Tag: demand

A Rant About Shortages and Speculators

Comment on my May 27 posting:  On Thursday, May 28, prices started to rise at the end of the day to $2.75.  Since then, there have been hikes to $2.85 on Tuesday and $2.95 today.

Thursday, June 4, 2009, 6:35PM:  I haven’t been very helpful with the price hikes this week, but Bill has!  Let’s reflect a bit on the past five weeks.  We have gone from $1.99 a gallon in Standale on April 27 to $2.95 a gallon today.  Why?  First we have numerous reports of mild gasoline shortages in the Midwest.  Good job, gasoline industry, in managing this vital part of our economy!  Second, the rise in gasoline prices has mirrored rises in the price of a barrel of oil (almost $20 a barrel) and in the Dow (almost 700 points) since April 27.  Yes, as I’ve written before, we are dealing with speculators again.  The price is being influenced by people who are demanding oil and gas as investments, rather than as fuel.  While in the long run, higher prices will inspire new and cleaner fuels, which I support, in the short run, just as we are digging ourselves out of recession caused in part by financial geniuses who bought and sold “default swaps” and other products they couldn’t afford to support, prices spiking to $3 could cause it all to grind to halt again, like it did last summer.  Great.  Hopefully these artificially high prices in Chicagoland will soon attract cheaper gasoline from other parts of the country.

Consumers get a spanking as prices rise to $2.69

Tuesday, May 26, 2009, 1:55 PM:  Woe to us.  Prices rose at random places on SATURDAY to $2.59, and today Speedway is making sure we understand with a system-wide re-set.  The new price in Michigan is $2.69 a gallon.  There are two separate issues here:  one is the relentless climb since April 27 (when gas was $1.99 a gallon).  The other is what happened this weekend.

The relentless climb could be just a delayed seasonal effect, as we get these moves every year in March and April, often related to the switch to summer blend gasoline.  I think, though, that after the stock market recovered from that scary low in early March, the speculators are looking to make money again and driving up wholesale energy prices is a way to do it.  I have some confidence in this observation because it isn’t that retail demand for gasoline is on the rise, and gold prices have been climbing lately, too.

As for this weekend, there are some goofy things going on in Chicago.  I learned this morning that wholesale prices went up a lot on Friday in Chicago and that’s what caused the hike to $2.69.  Now, this morning, they’ve dropped almost a dime a gallon, and maybe, just maybe, we’ll see that in our retail prices by Wednesday.  That’s a wish, not a prediction.

Price jump soon (today?) to $2.19?

Looking at morning numbers briefly this morning before an interview on WOOD AM1300, I think I might have to announce that I’m expecting a price hike soon to $2.19! A quick look at closing prices on the market from late last week and yesterday:
Thursday close $1.42
Friday close $1.47
Monday close $1.54

As you can see, wholesale prices are up a whopping 12-cents since just Thursday! While I believe Speedway’s price hike Friday to $2.15 was over done to provide more profit for their Saturday/Sunday Speedy Rewards discount, I now believe that they will raise prices again to keep up with wholesale cost.

Another contributing factor is the switchover to Summer blended gasoline which costs more to make. Refiners were required starting Friday (May 1) to only sell Summer blended fuel after that time. Retailers have until June 1 to make sure they have it in their tanks.

At last check, the Chicago market is suffering a huge Chicago Premium for RBOB gasoline (ethanol blended gasoline, which nearly all retailers sell). The Chicago region was paying nearly 18-cents more per gallon than any other region. Chicago is currently trading RBOB Unleaded at a 21-cent PER GALLON premium to NYMEX pricing.

I’m led to believe we’ll see a jump to between $2.15-$2.25. I’ll pick $2.19.

Gasoline demand is starting to rise so don’t think this is a shock to see higher gas prices. At least we’re not paying $3 or $4/gallon!

Patrick

Speedway States prepare for more price hikes!

That’s right, I expect another good jump in gas prices, as soon as tomorrow (Friday) in many Speedway States. Speedway did not raise as high as anticipated resulting in a higher risk of a price hike sooner, and the wholesale market was up a large amount today.

Wholesale spot prices from Chicago rose 13-cents today and close at $1.35/gallon, nearly a 40-cent rise since Monday! Prices have risen about 15-cents today, but stations are going to be very eager NOT to lose money and will likely be forced to make a larger second hike. In my opinion, Speedway is probably upset that they only raised prices to $1.85 when they really could have gone higher. Now they might be forced to deal with negative PR with two price hikes. Will they hold out to Monday to avoid some negativity? Its happened before, but as you can see, they’re still losing a LOT of money per gallon with their small 15-cent hike. Prices at Speedway would need to jump to $2.05 to equal the same price on the wholesale market tonight.

We may see Speedway attempt to raise to $2.05 in a very odd fashion, or you may see small stations attempt to rise first with a very disorganized Speedway hike- I’m not sure how it will happen, but I am led to believe it WILL happen and SOON!

Diesel prices around the Midwest should be dropping below gasoline prices in many areas as well. Refiners have already begun to boost gasoline production but it looks like with stronger than average demand, prices will continue to advance higher.

There also continues to be small refinery disruptions nationwide tonight with multiple refineries in Louisiana having issues.

There is also belief that since Oil has broken the 50-day moving average, we are in the beginning stages of a rally in oil prices, which would mean my opinion that we have “rounded the corner” (Spring run up in prices) was correct, but we’ll need to wait and see.

One thing is for sure, if you delayed or forgot to fill up, it is still better to fill up at $1.85 than $2+.

Speedway States prepare for higher prices!

Nationwide gasoline prices to continue to rise

With the threat of a large strike being carried out by the United Steel Workers union and a large stimulus bill making its way through Congress, gas prices are going nowhere but up from the current national average of $1.85 per gallon.

Prices have advanced lately because of a growing number of traders who see the new stimulus as a boon for Americans to begin spending, and thus increasing demand for their fuel thirsty vehicles. Traders seem to believe that the stimulus would create demand overnight and somehow dry up the millions of barrels of surplus crude we currently have.

We also have negotiations between the USW and major oil players continuing at this hour, but it seems that talks are far from stopping a strike at 12:01am Sunday morning, and unfortunately, any walkout or lockout will almost guarantee higher gas prices across the country.

Since my last update it has been revealed that even the newest member to the refining industry, Valero, has pledged to idle refineries in the case of a strike. This comes at a huge blow to U.S. consumers who are fed up with prices hikes that have started again to accelerate since gasoline prices hit a low of $1.62 per gallon last month.

Valero joins another large refiner, BP Plc, in annoucing support for the United Steel Workers union, who represents nearly 30,000 workers at roughly half of U.S. refineries. The U.S. would be joining the United Kingdom, who also is dealing with a strike at oil facilities. However, the U.K. seems to have partially dodged a bullet in their worker strike, with enough replacement workers brought in to keep facilities pumping out gasoline for consumers eager for relatively affordable gasoline.

The U.S., on the other hand, does not seem as fortunate if a strike were to be announced here. ExxonMobil seems to be one of the only oil companies with plans to bring in enough temporary workers to keep output on their massive refineries going through the weekend.

The news comes at a terrible time for a U.S. economy crippled by a recession and record unemployment, which may now have to deal with a spike in gasoline prices come Monday if a strike is not averted.

I would recommend that gasoline consumers keep an eye on developments Sunday morning and fill up if necessary before Monday morning, when prices could spike 20-50 cents per gallon nationwide as a result of union workers going on strike and forcing refineries to either find temporary workers, or to shut down their plants, halting all gasoline production.

This strike could also signal the beginning in price hikes expected to last through early Summer as refiners switch to Summer Blend gasoline, a fuel designed to alleviate pollution but costs more to produce.

Fill up and stay tuned!

Patrick

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