Tag: diesel

Diesel under $2?! Quite possible in just days…

That’s right- you folks with the diesel trucks may FINALLY get to see diesel under $2 again, something maybe you thought (and I) that you wouldn’t see again in your lifetime!

The Pilot station in Burns Harbor, Indiana (about a 1.5-2 hour drive from Grand Rapids) is currently selling diesel at $2.01. Now, you definitely would not drive down there just to get fuel, but if you’re taking a trip to Chicago, fill up there.

I wonder when and if UPS will EVER give up their fuel surcharges now that diesel prices have come down. I highly doubt it, I’m sure they love the extra income it brings!

I don’t see Midwest prices going up anytime soon, in fact- I see a Chicago Discount building in. Midwest PADD storage was at 52.5 million barrels yesterday in the DOE’s weekly report- a GREAT number to be sitting at. Refiners will start having to sell that winter blend fuel at discounted prices once Summer comes closer…

Midwest prices should fall into the $1.70’s. I’ll be watching the market closely, a price hike may happen sooner rather than later.

I’ll be taking vacation to sunny Florida next week, so posting may be lacking.

Patrick

80 million barrels of oil floating in the ocean, owners betting and hoping for higher prices

Just to warn you, this post will be a bit lengthy, but may be incredibly insightful for some. First off, it looks like Ed has predicted a hike to $1.99. We’ll see if he’s right on… if you can get gas for around $1.80, fill up like I did tonight just in case. I’m not completely sold on a price hike, but we will see what happens.

Now to explain my post title. Was there a ship leak or some accident? No. There ARE 80 million barrels of oil floating on the sea protected by a thin layer of steel, sitting in huge supertankers. According to Bloomberg, Frontline Ltd., the world’s biggest owner of said tankers has made this claim. It would be the most oil stored at sea in 20 years, as traders seek to cash in on higher prices later in the year.

This is an idea that carries a good amount of risk if you ask me… but you don’t make money without risk. Oil prices haven’t really started a good climb yet this year, and prices have largely given up most of their gains they made the last two weeks. These supertankers are huge ships that cost large amounts of money to lease but some can hold well over a million barrels of oil. If prices jump $10/bbl, there’s a large amount to be gained. However, with oil supplies in Cushing, Oklahoma nearly at capacity (the delivery point for contracts traded on the NYMEX), what’s going to happen? We’re already awash in oil, sitting nearly 40 million barrels above where we were JUST LAST YEAR! Crude oil in storage this week, as reported by the DOE, was 326.6 million barrels. Like I said, storage in Cushing, OK, was at 33 million barrels, with capacity of 34 million barrels. This represents a 20% GAIN in oil inventories there in just 4 WEEKS! How are these traders betting on higher prices in a few months when we’re lush with oil in a recession?

Figuring those 80 million barrels could go anywhere in the world, let’s figure half goes to the U.S., the world’s leading consumer of oil. If that 40 million barrels (which is doing nothing) would eventually end up at U.S. ports in a few weeks, we could have the most oil in storage since September 21, 1990!
Even WITHOUT the 40 million barrels, we’re already at our highest level of storage for a January since 1999, when demand was strong and the economy was surging ahead… remember the .com era? So many startup companies… and to see us at the same level of oil now with a much different outlook?

Let’s throw a name out here… a banking company that used to actively trade oil contracts (and bet on higher prices). Remember Goldman Sachs? The company whose analysts predicted $150 oil? What ever happened to them? They seem to have gotten out of the oil trading business. Goldman is now forecasting oil prices in the $30’s for quite some time. Do they have any obvious interests in oil now? Not that I can see- and crazy enough they’re actually making some sense with their seemingly non-biased oil price forecasts!

What’s this all got to do with gas prices?

Lets think it over. I’ll even format it so it’s easy to read:

  • U.S. January oil inventories highest since 1999 and economic outlook is much worse than that of 1999
  • 80 million barrels of crude oil haven’t even hit the market, owners betting on higher prices
  • Gasoline inventories healthy
  • Excluding 2006 and two weeks in 2007, oil inventories (including SPR) are at their highest levels EVER
  • Gasoline demand down 3-4%
  • Diesel demand down 4-5%
  • Jet fuel demand down 12-15%
  • OPEC countries need to pump more to generate revenues
  • Refinery utilization at just 85% and we’re still putting plenty of gasoline into storage

Point is-with such great news on the shape of oil inventories, how can oil and/or gasoline make a spring run-up in prices? Ed’s bet that we’d see $2 gas before we saw $1 gas is nearly the OFFICIAL winner, but I still think prices have more room to fall.

My short-term bet on oil (the next two months) is that prices fluctuate between $30-$45, but we may briefly break the $30 barrier. A gasoline prediction? I’ve already had that bet with Ed. Once he wins, MAYBE I’ll make another prediction.

Patrick

Diesel pricing and the gas price ETF

Thursday, December 11, 2008, 9:25 AM:  For future analyses, I have started to keep track of diesel prices on Lake Michigan Drive and the daily close of the US Gasoline Fund ETF (ticker:  UGA).  For the former, I have been asked questions several times over the past year about diesel prices, and my responses have usually been "I don’t have a clue".  I am starting to work on getting a clue, and what I have seen so far after two weeks of observation is that diesel prices don’t change from day to day like gas prices do.

About the ETF, from Yahoo:  "The investment seeks to track, net of expenses, the changes in percentage terms of the [wholesale] price of gasoline."  In two weeks, wholesale prices have gone from $1.13 to $1.00, and the ETF has gone from $22 to $19.  So, if I think we are going to see $2 retail, I could buy UGA or UGA calls to put my money where my mouth is.  If $1 retail is in the cards, then sell short UGA or buy UGA puts.  Disclaimer:  option and stock trading carries risks, you can lose all your investment, etc…

 

Michigan exporing options to raise gasoline tax!

That’s right- the State is thinking of raising gasoline taxes now that the price of gasoline has come down. With gasoline under $2, the State is exploring options to raise gas taxes. And to think- "In five years… you’ll be blown away"… with what, new taxes? Thanks Jennifer!

<– GIVE US YOUR OPINION IN OUR POLL!

From the Associated Press: (News Story HERE)

LANSING — Gov. Jennifer Granholm and lawmakers should consider eliminating Michigan’s 19-cents-a-gallon gasoline tax and replacing it with a tax on the wholesale price of gas, according to a report being released Monday.

Swapping the taxes would let revenues rise or fall with changing fuel prices rather than tying gas revenues to consumption, which is falling as motorists drive more fuel-efficient cars or cut back on buying gas to cope with prices that at one point topped $4 per gallon.

The change could boost transportation funding in the long run and might ensure that a bigger share of taxes paid at the pump actually go toward Michigan’s deteriorating roads, advocates say.

The recommendation is one of many listed in a Transportation Funding Task Force report set for release Monday. The Associated Press got an advance copy of the 85-page report.

"We may need to shift away from a 19th- or 20th-century tax on motor fuels," said Rich Studley, task force co-chairman and head of the Michigan Chamber of Commerce. He warned that the current system is becoming "obsolete."

The 13-member task force was created by a state law asking for recommendations to improve roads, bridges, airports and public transportation and come up with new ways to pay for them.

The panel, which includes four legislators — two Democrats and two Republicans — decided to pass up delivering a preliminary report due Oct. 31 and release the final report months ahead of schedule.

The report says Michigan must double its transportation spending and warns that one or two incremental fee increases won’t be enough to meet the need.

States have been struggling to find ways to raise enough money to fix crumbling roads and bridges and fund airports and public transportation. Gasoline sales nationally are down, so state and federal gasoline taxes are drawing in less money. Michigan continues to get back less in federal transportation dollars than it sends to Washington.

And tight budgets in recent years have led some states to put off critical work or inspections. That caused a tragedy in 2007, when the Interstate 35 bridge collapsed between Minneapolis and St. Paul, Minn., killing 13.

The Michigan task force did not recommend specific ideas over others. In listing options in order of how soon they could be done, it suggests:

  • Increasing vehicle registration fees and eliminating registration discounts. The yearly registration fee declines for three years after a vehicle is registered.
  • Converting or raising the 19-cent-per-gallon gas tax. Each penny increase would raise about $56 million. Converting the tax to one based on part of the sales price could eventually generate more money.
  • Raising the 15-cent-a-gallon diesel tax to align it with the gas tax.
  • Increasing the state’s 6 percent sales tax by a penny, to 7 cents on the dollar, and dedicating the extra money to transportation. This would require a state constitutional amendment.
  • Redirecting all the sales tax on motor fuel taxes to transportation, which would require a constitutional amendment. Much of that money now goes to K-12 schools.

"We have laid the groundwork for the Legislature to see the needs clearly and then we have also laid out for them a litany of solutions," said Mike Nystrom of the Michigan Infrastructure and Transportation Association, a construction industry trade group.

Because tax or fee increases will be a tough sell to the Legislature and to consumers worried about losing their jobs and their houses, the report outlines how the increased spending would make life better for residents.

It says less congestion would save travel time, that smoother and safer roads would reduce vehicle maintenance costs and accidents, and that new jobs could be created.

"To grow our state, just like anything else, you have to invest in something," said Rep. Pam Byrnes, a Democrat from Lyndon Township near Chelsea who sits on the task force. "If your driveway crumbles, you need to patch it up or fix it."

Granholm and legislators are facing pressure to act.

In less than a year, state and local governments could lose $950 million annually for road projects because they won’t be able afford to put up the money required to get matching federal dollars.

Yet a short-term fix such as raising the gasoline tax would be tough politically and may not provide stable funding in the long term. The state last raised the tax in 1997.

Despite the recent drop in gas prices, the cost to fix roads and build new ones is climbing. Asphalt costs more, as does road equipment.

One future solution might be a high-tech toll system that charges drivers for the roads they use.

Motorists wouldn’t have to contend with collection booths. Instead, ID tags on vehicles would be tracked as they pass through intersections or ramps to enter and exit the toll system. Computers would calculate usage on a pennies-per-mile basis and bill motorists monthly.

Michigan doesn’t charge tolls except for the Mackinac Bridge and some of the crossings into Canada. Motorists might object to having their driving monitored in that way. But some say the technology may be worth trying.

"This is the wave of the future," said task force member Ann Jousma-Miller, who also serves on the Michigan Commission of Agriculture. "This is the type of thing we all need to look at."

Fantastic! Although we need more money for roads badly, I have a feeling that unless there is an amendment to the State Constitution, most of this money may end up in the General Fund.

I’m FOR raising the gas tax by a small amount IF THAT MONEY is guaranteed to go to road repair/replacement/etc.

Thoughts? Chime in!

 

Finally: Diesel under $4 in Indiana

Just a quick note: diesel consumers can now find diesel fuel for $3.99/gal in Burns Harbor, Indiana. After nearing $5/gallon, I’m sure consumers of the fuel are a breathing a sigh of relief. This should greatly help trucking companies, especially the smaller operations.

Gas prices in the Grand Rapids area should remain steady around $3.80s-$3.90s for the time being.

Diesel consumers: your price drops are here!

I think you’ll agree with me on this one- Diesel consumers have LONG awaited the price drops that gasoline has seen. Since gasoline has dropped mid-July, diesel HAS followed its drop on the wholesale market, BUT for some reason, those price drops really never made it to large chain retailers. Even as I write this, some of the SAME BRANDED stations have diesel prices ranging from $4.39 to a whopping and unreasonable $4.69! Its a rarity for Grand Rapids to see this sort of range for gasoline (Have I ever see gasoline price ranges of 30-cents on non-hike days?) Even this station pictured below had sold diesel for as much as $4.79 just days earlier… what is going on? I’d say there is some gouging here, but hey, the Attorney General’s office of this State seems to turn a blind eye to “gouging” (at least when I called a few weeks ago!)- but WHY? Who has donated money to him?

Diesel continues to trade lower. Stations in nearby Indiana have diesel as cheap as $4.19… the price drops should continue! SHOP AROUND is the best advice I can give you.

Just down the street at BP, take a look what diesel runs!


TheGasGame.com (c) 2017 Frontier Theme