Tag: capacity

HOLY SMOKES! Retail gas prices to reach $5 in the South before Ike hits, over $4 here!

UP-TO-DATE HURRICANE IKE INFO OR CLICK “HURRICANE CENTRAL” NEXT TO THE BLINKING Q&A LINK

If you have any interests in the South (Texas, Lousiana) area, you might want to inform them to stockpile gas at ANY PRICE under $4. Grand Rapids will likely also see a price hike to over $4, with more hikes coming.

Currently, gasoline for delivery in the South/Gulf area is trading $1.40 higher PER GALLON to $4.56 a GALLON. That is the wholesale price, so retail prices there will likely hurdle over $5/gallon.

ExxonMobil today is beginning to shut the largest refinery in the United States (590,000bpd capacity) as Ike nears and parts of Texas come under a mandatory evacuation.

Texas has a large number of refineries that are at high risk with this storm. These refineries lack the upgrades that some refineries got after Hurricane Katrina in 2005. The refineries at risk and their production (according to Wikipedia):

We are likely to see prices rise well over $4 here in Grand Rapids soon as a result of Ike. Nationwide prices will likely climb at least 10-20cents per gallon. With Ike hitting and the remnants of Gustav, we’re likely going to feel a hard pinch at the pump soon. We could even set new record highs.

Also getting updates this noon that the U.S. Coast Guard has closed the nation’s LARGEST petroleum port to any new vessel traffic due to Ike.

Continuing bad news from the Louisiana Offshore Oil Port (LOOP): The Louisiana Offshore Oil Port, which is the biggest U.S. oil-import terminal and handles 13 percent of imports, shut marine operations yesterday because of Ike.

This is going to get ugly. Stay on F and plan to cut usage where possible.

Worse case scenario is that we run low on crude oil in the Midwest, as the Gulf area provides much of our oil. At least the oil imports from Canada will continue to flow!

West Michigan’s higher prices justified, the pain will continue…

First off: Read this post thoroughly if you want to find out WHY prices are justified.

A brief thank you to Tom Kloza for taking the time out of his day (Publisher @ OPIS) to respond to a few questions I had.

I now understand and can say that I know why Grand Rapids (and all of Michigan) are suffering from higher gas prices than the national average (currently at $3.66/gal)

It all started back around August 11. Grand Rapids prices had been closer to the national average, and then suddenly on the 11th, the difference between NYMEX gasoline and our local rack prices started their disconnect.

Here’s an image (graph provided by GasBuddy, edited by me) to show you exactly what’s been going on:

If you notice, the disconnect is getting worse over time. On August 11, Grand Rapids was quite close to the national average. Around Aug. 15, we had a difference of about 15-cents. On Aug. 23, that shot to 19-cents. Then yesterday it jumped to 25-cents (more like 30-cents since all the stations reset at once here)

On the subject of this matter, people have been convinced we’re being gouged. At first it would appear so, and I was ready to believe it. In haste perhaps, some were even trying to tie the price of oil (same price months ago when gas was 60+ cents cheaper) to the price of gasoline. In my years of doing this, experience has taught me that oil and gasoline prices can never be tied together.

After receiving a response from Mr. Kloza telling me briefly about struggles with getting gasoline here, I went digging. The content below is what I found:

NEW YORK, Aug 11 Reuters – Gasoline differentials in the the Midwest and U.S. Gulf Coast were expected to continue climbing this week as refinery outages, tight inventories and low imports underpin values, dealers said. The latest in a slew of unplanned refinery upsets is a reduction of rates at Marathon’s 222,000 barrel per day Catlettsburg, Kentucky refinery after a crude oil pipeline rupture on Sunday, August 10.

Reduced rates at the refinery are expected to further boost already strong differentials for gasoline in the Midwest, adding to a decrease in gasoline supply in the region after last week’s an outage at Citgo Lemont’s FCC.

“The Magellan system inventories of gasoline have dropped 600,000 barrels since August 1st as new barrels were diverted the St. Louis and Chicago,” one Midwest broker said.

“At 18 days of supply coverage the system is not yet critically short gasoline… (Group Three) must compete for barrels against Chicago for these barrels, so more strength is likely.”

Gulf Coast gasoline differentials were also expected to be supported by a number of refinery upsets from last week.

Lyondell’s gasoline-making fluid catalytic cracking unit at it’s Houston, Texas refinery had an upset last week, and a company spokesman said the unit was still running, but did not specify if it is currently at full rates.

The restart of Citgo’s Corpus Christi, Texas refinery after a power outage last week is expected to last through Wednesday of this week, according to a filing with state regulators.

Gulf Coast gasoline differentials are expected to be further supported by sinking inventories of the motor fuel due to lower imports.

In the New York Harbor, values for conventional gasoline are generally seen tracking the Gulf. But the upside for reformulated gasoline may be capped due to higher inventories of the fuel due to weak blending economics.

After reading that, I found another news story dated more recently, September 5:

NEW YORK (Dow Jones)–U.S. refiners pushed gasoline output to record highs in the days before Hurricane Gustav shuttered operations along the key Gulf Coast.

Many plants are beginning to ramp up operations, but pre-storm oil
inventory data point to several areas of potential supply tightness far
from the Gulf region.

Late Friday, the federal Environmental Protection Agency issued waivers from clean fuel requirements for parts of Georgia, Alabama and North Carolina, and extended waivers in Louisiana until Sept. 15 to “allow for greater flexibility for the fuel distribution system to support an adequate supply of gasoline.” Lost refinery output last week alone could be on the order of 20 million barrels of gasoline and other products.

Power outages to plants and pipelines complicate the matter and spread the problem beyond the region. Midwest refiners – notwithstanding a surge to record-high gasoline output last week -face a supply shortfall as the Capline pipeline, the 1.2 million barrel-a-day main artery for crude supplies from the Gulf to the heartland, is only just resuming partial operations. The Colonial Pipeline from the Gulf to New Jersey, a crucial link for Northeast U.S. supplies, is running at reduced levels.

During September, shipments of gasoline on the vital carrier averaged 1.2 million barrels a day in the past five years, with distillate flows at around 625,000 barrels a day. At best,
refiners are likely to take at least a week to bring operations back, while offshore output will likely take twice as long to return to pre-storm levels, government officials estimate.

The big loss of refining capacity, relative to shut-in crude output, has helped sharp the steep falloff in prices begun when Hurricane Gustav was shown to be less destructive than Hurricane Katrina in August 2005.

Imports, especially of gasoline, are expected to flow heavily from Europe, where the fuel remains in surplus and the usual seasonal decline in demand may blunt the impact of supply losses. The end of August brings an end to the peak summer gasoline demand season, which was battered by high prices this year.

Michael McNamara, who compiles the SpendingPulse survey for MasterCard Advisors LLC, said U.S. gasoline sales between the end-May Memorial Day and Labor Day dropped 3.9% to around 9.4 million barrels a day, after a year-to-year rise in the peak period in
2007 of 2.4%.

Demand Down For 13th Month

EIA data for the four weeks to Aug. 29 show total U.S. oil demand down 733,000 barrels a day, or 3.5%, from a year ago, at 20.292 million barrels a day. That would be the lowest August demand since 2003 and mark the 13th straight year-to-year drop in monthly oil demand.

Preliminary data show January-August U.S. oil demand is down 847,000 barrels a day from a year ago, the biggest decline in the first eight months since 1981. At 19.9 million barrels a day, demand is the lowest in the period since 2001.

A pre-storm surge in gasoline output in the Midwest of 12.3% pushed regional output to a record 2.55 million barrels a day, and pushed nationwide output to a highest-ever weekly level of 9.422 million barrels a day. In an indicator that says more about sluggish demand than about refining capabilities, domestic output of gasoline
topped demand at the end of August for the first time on records dating back to 1991.

The last time domestic output topped demand in any week was in mid-January. Production exceeded demand by a slim 22,000 barrels a day in the latest week, while a year ago, demand outpaced production by 420,000 barrels a day in the last week in August.

Still, while margins favor a counter-season shift to gasoline output over distillate output, and refiners outside the Gulf Coast have some spare capacity, reliability of crude supplies from the region is vital.

Marathon wants to borrow crude oil from the Strategic Petroleum Reserve for running at two Midwest refineries, but the oil must be shipped through the still-limited Capline, which Shell said it hopes to have fully operational in the coming weekend. Valero said it cut runs at its Tennessee refinery.

Talks EIA warns that some local markets may face supply tightness and potential price jumps. But they won’t likely be enough to reverse the slide in prices in recent days, provided there isn’t any lasting damage to facilities.

Front-month crude has been the cheapest of all listed Nymex contracts in the past 10 days, a price curve that suggests weak near-term demand for crude and potential for a significant stock build, as refiners are rewarded for building inventories at relatively cheap prices now. But, at least in the U.S., Gustav is overriding, at least temporarily, those traditional moves.

So basically, on the 11th of August, a refinery went down due to a pipeline rupture. That pipeline may have well carried crude from the Gulf to the Midwest, so naturally when a pipeline goes out of service, oil delivery is effected. With less oil available to refine, supply takes over. Less supply means higher prices. Now we’re suffering from Gustav, which has also closed delivery of oil to some Midwest refiners. Can’t refine products means less supply, means higher prices. Since places outside the Midwest have alternative ways to get crude, their prices are lower because getting oil isn’t an issue like it is here.

A few words from Tom Kloza’s blog:

As I write this, the price of gasoline in the biggest global bulk market (the U.S. Gulf Coast) is trading for some 60cts gal or more above gasoline futures, or about $3.30 gal late Wednesday afternoon. It appears as though Ike has put some of the largest clusters of U.S. refining in jeopardy.

The last time we saw crude oil prices this cheap, the national average price for gasoline was about $3.25 gal. It’s about 40cts gal higher than that now, and I suspect we’ll see more increases in some markets by the weekend, even if Ike fizzles and cuts a path through rural less populated counties. Chicago is many states removed from Hurricane landfall, but even there, we’ve seen the impact of Gustav as well as the threat from Ike. Refiners have had less crude to run, and wholesale prices there have also moved into the $3.25 gal or higher neighborhood. This explains why some Midwestern towns saw some large retail increases even as network talking heads discussed plunging crude prices.

Most of the upwelling we’ve seen in fuel prices in September is related to Hurricane Gustav. It did not significantly damage refinery infrastructure but it did result in a drop in refinery output of nearly 2-million bbl per day last week (as measured by the Energy Information Administration or EIA today). Those kinks of lost daily output are now being felt in places like Kentucky, Tennessee, Illinois, and especially in states like Florida. Even California isn’t exempt — the state gets some of its very clean gasoline from refineries in the Canadian Maritimes and a key plant in the Virgin Islands. Fuel produced at those plants will probably be diverted to coastal states in the U.S. this month.

Even if Ike misses Texas refinery infrastructure, more kinks are coming, and Americans will inaccurately assume that they are being hosed. Capitalism is at work here – supply is threatened—and buyers outnumber sellers, for the moment.

Basically prices are higher because we’re battling other states to buy the same gasoline. The highest bidder wins because this is supply and demand!

Patrick

Math/Stats/Data

This page is filled with great information on the math behind gasoline prices, the stats of hikes, days they are most likely to occur, and the data behind why prices rise and fall. This information is about as raw as it gets, meaning it is hard to understand for some who haven’t looked at it before. We’re posting it to show what we do to try and win “The Gas Game”.

First of all, see how Ed calculates the expected price. It is a formula that takes in many numbers from different sources.

Secondly, see what day a gas price hike is most likely. Ed’s data reflects over six years experience of monitoring gas prices.

Third, try and read the Weekly Petroleum Status Report from the Department of Energy. This report can greatly effect local prices and market prices. It is released typically on Wednesday mornings at 10:35am Eastern Time.

If you aren’t bored yet, another good summary of a week’s petroleum usage is the data report “This Week In Petroleum” (Gasoline Section). It is raw numbers, graphs, and data from the nation’s oil companies and refiners. It contains some of the same information found in the WPS report.

Some other good information and data about gas prices can be found on gasoline retailer’s own websites. Some retailers even list their current fuel prices at some of their stations. Some that do this are Speedway, Pilot, and Flying J. Definitely monitor many stations across the country for a large snapshot!

All of these pages that are listed are a GREAT source of information for why gasoline prices go up and down. The government reports especially play in to prices. After the reports are released, traders read them and see if there are any surprises. Before the reports are released, traders are typically polled to check their expectations of the governments report. If the report is worse than expected, traders buy oil and gasoline contracts, and wholesale prices rise. If the report is better than expected, traders sell oil and gasoline contracts, and wholesale prices fall. This is part of the reason why most gas price hikes are Thursday: the report is released Wednesday, traders react, and pump prices either rise the following day or they remain the same or fall if the report is good.

Today’s Grand Rapids Gas Price Trend:

Some more good resources to check out:

Oil and Gasoline News from MarketWatch | Speaking of Oil with Tom Kloza | Energy Information Administration | AXXIS Petroleum- Price Services | List of U.S. Oil Refineries, Capacity and Location | U.S. Refinery Expansion Plans/Updates | Michigan Gasoline/Product Pipeline

Helpful Images:

Areas where RFG (Reformulated Gasoline) are required by the EPA

Areas where RFG (Reformulated Gasoline) are required by the EPA

More information and links to data may be posted here at any time, so stay tuned! In addition, if you have any good information/stats/data that you think should be added here, e-mail Patrick. The address is on the left side of the main index page.

Gustav, Hannah, and Tropical formations, oh my!

Note: I decided I had better take a quick break from vacation. I was away hiking in Yellowstone, please forgive me for not posting.

When my phone got service yesterday, I had received numerous voice-mails informing me that a Hurricane “Gustav” had formed and could be effecting gas prices. Unfortunately I’ve been out of the loop- until now.

Gustav looks like it will be a dangerous category three or four when it hits Louisiana later this week. What’s this going to do to gas prices? Well, for the time being, the market is calm. One must realize that after Katrina, refineries and rigs have been much improved when it comes to large hurricanes. Also, refiners haven’t been producing as much gasoline as before Katrina.

With refinery utilization continuing to be much below 90%, any negative impact on Gulf refiners could be offset by all other refiners raising their utilization to 95%+. When Katrina hit in 2005, refinery utilization had been at 97.1%. With utilization THAT high and Katrina flooding refiners, there was no way that other refiners could up their production much. Last week, utilization was a measly 87.3%. Any capacity that goes offline could be offset by other refiners raising production runs.

Also, those refiners in the Gulf area have poured money into making their rigs and refineries better prepared for massive hurricanes. They didn’t just repair their facilities… they made them better.

The market may jump to its senses, but if we don’t see more than a 10-cent gain, you’ll see traders viewing that as a weakness in the market. We’re also helped by a continued gain in the U.S. dollar against the Euro.

It’ll be interesting to see what oil and gas does when trading opens Sunday.

I would definitely stay tuned here… I’ll be home early this week with more information as I receive it. We could see prices rise, but things are calm… for now! I see prices in GR falling to $3.70. Prices may continue their fall until Gustav gets closer to making landfall.

Patrick

Is the “June Slowdown” starting on gasoline markets?

It’s been a while since I wrote here folks, but it seems prices have been “somewhat” steady around our region, and quite steady (what a surprise!!) in Grand Rapids.

If you read my previous post about the Summer Forecast, you’ll have a better idea where this post fits in the big picture.

Of course my writing was prompted by the Weekly DOE Report released today at 10:30am EDT.

Let me highlight some of the good news from that report for you that will help push prices (gasoline) lower:

  • Refineries operated at 89.7% of capacity last week. This number is higher than previous weeks and is necessary to produce enough product for the Summer Driving Season
  • Gasoline production and Distillate (Diesel) production rose compared to the last week, averaging 9.1 million barrels and 4.5 million barrels per day, respectively.
  • Gasoline inventories rose by 2.9 million barrels last week, much higher than expected
  • Distillate (Diesel) inventories rose by 2.3 million barrels last week, higher than expected
  • Propane inventories increased by 2.3 million barrels last week, wow!
  • Total inventories rose just 200,000 barrels last week, but most of that was due to a large drop (4.8mb) in oil inventories
  • Total demand of petroleum products has averaged 20.4 million barrels per day, down 1.1% compared to last year.
  • Gasoline demand as averaged 9.3 million barrels per day, down 1.4% compared to last year.

The only real downfall to this otherwise good report was the large draw-down in oil inventories (4.8 million barrels), but that’ll happen in Summer when refineries are trying hard.

Crude oil inventories are now over 40 million barrels below what they were a year ago (347.7mb compared to today’s 306.8mb) which definitely could use some improvement from OPEC.

The Midwest PADD’s storage rose last week from 48.6 million barrels to 49.3, which is good news, but could have been better. Perhaps our prices will fall a bit more than the rest of the nation.

Overall, a good report. Wholesale gasoline and diesel prices are really taking a beating in early morning trading after this great report came out. Gasoline at last check was down nearly 10-cents a gallon while Diesel was down nearly 8-cents per gallon. Crude was roughly $2 lower to $122.50.

We should see Grand Rapids prices slowly come down if the market holds negative. We could see as low as $3.85 in the next week, so don’t be too quick to fill up… PRICES WILL BE COMING DOWN (ugh, although we’re still talking just 15 cents south of $4… sad!) pending today’s closing numbers.

Patrick

Another good DOE report!

Its very good news this time of year when the DOE releases a “favorable” report like they did moments ago at the normal 10:30am time.

Highlights:

Cons:

  • Refineries operated at a low (albeit slightly higher than last week) 84.7% of capacity last week

Pros:

  • Crude oil inventories rose by 3.2 million barrels last week. At 308.5 million barrels, we are now into the MIDDLE of the average range for this time of year… we’ve had consecutive oil inventory gains the last couple months. NOTE: we are 11 million barrels below our last year level. We need to fill this gap ASAP.
  • Gasoline inventories rose by 2.3 million barrels last week and are above the upper limit of the average range
  • Gasoline demand remains flat compared to last year, averaging about 9 million barrels per day
  • Distillate demand fell about 3.5% last week compared to last year
  • Overall demand of petroleum products fell 2.4% last week, averaging about 20.6 million barrels per day
  • Midwest (PADD2) storage is nearing 57.5 million barrels or storage. Anything over 57.5 million barrels would be the highest level since March of 1999!

This is good news, I’m mixed on a hike- but due to the ever increasing Midwest storage, don’t believe a hike to happen. If it does, it would only be to 3.25 or so.

Patrick

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