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]

Originally Posted by Valiant

Answer or quote it again.

No.

[Donger]

Wow. Gasoline demand in the US dropped by somewhere between 1.2 and 4% last month. That's huge.

[InChiefsHeaven]

The irony seems to be that if gas prices are low, it's going to be because the economy sucks...so, rooting for lower gas prices means rooting for a sucky economy...

[BossChief]

Putin Accuses Oil Firms of Price 'Conspiracy'

Russian Prime Minister Vladimir Putin accused oil companies on Thursday of a "conspiracy" to force up gasoline prices, as the world's largest oil producer struggles to combat fuel shortages.

Putin rebuked Deputy Prime Minister Igor Sechin, his point man for energy, for suggesting at a government meeting that price rises had resulted from a lack of oil products offered for sale on commodities exchanges.

"It's not a shortage. This is not about a shortage. This is a conspiracy. They are colluding," Putin told Sechin, who serves on the board of state-controlled oil major Rosneft and is widely seen as the chief spokesman for the industry.

The government last week raised gasoline export duties by 44 percent to keep fuel in the domestic market after pumps ran dry in some regions and shortages spread to Moscow and St Petersburg.

Sechin has chaired talks to discuss proposed amendments to oil tax reforms that would ramp up export duties on refined products to punitive levels if crude oil prices are high.

Analysts blame the shortages on price curbs demanded by Putin from industry bosses in February, and a lack of investment in the refinery capacity needed to produce the premium fuel used by Russia's growing fleet of modern cars.

Fuel prices are the latest driver of inflation that is close to double digits. Gasoline prices rose by 2.8 percent last week, their biggest jump in 14 weeks, data showed on Thursday.

The central bank hiked interest rates last Friday to contain inflation, which will be key for sentiment ahead of elections to parliament in December and a presidential poll next March.

Putin has not ruled out returning to the presidency, and the viability of any candidacy will depend on his handling of the economy. President Dmitry Medvedev, the other wheel in Russia's ruling "tandem," may also seek a second term.

Sechin's talks with officials discussed emergency measures such as increased trading of oil products on official exchanges and intervention sales of gasoline from strategic reserves.

One goverment source familiar with the talks said, however, that such intervention sales would be difficult to carry out in short order from a legal point of view.

Sechin did not clarify what measures he would back, but said possible additional measures would be focused on crude oil.
Russia's government sets monthly export schedules for oil firms from major ports and therefore has the ability to limit shipments, a measure that could unsettle oil markets at a time of high global prices.

Russia produces over 10 million barrels per day (bpd) of crude, of which 4 million bpd is refined. Around half of the refined products are exported, mainly to Europe.

FIRM GRIP

Russia's government has been tightening the screws on the oil sector, which generates the lion's share of state revenue, to rein in the budget deficit and fund pre-election spending helped by oil prices' rise to a 2 1/2 year high.

It has from this month cancelled preferential export duties for Rosneft's Vankor oilfield as well as for TNK-BP's Verkhnechonskoye and Surgutneftegaz's Talakan. Some analysts had expected that the government might ease pressure on the sector by cutting taxes on crude production but Deputy Finance Minister Sergei Shatalov said he saw "no reason to do this."

Thursday's meeting considered faster implementation of an Energy Ministry proposal to lighten the tax burden on crude oil exports and equalise export duties on products.

The so-called "60/66" proposal would lower a coefficient that determines crude oil export duty to 60 from 65 now, while equalising the export duty applying to light products at 66 percent of the crude oil export duty.

High oil prices have, however, complicated the maths on the proposals, which had been due to take effect in July.

The Vedomosti daily reported that one proposal on the table would lower the crude oil export duty coefficient to 55 and hike the factor applying to refined products to 86 percent if the oil price exceeds $90 per barrel.

"60/66 only works with the price at $90-$95 per barrel... With $100 it doesn't work at all," Deputy Energy Minister Sergei Kudryashov told reporters.

Read more: http://www.foxbusiness.com/markets/2...#ixzz1LW6YXEps

[Alton deFlat]

I was surprised to see gas prices dropped here over night. They were down about a a nickel. $3.79 now.

[Alton deFlat]

Originally Posted by InChiefsHell

The irony seems to be that if gas prices are low, it's going to be because the economy sucks...so, rooting for lower gas prices means rooting for a sucky economy...

I read this on CNN.

In the past week, oil prices have tumbled more than 10% on worries that recent disappointing economic reports may mean we are in for an economic slowdown.

Well, no shit!! I'm an idiot, but even I could have told them that raising gas prices that drastically is going to effect the economy negatively.

[jiveturkey]

Does this mean prices will quickly head back up?

Strong Job Report Shows U.S. Economy Gaining Steam
http://www.nytimes.com/2011/05/07/bu...jobs.html?_r=1

[Dr. Johnny Fever]

Gas here went down from $4.16 to $4.09 overnight WOOOOT! We can spend our money frivolously again!

[Donger]

Crude going back up today. Yesterday was too much of a drop, IMO.

[BigMeatballDave]

I thinkin gas is over priced. When oil peaked @ 147 in 08, gas was pretty much where it is now.

[sedated]

Originally Posted by Donger

Crude going back up today. Yesterday was too much of a drop, IMO.

so, following the usual pattern, the suddent drop had no affect on gas prices, because of the "wait and see" attitude when prices decrease. However, the subsequent rise/rebound will cause gas prices to go up, because of the "panic" attitude when prices increase.

[Dayze]

prices were raised in order to ancitipate all the demand that was gonig to happen when the prices dropped.
lol

[4th and Long]

Oil 'goes crazy' after jobs report



2011: 12:53 PM ET

NEW YORK (CNNMoney) -- Commodities tried to make a comeback Friday, after a stronger-than-expected report on the labor market sparked a rush into equities.

The U.S. economy added 244,000 jobs in April, the government said Friday. Economists surveyed by CNNMoney had predicted an increase of 185,000 jobs in April, following a 216,000 rise in March.

As stocks rallied, oil prices flip-flopped. Crude fell 3% ahead of the jobs report, then got a little boost before retreating again.

In early afternoon trading, crude for June delivery slipped 1% to $98.80 a barrel. On Thursday, crude sank nearly 9% -- the biggest one-day percentage drop in two years.

"Oil prices are going crazy," said Phil Flynn, senior market analyst at PFG Best. "We had this huge correction because people were concerned about the economy slowing down and demand weakening, and now we're rebounding from yesterday's selloff because we got a good jobs report and people are saying maybe demand will be okay."

Track commodities

Flynn said oil had to take a break from the recent run-up at some point, and now that "we broke the back of the parabolic bull move," it will just take some time for prices to stabilize.

"We're going to see some volatility, but I do think we've hit the top -- I don't think we're going to see $115 a barrel for some time," he said, adding that once the near-term choppiness smoothes out, prices will likely hover between $80 and $104 a barrel.

Crude prices neared $114 a barrel last month as fears about supplies took hold following escalating violence in Libya. But as investors got 'accustomed' to those concerns, oil prices became mired in a fairly tight range...until this week.

Why companies are about to start hiring

In the past week, oil prices have tumbled more than 10% on worries that recent disappointing economic reports may mean we are in for an economic slowdown.

Along with oil, stocks also took a big hit Thursday as investors became increasingly nervous ahead of the government's monthly jobs report.

Earlier this week, payroll processing company ADP said private sector payrolls grew by 179,000 in April, after an upwardly revised 207,000 increase in March. Economists were expecting a gain of 200,000 private sector jobs.

The ADP jobs report typically sets the tone for the government's monthly jobs data. Meanwhile, on Thursday, a report showed jobless claims surged to the highest level in eight months.

The dollar gained nearly 2% on Thursday after the European Central Bank left interest rates unchanged -- putting additional pressure on oil prices. Because crude prices are priced in dollars, a stronger U.S. currency tends to pressures commodities.

That was the case Friday as well, with the dollar rallying 1% against the euro, which added to the commodities selling pressure.

Silver: canary in the commodity coalmine?

In other commodities, silver prices also pared some of its early losses, falling 4% Friday -- after sinking 7% before the jobs report. Silver has taken a big hit after the CME raised its margin requirements, meaning traders have to leave more on the table to buy silver futures.

Gold for June delivery ticked up $2.10, or 1%, to 1483.50, after dropping more than 2% on Thursday.

Gas prices declined on Friday, following a 44-day string of gains -- during which the price of gasoline surged 12%. The national average price for a gallon of gasoline fell one tenth of a cent to $3.984 on Friday, according to motorist group AAA.

[Saulbadguy]

Donger, I have a feeling your whole family is going down.

[chasedude]

Originally Posted by Donger

Crude going back up today. Yesterday was too much of a drop, IMO.

Your thought is wrong Down 2.62 so far @ 97.51, but you already knew that didn't you?