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.

[Donger]

Crude reached $106.95 today but has fallen back to $105 right now. Retail average of $3.50/gallon.

[Donger]

Oh, and there are small rumblings in the Kingdom:

http://news.yahoo.com/s/nm/20110306/...saudi_protests

[Deberg_1990]

http://www.dailyfinance.com/story/cr...-spr/19868003/


The Fix for High Oil Prices? Regulate the Speculators





As the crisis in Libya continues to shake world oil markets, a rising chorus of voices in Washington is calling for President Obama to release millions barrels of oil from our 727 million-barrel Strategic Petroleum Reserve (SPR), The New York Times reports. With gasoline prices up 33 cents a gallon in the last month, that's a tempting idea. The government tapped into the SPR after Hurricane Katrina in 2005 and during 1991's Persian Gulf War. In both cases, the moves took pressure off oil prices.

But is the current situation such an emergency? No way. After all, as I wrote last month on DailyFinance, Libya represents a mere 0.5% of U.S. oil imports, and Saudi Arabia is increasing its production to make up the difference. There has been no sudden increase in demand for oil, nor has there been a truly significant drop in supply. In fact, refineries -- which convert crude oil into gasoline and other chemicals -- are operating at a relatively low 88.4% of capacity, according to the U.S. Energy Information Institute.

So why are oil prices going up so much? Speculators.

Oil speculators using cheaply borrowed money to bet on rising oil prices and a falling dollar are playing on media-fueled fear to make big profits. The good news is that stopping those speculators would be easy: Regulators should demand higher margin requirements. By cutting off their easy ability to gamble with cheap debt, the regulators could push speculators out of the market and relieve consumers from pain at the pump.

The Politics of Regulation
Last time we had a huge run-up in oil prices was 2008 when oil hit $147 a barrel. When the Commodities Futures Trading Commission -- the body that's charged with keeping the trading pits honest -- investigated, it discovered that 81% of the trading volume in oil was being conducted by speculators. Put another way, businesses that actually use the oil, such as airlines, were doing just 19% of the trading. The vast majority was done by hedge funds and investment banks to make a quick buck.

The CFTC let speculators into the oil-trading market back in 1991. That's because, as I wrote on BloggingStocks in 2008, J. Aron, the trading unit that hired Goldman Sachs (GS) CEO Lloyd Blankfein, requested and got an exemption that allowed it to trade oil even though it wasn't going to take delivery. Once J. Aron got through that door, so did many others -- including Enron. Remember how that turned out?

The Dodd-Frank financial reform law requires the CFTC to do something about speculators, but they've managed to delay the implementation of so-called position limits until 2012. According to Heatingoil.com, the CFTC will be at least a year late in complying with the Dodd-Frank requirement that it limit speculators' ability to drive up oil prices.

Let Real Supply and Demand Dictate Prices
So, thanks to the CFTC's inaction, the level of speculation in oil prices is at record levels. According to Heatingoil.com, trading volume on the NYMEX from oil traders who don't take delivery -- so-called "net long positions," hit a level not seen in four years in January.

The fuel that keeps these speculators going is cheap capital -- supplied by our friends at the Federal Reserve. But again, it's easy to stop this: Simply require those speculators to use much less borrowed money when they trade.

Last month, two exchanges did just that -- but it wasn't enough. According to Bloomberg, the New York Mercantile Exchange (NYMEX) in February increased its margin requirements 20% to $6,075 per contract, and the International Exchange (ICE) increased its margin requirement 7% to $5,200.

If consumers had a say, NYMEX and ICE would double those margin requirements today, and you'd then see oil and gasoline prices drop to the levels dictated by supply and demand rather than Wall Street greed. Shutting down the speculators' ability to gamble quite so much with borrowed money would be a better answer than releasing oil from the SPR when we don't have a real supply emergency.

[Ugly Duck]

Gas is at $4.20 at the Shell station in town today.

[Pitt Gorilla]

Originally Posted by Ugly Duck

Gas is at $4.20 at the Shell station in town today.

It's got to be 4.20 somewhere.

[Donger]

Originally Posted by Deberg_1990

http://www.dailyfinance.com/story/cr...-spr/19868003/


The Fix for High Oil Prices? Regulate the Speculators





As the crisis in Libya continues to shake world oil markets, a rising chorus of voices in Washington is calling for President Obama to release millions barrels of oil from our 727 million-barrel Strategic Petroleum Reserve (SPR), The New York Times reports. With gasoline prices up 33 cents a gallon in the last month, that's a tempting idea. The government tapped into the SPR after Hurricane Katrina in 2005 and during 1991's Persian Gulf War. In both cases, the moves took pressure off oil prices.

But is the current situation such an emergency? No way. After all, as I wrote last month on DailyFinance, Libya represents a mere 0.5% of U.S. oil imports, and Saudi Arabia is increasing its production to make up the difference. There has been no sudden increase in demand for oil, nor has there been a truly significant drop in supply. In fact, refineries -- which convert crude oil into gasoline and other chemicals -- are operating at a relatively low 88.4% of capacity, according to the U.S. Energy Information Institute.

So why are oil prices going up so much? Speculators.

Oil speculators using cheaply borrowed money to bet on rising oil prices and a falling dollar are playing on media-fueled fear to make big profits. The good news is that stopping those speculators would be easy: Regulators should demand higher margin requirements. By cutting off their easy ability to gamble with cheap debt, the regulators could push speculators out of the market and relieve consumers from pain at the pump.

The Politics of Regulation
Last time we had a huge run-up in oil prices was 2008 when oil hit $147 a barrel. When the Commodities Futures Trading Commission -- the body that's charged with keeping the trading pits honest -- investigated, it discovered that 81% of the trading volume in oil was being conducted by speculators. Put another way, businesses that actually use the oil, such as airlines, were doing just 19% of the trading. The vast majority was done by hedge funds and investment banks to make a quick buck.

The CFTC let speculators into the oil-trading market back in 1991. That's because, as I wrote on BloggingStocks in 2008, J. Aron, the trading unit that hired Goldman Sachs (GS) CEO Lloyd Blankfein, requested and got an exemption that allowed it to trade oil even though it wasn't going to take delivery. Once J. Aron got through that door, so did many others -- including Enron. Remember how that turned out?

The Dodd-Frank financial reform law requires the CFTC to do something about speculators, but they've managed to delay the implementation of so-called position limits until 2012. According to Heatingoil.com, the CFTC will be at least a year late in complying with the Dodd-Frank requirement that it limit speculators' ability to drive up oil prices.

Let Real Supply and Demand Dictate Prices
So, thanks to the CFTC's inaction, the level of speculation in oil prices is at record levels. According to Heatingoil.com, trading volume on the NYMEX from oil traders who don't take delivery -- so-called "net long positions," hit a level not seen in four years in January.

The fuel that keeps these speculators going is cheap capital -- supplied by our friends at the Federal Reserve. But again, it's easy to stop this: Simply require those speculators to use much less borrowed money when they trade.

Last month, two exchanges did just that -- but it wasn't enough. According to Bloomberg, the New York Mercantile Exchange (NYMEX) in February increased its margin requirements 20% to $6,075 per contract, and the International Exchange (ICE) increased its margin requirement 7% to $5,200.

If consumers had a say, NYMEX and ICE would double those margin requirements today, and you'd then see oil and gasoline prices drop to the levels dictated by supply and demand rather than Wall Street greed. Shutting down the speculators' ability to gamble quite so much with borrowed money would be a better answer than releasing oil from the SPR when we don't have a real supply emergency.

I've no problem with that. I read that some are buying June at $200/barrel already.

[R8RFAN]

3.55 today here in Thomasville NC

[BigMeatballDave]

Originally Posted by Donger

I've no problem with that. I read that some are buying June at $200/barrel already.

These ****ers need to be tied up naked, and let rats dine on their junk.

[R8RFAN]

Death Valley


4 dollars? pfffft..

[Donger]

Originally Posted by R8ers

Death Valley


4 dollars? pfffft..

Holy sh*t.

[Bugeater]

What kind of ****ing 'tard needs a blind spot mirror on the driver's side?

['Hamas' Jenkins]

You should not be allowed to speculate on futures for an inelastic commodity and Goldman should have never gotten a trading exemption that allowed them to speculate on it in 1991.

[R8RFAN]

Originally Posted by Bugeater

What kind of ****ing 'tard needs a blind spot mirror on the driver's side?

Somebody too lazy to swivel their neck?

[BigMeatballDave]

Originally Posted by Bugeater

What kind of ****ing 'tard needs a blind spot mirror on the driver's side?

LOL I have one on both. They were there when I bought the car. I'm so used to looking behind me, I've never used them. I cant trust it.

[Bugeater]

Originally Posted by R8ers

Somebody too lazy to swivel their neck?

Do some people actually turn their heads to check the driver's side? I never do.