasoline prices: natural gas.

Since retiring from Shell in 2008, he's been actively promoting natural gas as a transportation fuel, as the head of an organization called Citizens for Affordable Energy.

"I believe that with the right focus and development of the natural gas fuels market, we could begin to reduce global demand for oil from the 100-million-barrels-a-day level around 2020 to lower demand levels by substituting natural gas fuels," he said. "We could pull it back to 90, 80, even 70 million barrels a day over the next two to three decades, taking enormous pressure off chronic high oil prices."

In the meantime, though, his advice to motorists regarding gasoline is simple: "Enjoy the price, because it's going to go back up."

[Discuss Thrower]

Told y'all

[TribalElder]

Originally Posted by GloryDayz

I've heard tales that say it's on a slight rise again. Have not been able to verify. Time to panic!

Yes, yesterday I saw 1.63 and 1.79

Today 63 is 79

[Donger]

U.S. Oil Rigs Decline by 49 to Reach Two-Year Low

http://www.bloomberg.com/news/2015-0...tml?cmpid=yhoo

U.S. drillers idled rigs seeking oil for a seventh week as production hovers near a three-decade high, contributing to a global glut that’s kept oil prices below $50 a barrel for more than two weeks.

The oil rig count dropped by 49 this week to 1,317, the lowest level in two years, Baker Hughes Inc. (BHI) said on its website Friday. Those drilling for natural gas increased by six to 316. The total slid by 43 to 1,633.

Oil rigs have dropped by 258 in seven weeks, threatening to halt the unprecedented growth in domestic oil production that has turned the U.S. into the world’s largest fuel exporter. The booming production, out of shale formations across the country, has OPEC and other foreign suppliers fighting to preserve their market share. Eight hundred rigs may be pulled out of U.S. fields during the first half of 2015, Penn West Petroleum Ltd. (PWT) Chief Executive Officer David Roberts said at a conference Thursday.

“If you go down to operating cost levels in the $30-$40 West Texas Intermediate range, and stay there, you will start to lose production in the highest cost fields in North America,” Michael Wittner, head of global oil research at Societe Generale (GLE), said Jan. 19 at a conference in Calgary. “You’re already seeing the rig counts coming down. Drilling will come down. Well completions will come down. In the end, it’s the steep decline rates that are going to do the job.”

Oil Prices

West Texas Intermediate for March delivery dropped 65 cents to $45.66 a barrel on the New York Mercantile Exchange at 1:15 p.m. East Coast time. Prices rallied briefly after news broke late Thursday that Saudi Arabia’s King Abdullah had died.

The Organization of Petroleum Exporting Countries, of which Saudi Arabia is the largest producer, has resisted calls to curb production amid an expanding surplus of global supply. Saudi Aramco will maintain its maximum sustained crude-output capacity, Chief Executive Officer Khalid Al-Falih said at the World Economic Forum in Davos, Switzerland, on Jan. 21.

The slump in oil rigs has yet to put a dent in U.S. oil production, which reached 9.19 million barrels a day in the week ended Jan. 9, the most in weekly data since at least 1983, Energy Information Administration data show. Output was virtually unchanged last week.

Drillers including Antero Resources (AR) Corp. and BHP Billiton Ltd. (BHP) joined the droves of companies curbing spending and canceling projects because of the collapse in oil prices.

BHP, the biggest overseas investor in U.S. shale, said Jan. 20 that it will cut the number of its rigs there by about 40 percent. Antero Resources said the same day that it will cut its 2015 capital budget by 41 percent.

Last week, Schlumberger Ltd. (SLB), the world’s biggest oilfield-services company, said it was cutting about 9,000 jobs and seeking to lower operating costs at a unit that helps producers find oil and natural gas.

[Jimmya]

There will be plenty of oil workers looking for jobs!