Comment on the July 29 prediction: Prices rose the next day to $3.79, so the prediction was CORRECT.
Sunday, August 12, 2012, 10:20AM: $4 a gallon is back. Booooooo!!! At the end of last week, we were having trouble with the web site, and we are sorry about that. I also wasn’t quite focused on what was going on. I should have listened more closely to my brother when he called me on Friday morning, saying he heard about more refinery fires and a hike of at least 25 cents in the making. I told him that was old news, from two weeks ago, but he was right. Here’s a quote from a news story: “In the past few weeks, pipelines serving Wisconsin and Illinois ruptured, refineries were shut down unexpectedly because of equipment problems in Illinois and Indiana, and a blaze broke out at a refinery in Richmond, Calif.”
Add to this how the drought has caused a jump in ethanol prices, and did you notice the S&P 500 is back over 1400? We continue to make the case of the close relationship between stock prices and gas prices, and we see it again this summer. Some hopeful signs, though: (1) August is usually the high point of the year for gas prices; and (2) when my brother calls to talk to me about gas prices, that usually signals a top. We’ll see. –Ed Aboufadel
With margins like these (see link in username), I would tend to agree.
Ohio Speedways are resetting to $3.899 right now.
Will be interesting to see how prices are affected once the pipeline spills and refinery problems get back online.
I saw Don D. from Gas Buddy on Fox Bis channel, and he was saying that they are starting to convert over to the winter blend of gas, which should lower prices.
Ed, would this be correct say come around to September maybe? ( historically speaking)
Why don’t you ever discuss peak oil production. Or the current plateau we are on?
Are you peak oil denier? I see you mention fox news so I assume you are not very intelligent. Highly educated I am sure, just not very intelligent.
Jim: Yes, come September, they start working on the winter gas blend, which is cheaper.
Curious: Not sure why you are trying to start a flame war about Fox News, or about peak oil. The concept of peak oil is useful to think about long-term trends in prices, but not for short-term predictions of gas prices, which is what we try to do on this site.
For those interested in reading a peak oil, this is a pretty good article: http://www.energybulletin.net/node/17009
I think it is interesting that the Texas Railroad Commission, which limited the rate of oil production in Texas, quietly lifted its limits in the mid-1970’s, after oil production peaked in Texas.
NYH RBOB is up 8 cents so far today. Any word on Chicago spot?
Looking like the perfect set-up for another spike tomorrow.
Chicago was down just over 7 cents as of 2:23 this afternoon, local time.
Here is a Yahoo! Finance video interview with Patrick, dated about 90 minutes ago:
Gas Prices Will Continue to Rise Until U.S. Builds More Refineries: GasBuddy Analyst
http://finance.yahoo.com/blogs/daily-ticker/gas-prices-continue-rise-until-u-builds-more-132114926.html
It takes a significant leap of faith to accept Patrick’s view in my opinion. After all, it was oil companies that shut down refineries, it is is oil companies that export lots of refined product, and it is oil companies that take weeks to address resets, outages, squirrels, and other refinery threats, real or perceived.
Maybe refiners figured out that in a move opposite to 2008, where oil was high and gas was relatively low, they can do just the opposite, $4 gas without the requisite $120+ oil…
Please read my comment in it’s entirety before flaming me….
The only way to drive down prices is to have such an oversupply of inventory, that when a piece of the supply is interrupted, the inventory is not significantly impacted, therefore not significantly impacting the price because demand can be met with the reduced supply. Then real competition can begin. We, the US, does not have such a ready inventory of gasoline. This is evidenced by the fact that when 10% of one refinery is impacted, wholesale prices will be impacted significantly, about 7 to 15% in that market. This tells you that the supply will be impacted.
The Gulf/BP oil spill never really impacted prices as it was known that the cut-off wells were such a small portion of our supply.
We have in storage, a pitiful amount of gasoline, not enough to run a month. Probably only 2 weeks, give or take. That is not enough over supply to cover a production incident. AND and oversupply in one area of the US lots of times cannot be trucked (cheaply) to another area due to boutique blends and the cost of shipping in general.
I am not saying that more refinery capacity in itself will lower the price, it certainly will ease things a lot, but GONE ARE THE DAYS, when all the permits can go through the local governments, in a couple months. Now there is 4 to 10 years of legal battles with the enviro lobbies alone. It is not easy to solve anymore, not at all.
No disagreement with any of TimmP’s points. But…
The first question is whether to blame Government or Big Oil for lack of building new refineries. Sure, it may take 4-10 years of legal battles, but as someone who drives past Whiting once a month and someone who lived in Cancer Alley, Louisiana for a while and drove past the Houston area refineries on a regular basis, I can really see why it takes 4-10 years.
The second question is whether Big Oil (as per Senator Wyden’s report) did indeed close lots of refineries to bring up margins. The report is out there, read it and make your own conclusions.
The third question is why Big Oil would increase capacity knowing ahead of time that doing so would erode their margins. Could it be that less gas at $4 is preferable to more gas at $3?
The fourth question is whether we can take Big Oil seriously when a squirrel takes out a refinery for any length of time, or when ‘maintenance’ and other events all happen at the peak of demand. or when it takes weeks or months to do minor repairs. I’m an engineer and understand that while refineries are complex things, so are, say, IC wafer fabrication plants, and I don’t recall them closing for months because of ‘upsets’ and the like…
The fifth question refers to the points regarding gasoline inventories. They seem to be stable for the last 20+ years right at 200,000 thousand barrels, or around 25 days give or take. We had refinery issues 20 years ago, but the rash of refineries going out for months on end causing serious financial damage to consumers is a relatively new phenomenon which conveniently coincides with the consolidation of refining capacity by Big Oil…
Bottom line, while there may be perfectly legitimate reasons for taking weeks or months to repair a coker unit, the average consumer is very leery of any reasons provided by Big Oil. It’s simply an issue of credibility more than anything else. Think what other areas of commerce could get away with what Big Oil is getting away with and see for yourself. We had several suppliers of electronic components located near the Fukushima nuclear plant in Japan. They, and we, did not raise prices or anything like that. If nothing else, industries and suppliers found new ways to make their supply chains more robust.
I can only imagine what we’d be paying for gasoline in the Midwest if a refinery or two were placed offline for a prolonged amount of time. I know it’s a layman’s view but as I said Big Oil has a ways to go towards building up any credibility with its customers.
Turbo46032: great questions! I would also throw in their the effect of trading markets on prices. On the face of it, it makes sense to use public markets to set the price of gasoline. But stock prices have some disturbing dynamics. (For example, investors in Aeropostale lost 11% on Friday: http://www.google.com/finance?q=aro)