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 HemiEd

I wonder why gas was $.50 per gallon cheaper right out side of NY City, (Newark) than it is here in the Chicago burbs? (last weekend)

New Jersey has some of the lowest gasoline taxes in the country. Chicago is the opposite.

[Donger]

Originally Posted by Demonpenz

As worried citizens scrambled to stockpile resources, prices at the pump rose to sky-high levels across the nation.

Ya think?

[HemiEd]

Originally Posted by Donger

New Jersey has some of the lowest gasoline taxes in the country. Chicago is the opposite.

Makes sense. They also do not allow you to pump your own gas in Jersey.

[Demonpenz]

It's my friends and I are stocking up because with it beginning to rise who knows where it ends. As a good rule of thumb we say this. For every unit it goes up by buy 2 times more. that way we don't get gouged. got to love big oil

[Donger]

Originally Posted by Demonpenz

It's my friends and I are stocking up because with it beginning to rise who knows where it ends. As a good rule of thumb we say this. For every unit it goes up by buy 2 times more. that way we don't get gouged. got to love big oil

Actually, gasoline prices are dropping, as expected.

[Donger]

"Ruh-roh!"

Oil Hits $80 a Barrel for First Time

NEW YORK (AP) -- Oil futures prices rose sharply Wednesday, briefly climbing above a record $80 a barrel after the government reported a surprisingly large drop in crude inventories and declines in gasoline supplies and refinery activity.

The report from the Energy Department's Energy Information Administration suggested oil supplies are tightening as demand remains strong. That's why oil prices are rising despite OPEC's decision on Tuesday to boost crude production by 500,000 barrels per day this fall, analysts said.

[Calcountry]

Originally Posted by frazod

It is simply an impossibility for me to drive like an old lady. Turning left out of my subdivision, I either go like a bat out of hell or wait half an hour. Same with pretty much everyplace else up here. I've got shit to do and places to go, and I want to get there as quickly as possible. People who putter around are the problem, not the answer to the problem.

I wave at you when I catch up to you each time at the red lights bitch.

[Donger]

OPEC chief says 80-dollar oil won't last

OPEC chief Abdalla Salem El-Badri said Friday the current oil price of 80 dollars did not reflect fundamentals and was unlikely to last long.

"I don't think 80 dollars (per barrel) will last," El-Badri told journalists here. "The fundamentals do not support the price."

El-Badri said that the current price of oil was "too high."

But OPEC did not have a target for the oil price, he said.

"We're not in favour a high price or in favour of a low price," the cartel chief said.

The price of oil surged to record highs this week even after the Organisation of Petroleum Exporting Countries announced it would pump an extra 500,000 barrels per day from the start of November as a signal of the cartel's willingness to respond to supply fears in consumer countries.

One-off factors such as the hurricane season were behind that, El-Badri argued.

But still the cartel was scratching its head over the exact reasons.

"We're all asking ourselves why. Perhaps you (the markets) know something we don't."

Asked whether OPEC at its next meeting in December would discuss further raising output if the oil price persisted at current levels, El-Badri was tight-lipped.

"Of course, we will discuss supply, demand and inventories, as usual," he said.

"We don't enjoy seeing a very high price."

In its monthly report, released on Friday, OPEC maintained its estimate for world oil demand growth in 2007 despite current economic problems.

"World oil demand growth for 2007 is forecast at 1.3 million barrels per day (bpd) or 1.5 percent, broadly unchanged from the last" report in August, the September report said.

The Vienna-based OPEC said it was taking into account "the current world oil demand growth in the third quarter, along with the anticipation of a normal winter in the fourth quarter" in the northern hemisphere.

The Paris-based International Energy Agency had on Wednesday lowered its predictions of global oil demand for both this year and next and warned that financial markets turbulence could force it to again revise its forecast.

The IEA, which acts as energy policy advisor to industrialised countries, reduced its demand forecast to 85.9 million barrels per day in 2007 and 88 million bpd in 2008 from its prediction last month of 86 and 88.2 million bpd respectively.

"Mild weather and interfuel substitution have contributed to the fall in demand," it said in its latest monthly report. "Looking ahead, continued high prices may further dent demand."

But OPEC said that "world economic growth remains unchanged for 2007 and 2008 at five percent this month."

The oil cartel said "it is expected that the fallout from financial market turmoil will impact US and world economic growth in the second half of 2007 and 2008, although it is still too early to gauge the size of the effect."

"In credit markets, confidence is far from reestablished," the report said.

"Much will depend on monetary accomodation to ease the strains produced by the higher cost of capital and tighter credit availability," OPEC said, adding that "all eyes are now on the Fed meeting on September 18, when it is generally expected that interest rates will be lowered by 25 points."

It said there were signs of economic weakness in Japan and the eurozone while China's growth was high but so was inflation "mainly due to high food prices, calling for further monetary tightening."

OPEC said meanwhile that "the demand for OPEC crude in 2007 is expected to average 31.0 million bpd, an increase of 0.1 million bpd over the previous year."

"In 2008, the demand for OPEC crude is expected to average 30.8 million bpd, a decrease of 216,000 bpd," OPEC said.

[Donger]

Gulf coast dwellers eye developing storm

NEW ORLEANS - Gulf Coast residents kept a watchful eye and the oil industry began making preparations Thursday as forecasters warned that a weather system swirling over waters west of Florida could make landfall as a tropical storm over the weekend.
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In storm-skittish Louisiana, the governor declared a state of emergency late in the day, putting the National Guard on alert and school buses, ambulances and evacuation shelter workers on standby.

Conditions favor the low-pressure system becoming a subtropical or tropical cyclone within the next day, the National Hurricane Center said. A coastal flood watch is in effect through Saturday, the National Weather Service said.

The storm's path remains uncertain, but "the general consensus" is that it will hit between the mouth of the Mississippi River and Alabama's Mobile Bay, said Sam Shamburger, a Weather Service meteorologist. That's about the same route Hurricane Katrina took in 2005.

The system could make landfall early Saturday, said Mark Smith, a spokesman for the Louisiana Office of Homeland Security and Emergency Preparedness.

"With Louisiana still suffering from the ravages of Katrina and having so many residents living in travel trailers and mobile homes, we feel it's prudent — at this time — less than 36 hours out from the onset of landfall, to recommend the governor make the declaration," Smith said.

A tropical storm carries sustained winds of 39 to 73 mph. In comparison, Katrina, which killed hundreds of people and flooded most of New Orleans, made landfall as a Category 3 storm, with sustained winds of at least 111 mph.

Oil industry workers have left five production platforms in the Gulf, and three drilling rigs have been evacuated, according to the federal Minerals Management Service.

In Louisiana, officials were taking no chances. Gov. Kathleen Blanco, in Spain on an economic development trip, ordered the state's Emergency Operations Center to open, and personnel will closely monitor the weather.

"From a planning and practical standpoint, we have to plan for a level higher than it is to ensure that we have the assets and resources in place should it become more severe," Smith said.

In New Orleans, which took the brunt of Katrina's fury and is still vulnerable to flooding, officials urged residents who might need help in the event of an evacuation to register with the city's 311 service.

"Now is the time to do so," said Col. Jerry Sneed, emergency office director.

Authorities encouraged residents to clear leaves from storm drains and catch basins on or near their properties to limit flooding in the event of heavy rains.

In Mississippi's coastal Hancock County, officials handed out sandbags Thursday, said Brian Adam, director of the county emergency management agency.

A telephone message recorded by Mississippi Gov. Haley Barbour warned residents not to panic but to be prepared. It started going Wednesday night, primarily in parts of Mississippi slammed by Katrina.

[Donger]

Crude oil jumps above $84

Crude oil prices jumped above $84 a barrel late on Thursday after production platforms in the Gulf of Mexico were shut down ahead of a threatened tropical storm.

Nymex October West Texas Intermediate hit a record $84.10 a barrel, up $2.17, but settled at $83.32, up $1.39 on the day. The October contract expired at the end of trading. The most active November WTI contract was up $1.05 at $80.75.

ICE November Brent closed 62 cents higher at $79.09 after peaking at an all-time high of $79.23.

Oil companies such as BP and Shell closed about 360,000 barrels a day of production or 27 per cent of the total in the Gulf of Mexico.

[Simply Red]

Thanks for the information.

[Donger]

Originally Posted by Simply Red

Thanks for the information.

You are welcome. And, some good news, Shell just announced that they are expanding capacity at their Port Arthur refinery to more than double the current capacity. It's essentially like building a new refinery (with regards to output). Scheduled to be completed by 2010.

[InChiefsHeaven]

Good info. Thanks.

[Donger]

Oil Rises but Pulls Back From $93 Record

NEW YORK (AP) -- Oil futures rose Monday, but pulled back from a new trading record above $93 set after Mexico's state oil company suspended a fifth of its oil production due to stormy weather.

The news that Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production came amid rising political tensions in the Mideast, a weakening U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices.

"Mexico shut in production for a few days," which will likely disrupt imports and cut domestic oil inventories further, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.

Oil prices have jumped 9 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. The Mexican oil fields are expected to return to service later this week.

Prices were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.

However, many analysts argue that oil prices have risen to levels not supported by crude's underlying demand and supply fundamentals, and are due for a correction.

Light, sweet crude for December rose 33 cents to $92.19 a barrel on the New York Mercantile Exchange after rising as high as $93.20 in overnight trading. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.

Other Nymex energy futures were also higher. Gasoline for November delivery rose 2 cents to $2.294 a gallon, while November heating oil rose 1.09 cent to $2.4434 a gallon.

Natural gas futures rose 11.2 cents to $7.33 per 1,000 cubic feet.

In London, December Brent crude advanced 50 cents to $89.19 a barrel on the ICE Futures exchange.

At the pump, the national average price of a gallon of gas rose 0.7 cent overnight to $2.856 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen nearly a dime in two weeks.

The weak dollar was also supporting energy futures. The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.

Oil prices could get another boost this week if the Federal Reserve cuts interest rates.

"The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.

Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.

"There is not shortage of news that speculators can use now to push oil prices higher," said Fadel Gheit, an analyst at Oppenheimer & Co.

[Donger]

Oil Hits $97 on Bombs, Demand Forecast

NEW YORK (AP) -- Oil futures jumped to a new record above $97 a barrel Tuesday after bombings in Afghanistan and an attack on a Yemeni oil pipeline compounded the supply concerns that have driven crude prices higher in recent weeks.

Those concerns were also fed by a government prediction on Tuesday that domestic oil inventories will fall further this year while consumption rises.

At the pump, meanwhile, gas prices continued to rise, following oil's 39 percent price rally since August. The national average price of a gallon of gas jumped 2 cents overnight to $3.024 a gallon, according to AAA and the Oil Price Information Service.

Separately, the federal Energy Information Administration reported that diesel fuel prices reached a national average of $3.303 a gallon, a new record.

Light, sweet crude for December delivery rose $2.72 to settle at a record $96.70 a barrel on the New York Mercantile Exchange Tuesday after earlier rising as high as $97.10, a new trading record.

Oil's seemingly relentless climb raises the question of how high energy prices will go. If crude does keep going up, it might be some time until consumers see relief at the pump. Some analysts predict prices could rise as high as $3.50 to $4 a gallon next summer.

The Energy Information Administration is predicting gas prices will remain above $2.90 a gallon for the rest of the year, and will set a new record national average of $3.235 a gallon by May. In May 2007, prices peaked at $3.227 a gallon as refiners, faced with a series of unexpected outages, struggled to produce enough gas to meet demand.

Meanwhile, estimates of where oil is headed from here range from $50 a barrel to $120. Some analysts believe supplies will get tighter as the year wears on, supporting prices. Others argue that prices have been driven artificially higher by speculative investing.

The EIA expects crude oil prices to rise from an average of $71.36 a barrel this year to $79.92 a barrel next year.

On Tuesday, oil was already up before news of the blasts in northern Afghanistan that killed 28 people and the attack in Yemen. Severe weather forecasts for the North Sea, expectations that domestic crude supplies fell last week and the weak dollar all contributed to the latest move upward.

While Afghanistan doesn't produce much oil, traders watch for the possibility that any escalation in the conflict there between U.S. armed forces and Islamic militants could spill over into other countries, disrupting oil supplies out of the Middle East.

John Kilduff, vice president of risk management at MF Global UK Ltd., noted that the attack in Yemen "has disrupted a pipeline that carries 155,000 barrels a day of crude."

Meanwhile, investors believe crude supplies are declining in the U.S. Analysts surveyed by Dow Jones Newswires predict, on average, that crude oil inventories fell by 1.6 million barrels last week. The EIA will issue its weekly inventory report on Wednesday. Oil futures' rise above $90 a barrel has been fueled in part by two weeks of unexpected declines in inventories.

On Tuesday, the EIA predicted oil consumption will rise in the fourth quarter and next year despite higher prices, and that inventories will fall.

"Strong demand, limited surplus capacity, falling inventories and geopolitical concerns continue to weigh on the market," the EIA said in its monthly Short-Term Energy Outlook.

The weak dollar, which fell to a new low against the euro Tuesday, is also lifting oil prices. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Oil prices settled 66 percent higher Tuesday than on Jan. 3, the first trading day of the year. But Tuesday's trading record of $97.10 a barrel is up 95 percent from this year's trading low of $49.90, set Jan. 18.

Other energy futures also rose Tuesday. December gasoline futures jumped 5.39 cents to settle at $2.435 a gallon on the Nymex, while December heating oil futures added 6.39 cents to settle at $2.6078 a gallon.

Natural gas for December delivery fell 13.6 cents to settle at $7.863 per 1,000 cubic feet on the Nymex on predictions for mild temperatures next week in the Midwest and Northeast, and expectations that inventories, already at record levels, will continue to rise.

In London, Brent crude rose $2.77 to settle at $93.26 a barrel on the ICE Futures exchange. A number of North Sea oil platforms were being evacuated Tuesday in advance of expected severe weather.

On Wednesday, analysts also expect the EIA to report that gasoline inventories rose by 200,000 barrels during the week ended Nov. 2, while supplies of distillates, which include heating oil and diesel fuel, fell by 500,000 barrels.

The analysts expect that refinery use grew by 0.8 percentage point to 87 percent of capacity.

Oil inventories likely fell due to a suspension of output at Mexico's state oil company Petroleos Mexicanos, a major crude exporter to the United States, which temporarily shut its ports last week due to severe weather.

"The oil market is really supported by the tight inventories in the U.S. market and the general expectations for the inventory report this week are that the crude inventories will likely fall," said Victor Shum of Purvin & Gertz Inc. in Singapore.

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