Could it be Fill-up Monday?

Well, Ed was spot on (as was I on the Spike Line page under the features link above). But it may not be over, yet. Market price in Chicago went up another 11 cents today. Could we possibly be in for another spike early next week?

This post is the first of a weekly feature I’ve been working on, the end of week report. We saw the Chicago CBOB go up around 35 cents this week from 2.6818 on Friday to 3.0270 today. The Chicago RBOB is up about 37 cents, and is currently 23 cents over the CBOB. The Chicago Ultra Low Sulfur Diesel is down 2.67 cents, and the Group 3 spot is up 1.56 cents.

The Indiana average is up 22.1 cents, Michigan up 17.5 cents, and Ohio up 20.9. All are still trending up, and could see another 5-10 cent climb before prices ease, or another spike occurs. The US average went down 2.6 cents on the week.

Why the big jump up? I had the pleasure of hearing an interview with Patrick on WIBC this afternoon, and he says it is because of the large amount of rain we’ve had causing power outages, and thus pipeline and refinery closures. These are temporary, however. There is a possibility of a spike on Monday, but they also may skip it, especially if there is an early drop in the market on Monday. We shall see. But these high prices won’t last long, and we should settle back into $3.30′s in a week or two as long as the national market doesn’t rise in the meantime.

Posted in Predictions
37 comments on “Could it be Fill-up Monday?
  1. skyler says:

    Bill, Do you mean that after $3.79 at Grand Rapids we will see it going into $4+ ?? What about the local ‘flood factor?’

  2. Turbo46032 says:

    If a 1/2 HP sump pump (and a pair of battery backups just in case) can keep my basement bone dry after 4 inches of rain here in Carmel IN then a 3 billion dollar refinery ought to keep operating unless 3-4 feet of rain fell in a day…

  3. Bill says:

    I don’t think the refinery had the outage, it was the surrounding area.

  4. skyler says:

    Don’t they have pipelines running? I thought the godfather of oil refinery (john d rockafellar) just did that in early 1900s and the same is still maintained and perhaps extended! check me if I am wrong on this! I think more has to do with general population’s unawareness about the whole distribution and those loop holes gives way to the refiners in price gouging! and in that case blaming on natural calamity related supply backlog is a good excuse to keep earning!

  5. Sam says:

    Wow, they really have a BS excuse for every situation, don’t they???

  6. Tuebor says:

    What is the alternative? If wholesalers didn’t raise prices, would they sell out of supply before more gasoline could be delivered to terminals? Would stations sell gas at $3.39 and then run out for a week? What kind of panic would that trigger? A black market where you pay $5, $8, $12 a gallon until supply resumes? Does the rise in wholesale price reduce demand and prevent shortages?

  7. TimmP says:

    Tuebor, you are correct. Free market will always find a way to serve things the cheapest in the long run. Having said that, we must remember that gasoline demand is very inelastic, that is to say it is not elastic at all. Higher prices have little effect on demand since most people are already cut back to bare bones driving 95% of the time. So having said that, it takes a very high price spike to quell demand for a possible shortage. Thus the prices swing UP MADLY, and down ever so softly. One of the things that does really bother me most of all, is that since gas was losing it’s margin, that’s when they decide to have a “delivery issue” and take a plant out of service. Since when has the mid west not had a week with 4+ inches of rain in one week in the spring or the summer. It happens probably 3 out of four years. That, I believe is misdirection to call this weather related. Nationwide, the prices were falling, and the midwest could not support lower prices. Something had to be done. And it was. And I don’t really believe in almost any conspiracy theories on anything.

  8. Tuebor says:

    I don’t do conspiracy theories either. I don’t know where this information about heavy rains causing the spike is coming from. Seems like someone tied the two together because they happened at the same time and then the story keeps getting repeated without any verification.

  9. Tuebor says:

    I finally found some relevant news other than word-of-mouth by GasBuddy. This article tells about storm effect at Citgo’s Lemont, Illinois refinery:

    http://www.dailyherald.com/article/20130419/news/704199695/

    and this one says Exxon’s Joliet refinery is down for a few weeks for turn-around maintenance:

    http://www.foxbusiness.com/news/2013/04/17/refinery-status-fire-at-exxon-beaumont-refinery-2/

  10. Alfred says:

    Don’t tell me for a second that these refineries do not have their own power backup. And even if they did lose power, you’ll will never convince me that the terminals themselves do not have weeks of supply in their tanks. I’ve worked at several of the different suppliers (Marathon, BP, Buckeye, Sunoco) as member of subcontracted labor I have been privied to having to work around delivery schedules. The amount of fuel and time that fuel is being pushed into a tank varies and it is not as often as what you might think. Also, we are probably going to see another spike due to “summer blend”. This is the less diluted blend so you are getting more actual fuel per $ spent. The “winter blend” is often injected with butane which is the big thing now. Sunoco, specifically, came up with a way to inject butane as a filler and it only works in colder temperatures before it separates. This injection causes you to only be getting a fraction of real fuel versus the summer blend which is instead injected with other crap (injector cleaner, dyes, etc)

    I get that it is a commodity, but the government (who is giving incentives to those who install said butane systems) is the biggest part of the problem. I’m all for moving forward with better technology, but until the government can put a damper on the major swings, I feel that it only hurts the consumer and stifles potential economic growth.

  11. Bill says:

    I see a possible 3.999 push Monday, not anything over 4 except near the lake in Indiana. I just heard about the refinery outages on Friday from Patrick, so besides the links someone posted above, I don’t know much more than that.

  12. Tuebor says:

    Here’s a sampling of refinery issues due to power interruptions so far this month:

    April 16: “Valero Energy Corp. said all units at its Port Arthur refinery had returned to production and were nearing planned rates by Tuesday afternoon following an unexpected loss of power Sunday from its utility provider Entergy Corp. Operators had begun restarting units at the refinery after power was restored shortly after the interruption occurred Sunday morning. ”

    April 14: “Entergy Corp. reported an apparent short circuit at the Kolbs substation in Port Arthur, Texas around 9:30 a.m. local time Sunday morning cut power to 17,900 of its customers in the area, including local refineries operated by Valero Energy Corp., Motiva Enterprises, and Total Petrochemicals USA Inc.

    Motiva’s Port Arthur refinery reported the incident caused a plant-wide power failure and resulted in numerous operational upsets and emissions from an alkylation unit, catalytic reforming units 4 and 5, and delayed coking units 1 and 2.

    Total reported multiple units at its Port Arthur refinery experienced operational upsets, causing excess emissions from sulfur recovery units No. 1 and 3, a tail gas thermal oxidizer, and Unit 833, among other flares, and forcing operators to institute emergency shutdown procedures.”

    April 9: “Imperial Oil emergency response crews quickly extinguished a fire at the Sarnia refinery thought to have been caused by lightning strike Tuesday night, plant officials said.”

    April 8: “PBF Energy reported flaring and sulfur dioxide emissions at its Delaware City refinery late Monday were due to a power failure, according to a filing with the Delaware Department of Natural Resources and Environmental Control.”

    April 5: “Valero Energy Corp. reported that a power interruption caused a sulfur recovery unit to shut down at its Meraux refinery on Friday, without affecting other units, according to a spokesman.”

    April 4: “United Refining Co. reported flaring at its Warren refinery Thursday after a power outage caused damage to a compressor, according to a filing with the U.S. National Response Center.”

    April 2: “Phillips 66 said Thursday that it had completed restarting all units at its Ponca City, Oklahoma refinery. Several units were shut down over the weekend because of severe weather. Phillips 66 restarted some units earlier this week.”

    And that’s just from power problems and not other issues. Refineries are delicate flowers. Any back-up power system would serve to maintain operator control until the plant could be shut down or stabilized. The report on the Chevron San Francisco refinery fire that came out this week said that once the leak was detected, operators started the shutdown process that would take four days!

  13. Chris says:

    Another interesting spike. Several Muncie, Indiana stations that shot up to $3.75, have already dialed it back to the $3.49 range.

  14. Turbo46032 says:

    Tuebor, with all due respect, most of the outages you listed are in the South, yet as the price chart clearly shows, gasoline prices in the Houston area are as stable as they can be, regardless of natural calamities, refinery power outages, squirrels chewing thru electrical cables, and weather.

    http://www.IndyGasPrices.com/retail_price_chart.aspx?city1=Indy&city2=Houston&city3=&crude=y&tme=1&units=us

    Meanwhile, our 5-state area remains hostage to Speedway, and power outages, calamities, and squirrels that appear to have no impact whatsoever on Houston gas prices cause gas prices in the Midwest to go up by a stunning amount.

    If the oil industry wants to be taken seriously by consumers, I suggest a healthy dose of truth to begin with.

  15. Tuebor says:

    I realize that. I posted that in response to Alfred. Also, there’s no comparing supply disruptions in the Gulf Coast market with the western Great Lakes market.

  16. Turbo46032 says:

    “there’s no comparing supply disruptions in the Gulf Coast market with the western Great Lakes market.”

    Could you please elaborate? I lived for years in Lafayette, LA, and we did get hit with a couple named storms, and multiple inches of rain a day were nothing new, and surprise of surprises, gasoline prices did not go thru the roof. Also, prices for gasoline never spiked in the Midwest back in the pre-Speedway gouge days. I believe the Speedway games started with ‘Dime Thursdays’ in the mid-late 1990′s and became better organized after 2000.

    In fact, it was probably Katrina that opened our eyes (and wallets) to the possibility of ‘disruptions’ in the supply supply chain, and it was not until AFTER $147 crude that refineries realized they could be a part of the action.

    Again, if the oil industry wants to be taken seriously by consumers, I suggest a healthy dose of truth to begin with.

  17. Tuebor says:

    Turbo, I would say it’s not a good comparison because the Gulf Coast has a large number of refineries, terminals, and a thick network of pipelines. It has always produced far more product than it consumes. A disruption at one or two refineries will have a tiny effect on supply in the area. This region is served by a handful of refineries and limited pipeline capacity, some of which is being lost to crude service. We have a few areas which required RFG or have different RVP summer standards. A disruption here has a greater effect than it would in Houston.

    That’s a separate issue than the Speedway effect, which I suspect is really a Marathon effect. Four of the refineries in this region are owned by Marathon and I would assume Speedway purchases its products from them (although not necessarily).

  18. TimmP says:

    What it all boils down to is this……There must be a payback or refiners, gasoline transport companies (pipe and truck), and especially Speedway, would not do business the way that they do. I don’t know exactly what the payback must be, besides to say it is $$, but you can bet your paycheck there is a payback, or they, none of them, none at all, would do it this way for us in the Ohio, Michigan, Indiana region. I hate to admit it, but Dr Phil is right when he says “There must be a payback, or you wouldn’t be doing it.”

  19. Sam says:

    Jumping to $3.89 in Grand Rapids as we speak.

  20. Mike - Kalamazoo says:

    Yep, same in Kalamazoo and our elected officials sit there with their heads up their asses and their hands out taking greedways money to look the other way.

  21. Tuebor says:

    There’s no way law makers are going to do anything. Despite the party holding the Oval Office, we are still in a very anti-regulatory political mood in this country. The majority of this country wants less regulation and less government interference in the affairs of business. Politicians have learned from previous investigations that there is no provable price fixing or manipulation among gasoline retailers. Your best bet is just to self-boycott Speedway if you really think they are controlling the market.

  22. Mike - Kalamazoo says:

    Already doing the self-boycott of Greedway and also working on everyone I know to do the same. Don’t think I have bought gas from them since I found this web site some years ago, although it really doesn’t do any good since all the other stations go up with a couple of hours of Greedway.

  23. Mike - Kalamazoo says:

    sorry – some months ago

  24. Turbo46032 says:

    As I said, it’s a matter of credibility. If any industry other than Big Oil had such issues, I would believe them and pay up without grumbling. However, I do not see natural gas or electricity going up and down like a yo-yo…

    What I’m seeing here is that we are simply being set up (conditioned) to expect that every time we get an inch of rain the price of gas goes up.

    Perhaps Big Oil would care to explain to us why all of a sudden storms seem to be ‘impacting’ our prices, yet they never did in the past – and also why storms never impact gas prices in the east. Heck, when Sandy hit last year prices actually went DOWN…

    Another few thoughts that raise eyebrows in Tuebor’s response…

    - There may be some ‘excess capacity’ in the South but ultimately the gas is produced for a specific customer who is expecting to take delivery, like anyone else. It’s not like Texas refineries go OMG, let’s delay delivery to customer X so we can cover for refinery Y that is out…

    - We (my company) have facilities that were hit by floods and the such, did we raise prices afterwards? of course not.

    - Semiconductor component prices climbed up to 20% when a size 9 quake and nuke plant hit Japan and disrupted production for months, here we have a few inches of rain hiking prices by 10%? are we serious?

    - in the same pattern, the drought of 2012 took out a sizable amount of corn and wheat production in the US. The impact was well under 10% for most crops price wise. Are we comparing the impact of a few inches of rain with that of the worst drought in 50 years?

    - Texas has more refineries, granted, so more opportunities for weather impact. From the two sets of disruptions provided it seemed to me the Midwest supply issues were relatively minor…

    - For some strange reason diesel seems unaffected…

    For the third (and final) time, if the oil industry wants to be taken seriously by consumers, I suggest a healthy dose of truth to begin with. To understand what ‘laughable’ means, read Yahoo! Finance oil related articles put out by stooges of Big Oil…

  25. skyler says:

    issues are are real and they are impacting the lives of an average american at every moment however, debating them over here is going to do very little than to bring to the notice of our lawmakers. demanding at the right place, with correct authority and logic will make it in favor of people else, the big oil and like always have more means and money to surround the lawmakers ‘we the people’ voted to their respective offices and lure them to campaign funding to continue in their offices for ignoring our pains and make policies in their favor. another important point is that of the common sense: if civilian residents buy the flood insurance and insurance for every possible thing to cover them do you think that big/small/mini oil will not have that? why increase the oil price due to an excuse for which they are covered by the insurance. isn’t it double edged cheating?

  26. Tuebor says:

    A few thoughts in response to Turbo46032:

    Electricity and natural gas retail prices are mostly regulated by state utility commissions so customers would not experience daily variations in their price. On the other hand, when California deregulated their market, wild swings and large increases in wholesale prices helped trigger rolling blackouts throughout the state. Meanwhile, wholesale electricity prices do experience large fluctuations as any look at the wholesale market would show. Last summer Midwest electricity prices varied from $20 to $120/MWh over a period of days.

    I don’t think “Big Oil” (who ever that is) needs to explain why storms and supply problems are affecting prices, but maybe traders should instead. They are the ones reacting to information about supply constraints and bidding up the price.

    Sandy occurred during a period of rapid autumn price declines. The storm initially had a greater affect on demand than supply as businesses shut down and drivers stayed home, which is why prices didn’t rise initially. Once the storm passed and demand returned to normal, local supply problems caused gasoline prices to rise and remain high over the following month. The Sandy bump can clearly be seen in this chart:

    http://www.DetroitGasPrices.com/retail_price_chart.aspx?city1=LongIsland&city2=NewJersey&city3=NewYork&crude=n&tme=9&units=us

    My point about the Gulf region is that there is an abundant or excess supply nearby and a dense delivery network so that any disruption at a plant or two can easily be mitigated by an alternate supply source. This region doesn’t have as much flexibility.

    The 2012 drought caused midwest corn prices to shoot up over 60% and export corn prices over 100%. High corn prices caused many ethanol plants to shut down for several months.

    I assume diesel doesn’t experience the same fluctuations since its demand is much lower than gasoline. The price doesn’t vary much over a period of months while gasoline does, so why would it spike when gasoline spikes?

    I think that retail gasoline is a competitive, low margin business based on selling a commodity that is derived from another commodity. This causes daily price variations which probably benefit the consumer in the long run. The alternative to having price vary from $3.29 to $3.89 over the month would be a steady price of maybe $3.69 throughout the month. The fact that retail stations derive more income from sales inside the store than gasoline reinforces this.

    You implied that you worked in the business. I don’t know which facet, but if you were in the purchasing, supply, sales, trading, or marketing business of a refiner, wholesaler or trader, could you walk us through a typical supply transaction? How did you attract customers or how did you choose a supplier, what kind of contracts did you offer, what were the terms, how were prices negotiated, what data did you use to arrive at those deals, etc. That would be interesting to have a peek inside the actual price setting process and could help explain the variability that we see.

  27. Derek says:

    Just some not fun facts courtesy of gasbuddy.com (grandrapidsgasprices.com):
    Grand Rapids USA Difference
    Today 3.880 3.503 .38
    Yesterday 3.833 3.504 .33
    One Week Ago 3.628 3.510 .12
    One Month Ago 3.819 3.642 .18
    One Year Ago 3.794 3.839 -.04

    So one year ago the local average was 4 cents under the national average. Today, however, is 38 cents above the national average…interesting.

  28. Ocho says:

    Getting hosed here in Flint again too. heading for a 3.87 average, until the gentle, feathery float begins Thursday, to ease us to a high 3.50s on Sunday Just wondering…. if they just kept it at 3.50 year round, wouldn’t they make basically the same amount of money?

  29. TimmP says:

    I have heard it all before. Every time, and I do mean every time, since the oil embargos of 1973, When pundits predict easing of prices, it’s just like the industry strives to prove the pundits wrong.

  30. ChrisDG74 says:

    It’s fill-up Friday. Spot up almost 7 cents yesterday..
    Ohio and Kentucky may see $3.799(I’m banking on $3.859). The rest of the state could see $3.959.

  31. TimmP says:

    OK, when the economy looks better, then oil goes up.
    So what then is the theory for today? Economy is poor… http://www.cnbc.com/id/100678290
    and the debt is 105% of GDP. So oil goes up?
    Wow. It always goes up, then.

  32. ChrisDG74 says:

    As long as Helicopter Ben Bernanke keeps printing $85 billion each and every month, oil will continue to go up. It’s not that oil is getting more expensive: It’s the the dollar is worth less.

  33. Tuebor says:

    I thought oil went down today.

  34. Turbo46032 says:

    The whole ‘flood causes price of gasoline to rise XXX cents’ brouhaha was simply a stall tactic to give crude time to ‘recover’. This has happened several times in past years. Once the price of crude falls to ‘undesirable amounts’ we get to reap the ‘benefits’ of $3.20-3.30 gasoline and then all kinds of maladies happen, from rain to squirrels to angry Nigerians, and all of a sudden the price of gasoline spikes for a few weeks. Meanwhile oil climbs for no apparent reason (read Yahoo! finance for details) and we’re back to square 1.

    Nice gig if you can get it.

  35. Turbo46032 says:

    Check out some awesome spike timings in the chart below:

    http://www.IndyGasPrices.com/retail_price_chart.aspx?city1=Indy&city2=&city3=&crude=y&tme=12&units=us

    5/30/2012

    7/29/2012

    8/20/2012

    9/24/2012

    11/02/2012

    11/20/2012

    Interesting period between 12/28 and 1/20/13 where crude was climbing and we were not

    2/15/2013

    2/23/2013

    3/7/2013

    4/15/2013

    so, in the last 12 months we’ve seen 10 instances where crude drops considerably, and virtually on the day of the crude’s decline (which lasts a few days or weeks) gasoline price spikes, and instead of enjoying the lower prices, we’re stuck with the high prices – until crude recovers -

    I’m sure the paid oil industry apologist will have detailed explanations for all of the above, including the fur coat color of the squirrels responsible for each of the ‘upsets’.

    I apologize in advance for being skeptical

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