Tag: production

30-cent Chicago Discount means you’re paying TOO MUCH!

Predictions
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A very unlikely situation (a good situation) has developed here in parts of the Midwest. I’ve noticed a trend that has resulted in much lower wholesale prices for the Chicago PAD District. Gasoline coming out of Chicago (which is most gasoline supplied to West Michigan), is currently DISCOUNTED nearly 30-cents from what it’s being traded at on the NYMEX. Chicago wholesale spot prices for regular unleaded are $0.9972 tonight $0.972 this morning! (Yes, that’s under a dollar before tax and transportation costs) This is a result of refiners trying to sell off their remaining stocks of Winter blend gasoline before they are required by law to start production of lower polluting Summer blend gasoline. This discount will only last until the Winter blend is gone… think of it as a clearance sale!

Speedway and friends, LOWER YOUR PRICES! You’re making a killing- why can’t you pass this savings on to your customers? I take aim at Speedway since they were the first to rise to $2.05.

To benchmark, last week we only saw a discount of 7 to 9-cents off NYMEX prices, which meant that the same gasoline Friday was bought for $1.25ish per gallon. Any station taking delivery any time soon will be absolutely awash in profit since this Chicago Discount has really kicked in this week.

I ask that stations pass the savings they are getting onto consumers, or hey, at least HALF?!

$1.9X prices are too high. Where is $1.75? Let’s go stations. Lower your prices! The first METRO GR  non-club station under $1.80 will get a THUMBS UP from me on this blog if it happens this week (lets see if anyone takes me up on that offer).

Patrick

 

Speedway States prepare for more price hikes!

Predictions
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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!

More price hikes coming for most of U.S., poor DOE report

Predictions
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Today’s DOE report definitely wasn’t so hot- showing a large loss in gasoline stockpiles when an increase was expected. Traders polled were expecting a small 500,000 barrel increase in gasoline stockpiles and the DOE reported a loss of 2.6 million barrels.

In an interesting twist, supplies in storage in the Midwest region actually rose over a million barrels, which may cause the Midwest to see prices staying under the national average for some time.

Refining continues to be a poor money maker, but with this news, I expect wholesale  gasoline prices to climb, causing refiners to slowly increase production due to increasing margins.

Speedway has been all over the map in the Midwest lately, with a hike last week in Minneapolis, and a hike yesterday in the Great Lakes area. While most of the nation should see slowly increasing wholesale prices, the Midwest should feature either flat wholesale prices or rising disproportionately slow compared to the rest of the country.

On another note, Diesel should slowly become cheaper than gasoline in many areas of the country over the next few months as driving season approaches.

States that have recently seen Speedway price hikes (this week) should be stable without a huge price hike (barring some large news maker), but areas outside the Midwest will continue to see prices climb.

Patrick

Nationwide gasoline prices to continue to rise

Predictions
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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

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.

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Patrick

OPEC’s threat- the market answers!

Predictions
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Threatened with sagging oil prices, OPEC held a meeting today to decide if any additional production cuts should be made. This would be their third (?) meeting outside of their normal meetings in the last few months as oil prices have lost all their gains made in the last four years.

While OPEC tried the "shock and awe" approach, the stock market was busy preparing for a response. OPEC went first and decided to cut 2.2million barrels per DAY of oil production, its biggest reduction EVER.

"I hope we surprised you," OPEC President Chekib Khelil said when asked whether the size of the cut would shock moribund oil markets into an upward trend. "If you’re not surprised we need to do something about it."

Crude oil immediately dropped to $40.20 a barrel after the announcement was made in a "in your face" attitude.

I’m convinced the more OPEC tries to prop up prices, the more it will harm their own interests. OPEC is helpless in this market, as we saw today. However, what OPEC is doing is setting themselves up for destruction. They’re obviously hurting for revenue, but this cut will make prices spike eventually when global markets do recover, leading to another potential disaster. OPEC is in a huge bind- they need revenue, but are doing a TERRIBLE job at trying to increase demand for oil (which SHOULD be their largest interest for long term viability).

OPEC is doing things that only benefit in the short term (and look- its not even helping!). The long term outlook for OPEC is failure.

So OPEC, how about announcing another production cut tomorrow so that oil will take another nose dive?

I don’t see a hike this week, but we’re closely monitoring that situation here. If prices become widespread under $1.55, look for a hike.

In the mean time, in your face OPEC!

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