Tag: maintenance

Whiting refinery maintenance, possible refinery worker strike… possible outcome? Record high gas prices!

Predictions
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Bad news tonight for consumers, although I personally believe that some issues will be addresssed and corrected before disaster hits. Without wasting time, let me cover the issues.

First, we have a number of refineries reporting being completely shut down tonight, including a 245,000bpd refinery in Texas and a 108,000bpd refinery in Washington. We also have some issues closer to home here in the Midwest. BP’s massive Whiting, Indiana refinery has unexpectedly shut a unit for maintenance. BP was hopeful that the maintenance would only last a week at most, but keep in mind that the unit needs to be shut-down and restarted which means that the unit’s actual time down will be more than a week. I am hopeful that BP will be accurate and have the unit back online ASAP to avoid higher prices in the Midwest market, but with Midwest prices already high, I am somewhat fearful that Midwest spot prices may rise more than those outside our PADD.

A possible price hike may happen as soon as tomorrow. I don’t have an estimated price range due to these issues listed, but it would be no lower than $1.99 and COULD break $2/gallon.

Also on the radar here at TheGasGame.com is a POSSIBLE STRIKE that could occur at some U.S. refineries as early as Sunday at 12:01am if a contract is not met. The United Steel Workers, a union that represents 30,000 workers at half of U.S. refineries that have a capacity of roughly 17.6 million barrels per day of refining capacity, may strike if a contract is not agreed on by weekend, Reuters reports.

Talks could go "down to the wire" on Saturday says USW spokesperson Lynne Baker. While both sides obviously want a new contract in place, both sides are bracing for strike. Oil companies are putting replacement workers on stand-by. Any strike would likely shut down a large portion of refinery capacity in the U.S. and could lead to a spike in gasoline prices as production dives to record low levels. This is a risky situation and one that has the potential to lead to overnight price spikes if there is no resolution. While I am also hopeful, I realize that the odds of a large refinery shut down are very small.

BP does say they WILL SHUT DOWN four of their five refineries represented by labor unions if there is a strike or lockout. BP said it would shut the plants to continue the good working relationship it has formed with the USW in recovering from a deadly 2005 explosion at its Texas City, Texas, refinery.

If any strike does occur, it would lead a huge blow to Midwest consumers, already paying more than the national average and dealing with higher unemployment than any other area in the country. I estimate that if a strike does occur and half of U.S. refineries elect to shut down, gasoline prices could spike almost overnight to $3 or $4.

In good news for Midwest consumers, PADD two contains the most crude oil since 1998- but we still need refineries to refine it so prices drop locally!

Like I said, any strike and shutdown is quite unlikely, but that doesn’t mean we should ignore a possible outcome or not plan ahead. Keep this in mind this week, and check back here at TheGasGame.com for further updates.

For media inquiries regarding this story, please contact us at media (AT) thegasgame.com

Patrick

Here we go again! Prepare for another price hike… $1.99 possible

Predictions
1 Comment

After an unprecedented week of price hikes in the area, I am sad to report that more hike(s) are likely very soon. The stage is set for a price hike Monday to $1.99 (they’d go higher but I expect them to stay under $2 because of negative reaction), but the exact price may be different if the market drops a significant amount tonight (Sunday).

Unfortunately, it looks like the pending war between Israel and Hamas and OPEC are likely two of the main reasons that wholesale prices and oil prices have been rising. It looks like the market may be starting to turn back as we get closer to Spring.

Also, our spot pricing is much higher, in my opinion, due to our PADD levels being so low. We’re sitting at 46.8 million barrels of petroleum in storage. We haven’t seen a low like that since 2007.

That can probably be traced to Sunoco’s Toledo, OH refinery undergoing 6 weeks of maintenance that that recently started.

Those two factors are likely pushing MIDWEST prices higher than other places.

We’ll see how things go, but I would definitely fill up tonight or first thing in the morning as our trend has definitely turned into a upward pressure on prices rather than a downward pressure on prices.

Has our enjoyment of gas around $1.50 come to an end? It might have…

Fill up!

Patrick

Michigan exporing options to raise gasoline tax!

Commentary
17 Comments

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!

 

Dow rises 900 points, gasoline rises as well.. hike soon!

Predictions
1 Comment

As of late, oil and gasoline have been virtually tied to the Dow as we look to economic woes as reasons to sell-off gasoline and oil contracts. With the Dow finally putting together a noteworthy rally, gasoline and oil both surged.

With a gain in wholesale prices along with much tighter Midwest supplies, we can expect our first price hike in weeks. The tightness in supplies is mainly due to refinery woes later this summer, combined with planned fall maintenance led to a large loss in inventories. Usually when this happens, refiners will direct products to the Midwest to take advantage of larger margins. However, coupled with Gustav and Ike, refiners were too busy directing fuel at the South, especially TN and GA as large shortages increased margins.

Fuel out of Chicago is now pegged roughly 40-cents over the NYMEX trading price, bringing us to a $2.35 wholesale cost before shipping and taxes.

I would fuel up very soon and take advantage of anything under $3, knowing that a hike would be to $3.19-$3.29.

Hopefully this is temporary, but we’ll find out.

Patrick

The 2008 Driving Season Begins. What’s in store?

Predictions
3 Comments

The long awaited 2008 Summer Driving season is now upon us, after a mostly gloomy and cool Memorial Day weekend here in Mid-Michigan. With gasoline prices approaching and surpassing $4, many are asking what’s in store for this Summer… what can I expect, when should I vacation?

This post may be one of my longer posts. Just sit back and read it, you may find some information you didn’t know. I’ll try to cover everything that’s on my mind at this point.

First glance this morning the market was up… but now we’re seeing a good size pullback in the oil and gasoline markets, with crude falling over $3bbl at this writing. Why? I’ll explain.

If you haven’t noticed, we’ve had a significant run-up in prices this past Spring. I suspect the main reasons were the weaker U.S. dollar, higher global demand, and speculation. It’s anyone’s guess what percentage each one of those played in the higher prices, but I’m sure there are a couple factors that I haven’t included that have helped push prices up as well.

$4.19 was the price this weekend if you hadn’t noticed, and many are wondering if this is the highest we’ll see this year. It’d be easy for me to say yes based on past years. In 2006 and 2007 prices for the year peaked in mid-to-late May. However, this year hasn’t been anywhere close to resembling ’06 and ’07. In those years prices climbed more due to actual issues and problems- refinery maintenance, etc. This year, we’ve really not had as much bad news, but the economy has been more the indicator. The worse the economy seems to get, the more oil and gasoline prices rise. You’d think the two would be hand-in-hand, but that’s not the case.

I’m *thinking* that now we’re in driving season, we may see traders pull out as they realize we’re sitting on record high oil prices without a real reason. Supply is remaining constant, Saudi Arabia says they’ll try to pump more oil, and we haven’t really had any refinery issues. Is it time for the market to go back to realizing the fundamentals instead of buying based on speculation?

Refineries have and are in the midst of a huge number of expansions and upgrades. Many older refineries are adding and replacing older equipment that isn’t as efficient. They’re tightening their belts [refineries] to get every penny out of every gallon of gasoline. Since oil companies have been enjoying record profits, they’ve also been spending billions on refinery expansions. Shell is well underway to renovate an existing refinery to near DOUBLE its output. While we won’t see it online for the next couple years, the market should be looking down the road and realizing that output will grow as record profits continue.

Let’s not forget about the Goldman Sachs analysts, Murti and Currie- they’ve predicted record territory for oil the last few years and have been amazingly accurate. Just a week or so ago, they raised their forecast to say the average price of oil in 2008 would be $141 and oil have a “super spike” to $150-$200/bbl. The day they released that forecast, oil prices took a sharp jump, and have continued their climb… not because of OPEC lowering output, or because a refinery shut, but because two men predicted higher oil prices. This is where I’m talking about a return to fundamentals instead of speculation! Anyway, these two men forecasted in 2005 that oil prices would rise to $50-$105 over six to 24 months and were pretty accurate. They then boosted their forecast to $80-$135 in September 2007, even during a seemingly non-existent hurricane season. Still, they re-raised themselves last December, and just weeks ago re-raised again. Just keep in mind WHY Goldman analysts may be doing this… that is, making seemingly high forecasts. They are in the business of selling oil, I consider them an oil broker. They run huge commodity funds, give advice, and trade oil. Wouldn’t you think that to be a HUGE conflict of interest? Almost like going against the Terms of Service of eBay and bidding up your own online auction.

The interesting part of this is that while Goldman analysts have raised their own forecasts, which would provide HUGE profit to oil companies (ExxonMobil, BP, Shell, etc), Goldman has NOT raised their stock outlook for these companies, and they’ve kept their rating on ExxonMobil at “neutral”. Would one think that Goldman might put its money where its mouth is and raise their outlook on these oil companies stocks? Quite interesting. Perhaps Goldman knows that while they enjoy making tons of money off trading oil, one day the bubble will pop. I can’t think of any other reason why Goldman would not raise their outlook on XOM stock [ExxonMobil].

Point here is that this latest rally is pretty much only supported by Goldman, which is like the oil trading god. Perhaps Goldman has been the one fueling the latest rises, buying more oil to push prices up so its analysts are correct. Nothing like using fear to make a profit, which may be what they’re trying to do.

Back to my office chair- I stare at the $3.98’s and $4.19’s that are out in the Midwest.

I’d love to predict lower prices, but the way I see it, any prediction I make will have odds that are worse than buying a Big Game lottery ticket.

However, I’ll do it anyway, and maybe the odds will be much better than a Big Game ticket, but still, I wouldn’t put more than a $20 bet on it.

Summer 2008 outlook:
Gasoline:
Late May prices peak to $4+, slowly decline into early-to-mid June, perhaps as low as $3. Early July will have much of the same, people will be rejoicing when prices come under $3, but that doesn’t look entirely realistic as hurricane season approaches. Traders will begin focusing on any hurricane that develops, and starting in mid-August, we’ll see prices fluctuate quite a bit. If any Category 3 or higher hurricane strikes West of the Mississippi in the Gulf, expect gasoline to jump right back to Spring highs or even higher. If the 2008 hurricane season is a non-event, expect market fundamentals to kick in and we may see a large correction in gasoline prices. I think that with demand slowing late Summer and oil prices due to come back down,
it will boost crack profit, which will entice refiners to make
utilization rates climb all summer leading to a potential collapse in
prices this fall/winter- perhaps as low as $2.50 starting in October and lasting through mid-November.

Diesel:
Prices won’t really pause much as global supplies remain well-below average. Prices may flirt with $5 in the Midwest while nationwide prices rise to near $4.75. Don’t expect high diesel prices to cause a huge demand slowdown, especially with farmers raking in profits growing their fields, feeding their equipment. The U.S. has been exporting a lot of diesel to Europe as well, so our own stockpiles aren’t as cushy as possible. Diesel may fall back to $4.35 as the summer continues, but it won’t last long. Expect diesel to rise substantially if hurricane season is active.

The huge wildcard will continue to be the 2008 Hurricane Season. If it’s more active than usual, be prepared to cancel vacations. If not, it may help push prices lower come late Summer and early Fall.

Obviously things can and will change rapidly, but Ed and I will continue to monitor prices throughout the Summer. We will both need some time off and may miss a prediction here and there, but overall TheGasGame.com will continue to be active!

Patrick

$4/gas, $100/oil PREDICTED… Rehike to 3.29+ likely

Commentary, Predictions
Comments

With wholesale market prices rising almost 10 cents already this morning, we will see another hike this week to 3.29-3.35, depending on if this rally holds, but I expect that it will. In fact, I see another rally tomorrow of this magnitude. I think the only thing that will slow these bulls down is the weekly DOE report released this week on Thursday due to the holiday Monday… but thats still a few days off!

After pouring over data from previous years Spring Run-ups, I think I can announce what I found when I did some calculations. Are you sitting down? If this year goes like ANY of the past 8, we WILL see $4 gasoline here in Michigan this Spring. Is it likely? Not immediately, but will take time. This prediction may not some to pass until April or May, like previous years. Not only is $4 a reality, it is LIKELY.

The refinery unit that exploded yesterday in Texas resulted in the entire refinery to shut down. While its a pretty small refinery, this is going to feed the market. They, and I think that more of these refinery problems will be likely, especially when refiners do maintenance this Spring.

Patrick

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