Month: April 2007

DOE report- LOUSY.

Well, hold on a second- the DOE report just came out, and you can expect gasoline to rise today…

The DOE report was… BAD.

Refinery utilization DROPPED to 87.8% this week after continued refinery problems kept gasoline stockpiles from building. Gasoline stockpiles are now WELL BELOW their average for this time of year. They fell an unexpected 2.8 million barrels.

Oil inventories rose due to this, even though analysts expected them to fall 1.5 million barrels. They ended up rising 2.1 million barrels.

Midwest PADD storage dropped to the lowest since Katrina in 2005, sitting at 46.6 million barrels. Remember, the refinery at Whiting, Indiana is down to less than 1/2 of normal production.

Look for gasoline to possibly rise to 2.25 (wholesale) today, and with the bad DOE report, I’ll be looking for 3.05 at the pump tomorrow.

Fill up!

~Patrick

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Anatomy of A Price Hike

Tuesday, April 24, 2007, 11:15 AM: I will use the occasion of yesterday’s price hike to $2.95 — predictable but not predicted by me — to describe the genesis of this price hike.

On Wednesday the 11th, prices jumped to $2.95, and the NYMEX RB price — a good estimate of the wholesale price — was about $2.13. That RB price jumped to $2.16 the next day, but then slipped to $2.04 by Wednesday the 18th. Wholesale prices went down in tandem, and by this past weekend, you could buy gas in town for $2.67, which was less than what the stations paid for the gasoline a few days earlier. But, by the close of business Friday, the RB price was $2.13 again, and the return to $2.95 was on its way. By Monday 8AM, CNBC had an RB price of $2.15, and for sure the e-mail to the stations had already been sent.

Speedway hiked their prices first to $2.95, as they usually do. In some cases, that was a jump of nearly 30 cents! The competitors followed, and Meijer sent out its price hike alert text message. The hike to $2.95 was not uniform, and some places are selling gas today for $2.88. That is because a $2.13 RB price has in the past corresponded to a price hike to about $2.88 rather than $2.95.

Unfortunately, RB prices rose another 5 cents on Monday, and another 4 cents this morning! So, I’m predicting another price hike to $2.99 by the end of the week.

Whiting! OUCH! Why now?

OUCH! Well, I stumbled upon the reason the Midwest PADD is down so much… and it does NOT bode well for us. (This is the refinery that I frequently talk about in Whiting, Indiana, near Gary)

Quote from Bloomberg

BP Plc, Europe’s second-largest oil company, said its Whiting, Indiana, refinery has cut production to about half its capacity, or 200,000 barrels, after the plant’s hydrotreating unit failed in March. The problems at BP’s fluid catalytic cracking unit have forced the plant to process more expensive grades of crude. The plant will keep refining at the current rate “until we complete the necessary repairs,” the company said in a statement distributed by the Regulatory News Service today.

Problems at the plant were exacerbated when a crane hit a power line and cut off its power on April 4. That caused an emergency shutdown and a small fire that was quickly extinguished, said Wendy Silcock, a spokeswoman with BP in London.

Look for Grand Rapids and the Midwest to suffer until this mess is resolved. Expect to be paying more than average until at least May, when hopefully the problem will be solved. If it isn’t solved until May, we might see higher summer prices than I previously thought.

Just to see how much this refinery puts out and how much it might effect us, here are the readings from the DOE weekly PADD report. Notice the start in big drops after Whiting production drops:

2/23/07: 55,488 (Whiting running normal)
3/02/07: 54,696 (Whiting reports problem)
3/09/07: 53,508
3/16/07: 52,483
3/23/07: 52,769
3/30/07: 50,664
4/06/07: 48,027
4/13/07: 47,636

Anyway, doesn’t look to get better around here until May, so we may see $3 for a few days until Whiting is back up and running normal.

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Price hike!

Well, after going down for several days on the wholesale market, we’re
down to that level in Grand Rapids (2.67) that will require a price
hike. After getting down to 2.05 last week, wholesale prices are back
up to 2.13. We should see 2.85-2.89 locally, as nationwide prices are
still near 2.89.

Get that gas for 2.67 first thing before prices hike!

~Patrick

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Gas Prices: Downturn accelerates!

Well, the DOE report was mixed: both good and bad.

The great news:
Refiners out did just about every prediction and utilized 90.4% of their capacity last week. Professional analysts expected refiners to use 88.7%, so this very much surprised them. I had predicted refiners to use up to 89.2% of their capacity so this too surprised me. Look for refiners to use around 91.3% next week.

Also good news (even though it may not seem so) was that there was a drawback in oil inventories. This signals to traders that refiners are demanding more oil to refine, signaling that they are ramping up production.

The not so great news:
Gasoline stockpiles still fell more than expected. Professional analysts were expecting a draw of 2.1mb, while a drop of 2.7mb is what occurred.
Midwest PADD storage fell to 47.3mb; however, I believe that major midwest players (Valero, BP, Exxon to name a few) are starting to ramp up production of our 7.8RVP gasoline. They are possibly still trying to get rid of all their winter gasoline, so look for next week’s DOE report to show a gain in Midwest PADD storage.

Gasoline is currently down to 2.02, but we shouldn’t see much of a loss or gain. If anything, I expect gasoline to have lose a fraction today. The news was both good in bad, keeping traders in check.

What’s this mean for us?
We might see higher rack prices due to lower PADD storage this week; we might see a small price hike to 2.82 or so, but the odds are only at about 40% for that to happen. Keep watching for prices to fall; we might get down to 2.67-2.69!

A brief note: think about this and answer to yourself: do you think so far in 2007 we’ve had MUCH HIGHER gas prices than the same period in 2006?
(scroll for answer)
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If you answered {{{*$$y*$**$e$$***$$s$$*}}}, (I tried to hide the answer in case you scrolled too far) you’re incorrect. So far, price this year have averaged around 2.414 while last year that number was 2.410.

~Patrick

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GR Gas Prices: Ready for a fall?

Well, the tide may have finally turned Monday for gasoline prices.

Monday we saw prices drop roughly six cents. Today, after a morning
of flat trading, gasoline took another five cent dive to 2.05. We’ve
shed roughly 11-13 cents in two days.

A few weeks ago I said I didn’t think we’d see $3 nationwide this
summer. I think we “rounded the corner”.
We hit the peak. While prices may stay around this level for a while,
we should see things calm down, and PERHAPS… as I told WZZM13 a few
weeks ago, we have a CHANCE of seeing around $2.50.

Stay tuned. Gas prices should fall the next few days, so no need to
rush to the pumps. The DOE Report tomorrow will be a pretty big
report as well, as I expect refiners to have used around 88.5%-89.2%
of their capacity as they start producing lower RVP summer gasoline.

~Patrick

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