Gasoline over $4 coming to a pump near you because this thread is ass

[Donger]

http://www.bloomberg.com/apps/news?p...d=afOlUzd30YOo

Pretty alarmist, IMO, but possible.

Spoiler!

April 23 (Bloomberg) -- Whether it's $50 to fill up your Prius or $130 for the Ford Expedition, $4-a-gallon gasoline is coming to a pump near you.

Fuel prices are rising at a pace not seen since Hurricanes Katrina and Rita knocked out a third of the U.S. oil refining industry in 2005. Gasoline consumption is climbing twice as fast as last year and will accelerate when summer travel begins late next month.

``What we're surprised by is the increased demand,'' said James Mulva, chief executive officer at ConocoPhillips, whose refineries from California to New Jersey produce 56 million gallons of gas a day, enough to meet 14 percent of the country's needs. ``Even though the price of gasoline is up, the demand is up,'' he said in an April 12 interview in Houston.

Population gains and U.S. economic growth are causing an increase in fuel purchases, according to Orlando, Florida-based AAA, the nation's largest organization for motorists. The U.S. economy will expand at a 2.4 percent annual pace in the second quarter, up from 1.8 percent in the first three months, according to the median estimate of 74 economists surveyed by Bloomberg. Gasoline use is rising almost 5 percent above the five-year average.

Americans are resigned to higher prices, says David Pursell, a principal with Pickering Energy Partners, a consulting firm in Houston.

``Last year, we had pump prices well over $3 for the summer and gasoline demand was up,'' Pursell said in an interview. ``Would $4 gasoline cause demand contraction? I think it will, but I also thought $3 gasoline would.''

Pump Prices

Gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.

Pump prices in the U.S. may increase to $4 a gallon from a nationwide average of $2.87 today, especially if hurricanes threaten Gulf of Mexico refineries, says Peter Beutel, an analyst at Cameron Hanover Inc. in Stamford, Connecticut, who helps industrial consumers manage energy costs.

``Hurricanes are always the huge wild card,'' said Beutel. ``We're all praying for a year like 2006 rather than 2005.''

The June-to-November Atlantic Ocean hurricane season may produce 17 tropical storms, with nine reaching hurricane force and four becoming major hurricanes whose winds exceed 111 miles per hour (179 kilometers per hour), London-based forecasters at Tropical Storm Risk said. Some of the storms will strike the Gulf Coast this year after a benign 2006, AccuWeather.com predicted.

Inflation Risk

Higher pump prices will make winners of refinery owners such as ConocoPhillips, San Antonio-based Valero Energy Corp. and Royal Dutch Shell Plc of The Hague. Shares of Valero and Sunoco Inc., whose only business is refining, are rebounding after a decline at the end of last summer.

The increase in fuel costs threatens to quicken inflation and restrain consumer spending in the U.S. An appreciation to $4 a gallon would add more than $10 for a driver who fills the 12- gallon tank of a Toyota Motor Corp. Prius. The owner of an Expedition, a Ford Motor Co. sport-utility vehicle with a 34- gallon capacity, faces an increase of almost $40.

Many Americans have no choice but to drive more, says Christopher Knittel, an economist who studies fuel consumption at the University of California in Davis.

More Commuters

``We live farther from our jobs than we did in the 1970s, and with the rise of dual-income households, we now have two people who drive those distances every day,'' Knittel said.

Consumers also do more driving for things such as taking children to soccer practice, which they are unlikely to quit, he said. The U.S. population has increased 1 percent a year in the past decade to 301 million in 2007, adding to demand for gasoline, economists said.

Rising fuel prices make it less likely that Federal Reserve policy makers, who have cited inflation risks for the past year, will cut interest rates to spur economic growth. Before the hurricane-induced peak in 2005, U.S. gasoline topped out at $1.42 a gallon in March 1981, or $3.21 when adjusted for inflation, according to the Energy Department.

Economies in Europe and Asia are less likely to be hurt by gasoline prices because fuel already is subject to high taxes designed to encourage conservation. A gallon of unleaded costs about 3.25 pounds a gallon ($6.49) in the U.K., and in Japan it's 130.3 yen per liter ($4.16 a gallon).

$4 Barrier

U.S. consumers will get little relief on gasoline prices from Europe this year, unlike 2005, when oil companies shipped more across the Atlantic after the hurricanes. Europe's gasoline inventories in February were 114.2 million barrels, down 11 percent from two years earlier, according to the International Energy Agency in Paris. The drop in Europe was almost twice the 5.7 percent decline in U.S. supplies in that time.

``Just as we used to think $3 a gallon was an impenetrable barrier, now it's $4,'' said Peter Morici, a professor at the University of Maryland School of Business in College Park and former chief economist for the U.S. International Trade Commission. Gasoline at $3.50 is likely, Morici said, and a conflict with Iran or any event that disrupts crude supplies may push it to $4.

Pump prices rose 33 percent in the past 11 weeks, the fastest rate of gain since a six-week, 34 percent rally to the record $3.069 in September 2005, Energy Department data show.

Bodman's `Worry'

U.S. Energy Secretary Samuel Bodman in an interview last week said the national average pump price could break the record this summer. While his agency's official forecast is for gasoline to peak next month at about where it is today, hurricanes, refinery closures or crude oil supply cuts may send prices higher, he said.

Higher prices are ``a legitimate worry,'' Bodman said. ``We have trouble spots all over the world'' that could boost crude oil prices. ``We're in a very tight situation.''

Spending on fuel in the U.S. consumes half as much household income as in the early 1980s, which means gasoline would need to reach almost $6 a gallon to have the same effect on the economy as in 1981, according to the Federal Reserve Bank of Dallas.

Storage tanks at U.S. refineries, terminals and ports hold enough gasoline to cover almost 22 days of domestic demand, 8.2 percent less than the five-year average and the lowest for this time of year since the 1980s, Energy Department figures show.

Shortages

Valero-owned filling stations in Denver and Colorado Springs, Colorado, ran dry after a Feb. 16 explosion and fire shut the company's McKee refinery in Sunray, Texas. A day earlier, a blaze at an Exxon Mobil Corp. plant in Nanticoke, Ontario, slashed output, resulting in shortages and higher prices across eastern Canada.

The McKee shutdown strained supplies so much that ConocoPhillips postponed maintenance at its Borger, Texas, refinery north of Amarillo to prevent shortages in the region.

``Refineries are becoming more complex,'' Mulva said in the Houston interview. ``What we're finding is it's more difficult keeping reliability up with more sophisticated pieces of equipment that are highly integrated.''

Tesoro Corp. of San Antonio, the second-largest refiner in the western U.S., said first-quarter refinery use dropped because oil companies delayed until this year maintenance that could have been done in 2006. The portion of U.S. refining capacity that was in operation in the first quarter declined to 87.3 percent from 88.9 percent a year earlier, according to Energy Department data.

`Refineries Blow Up'

``Prices will depend entirely on whether we have a couple of refineries blow up,'' said Philip K. Verleger, an economist who runs a consulting firm in Newport Beach, California. ``It's almost impossible we'll get to $4 a gallon if all the refineries run well this summer. But if something happens and there are problems, then anything's possible.''

The average share gain for Valero, Tesoro and six other oil-refining companies is 26 percent this year, outperforming the 4.1 percent gain for Exxon Mobil and a 4.7 percent increase for the Standard & Poor's 500 index.

The shares will continue to rally, said Paul Carlson, who helps manage $3 billion at HGK Asset Management in Jersey City, New Jersey.

``Refiners are doing very well these days,'' said Carlson, whose holdings include ConocoPhillips, the second-biggest U.S. refiner. ``There will be lots of demand for any new refining stocks.''

`Back in Favor'

As recently as August, investors were selling oil refiners on concern an economic slowdown would slash fuel demand in the U.S., the world's largest energy market. During seven weeks last August and September, Valero shares fell 29 percent, wiping out $12 billion in market value.

``Refining is very much back in favor,'' said Douglas Ober, who helps oversee $2.3 billion at Baltimore-based Adams Express Co. ``Even with higher prices, we haven't seen any substantial cutback in demand. They're cranking out as much of this stuff as they can, and we're throwing it in our tanks as fast as we can.''

The margin earned from processing crude oil into fuels rose to $24.68 a barrel on April 11, the highest since right after the hurricanes in September 2005. The margin has since retreated to $22.12 a barrel, still about double the five-year average.

``It'll be a fairly tight gasoline market all through the summer,'' said Robert Hinckley, an analyst at Rochdale Securities in New York.

[Hog's Gone Fishin]

Originally Posted by DaneMcCloud

I don't understand why crude is below $50 a barrel yet gas prices in LA are all at least $4.29 per gallon.

Because of all the Raiders fans as well as the players stealing gas. They gotta make up for the loss.

[DaneMcCloud]

Originally Posted by Hog Farmer

Because of all the Raiders fans as well as the players stealing gas. They gotta make up for the loss.

[Donger]

Heading down again today. $44.23 down almost 2%

[Discuss Thrower]

Diesel 2.29 in the Queen City of the Ozarks.

[Bowser]

Originally Posted by Discuss Thrower

Diesel 2.29 in the Queen City of the Ozarks.

I can't remember the last time diesel was cheaper than unleaded, much less .20+ cheaper.

[Donger]

US Refineries Running at 10-Year High

In Wednesday’s report on the nation’s petroleum inventories, the U.S. Energy Information Administration (EIA) said that U.S. refineries were running at 96.1% of capacity in the week ended July 31. The last time the country’s refineries ran at that level was the week ending July 8, 2005, more than 10 years ago.

July is a big month for oil refiners, or at least it was. In 1998, U.S. refiners ran at 100% of capacity during the week of July 10 and at more than 100% of capacity in the week before Labor Day. Following that week in 2005, it took six years for refiners to reach even 90% of capacity again.

There could be a few reasons for the boost in refining. First, U.S. drivers posted in May a new all-time high for miles driven. (May is the most recent month for which data is available.) Miles driven had reached a peak in November 2007 and then stagnated for nearly eight years.

The increase in miles driven is likely due mainly to lower gasoline costs, which typically encourage Americans to hit the road. As unemployment rates decline, more people are back in the cars driving to work as well.

Another primary reason for the increase in refinery usage is product exports. Since late August of 2013, U.S. refiners have been exporting more than 3 million barrels a week of gasoline, diesel and other refined products. The current total is 3.74 million barrels a day of exports, based on a four-week average.

Some of the export increase is due to production of lightly refined crude oil that is the nearest thing U.S. producers and refiners can send out of the country, except to locations in Canada and Mexico. Kinder Morgan operates a so-called splitter plant that separates the condensates that are produced along with crude oil into components such as naphtha, kerosene and gasoil. The components are then exported and fully refined into usable fuels once they reach their destinations. The announced earlier this week is also targeted at these light condensates.

Because refined products command a higher price than crude oil, producers can take advantage of the refining spreads to boost profits for a reasonable cost. Where a new refinery to produce gasoline might cost $3 billion to $4 billion to construct from the ground up, a condensate splitter plant may cost as little as a tenth of that. Besides, as automobile mileage improves, growth in demand has slowed and that trend will continue, even if more slowly because pump prices are so low.

A final reason for the boom in refining last week may be that California’s refineries are coming back online after some unscheduled repairs. California drivers have been paying nearly $3.50 a gallon recently for gas when the national average is around $2.55. One consumer advocacy group has accused California refiners of exporting gasoline in order to reduce inventories in the state and keep prices high.

It is also worth noting that U.S. refiners are not the only ones who have either been taking advantage of or positioning themselves to take advantage of the higher prices paid for refined products. Saudi Arabia has a third 400,000 barrel-per-day refinery on the drawing board (it already has two that size), the United Arab Emirates is doubling the capacity of its 415,000 barrel-per-day refinery at Ruwais. Both are looking at additional exports to help boost profits while crude prices remain low.

[Discuss Thrower]

Originally Posted by Bowser

I can't remember the last time diesel was cheaper than unleaded, much less .20+ cheaper.

It's varying by station. Diesel stayed consistent at 2.39 at two stations on Battlefield for the better part of May-June. Now one of them is down to 2.30 No.2 Diesel and 2.39 87 unleaded.

The 2.29 Diesel was at the station on the SE corner of the Sunshine and Campbell intersection.

[Donger]

Diesel tends to be more steady than gasoline because there aren't any different blends mandated.

[Discuss Thrower]

Originally Posted by Donger

Diesel tends to be more steady than gasoline because there aren't any different blends mandated.

Which is why I switched to that type of engine. Even if it's more expensive on the whole, it will at least be consistent.

And shit, it seems that it also has the benefit of being less in demand than 87 that once it hits a low it stays there for a while.

[DaneMcCloud]

Still $4.49 at the nearest Chevron station yet it's $3.39 at the Burbank Costco today according to Gas Buddy.

Donger, would you mind explaining why some stations can charge more than a $1.00 more than others? I realize that Coscto prices are less expensive due to yearly membership but it's only 20-30 cents more at Burbank gas stations, yet it's $4 dollars or more in Hollywood.

It's less expensive in Beverly Hills than Hollywood. It's just bizarre.

[Donger]

Originally Posted by DaneMcCloud

Still $4.49 at the nearest Chevron station yet it's $3.39 at the Burbank Costco today according to Gas Buddy.

Donger, would you mind explaining why some stations can charge more than a $1.00 more than others? I realize that Coscto prices are less expensive due to yearly membership but it's only 20-30 cents more at Burbank gas stations, yet it's $4 dollars or more in Hollywood.

It's less expensive in Beverly Hills than Hollywood. It's just bizarre.

It's probably a combination of two things:

1) Possible local taxation varies between the two.

2) It's more likely that for some bizarre California reason, people are willing to pay more in Hollywood than Burbank. I've said it before, but we have a station that is always $0.40 higher than two other stations a mile down the road. They can charge that because it's located very conveniently for all the MILFs in the neighborhood who will pay another $0.40 for the convenience. Or they simply aren't aware that their prices are high...

[Bowser]

I'll go with the "higher population in that area" theory, either people living in Hollywood or around/touring/vacationing there as opposed to Burbank. It's my ongoing theory of why gas is more expensive in the metro KC area than it is outside of it for the first time in forever - Kansas City must have passed some population number that automatically bumps up the prices.

[lawrenceRaider]

Originally Posted by DaneMcCloud

Still $4.49 at the nearest Chevron station yet it's $3.39 at the Burbank Costco today according to Gas Buddy.

Donger, would you mind explaining why some stations can charge more than a $1.00 more than others? I realize that Coscto prices are less expensive due to yearly membership but it's only 20-30 cents more at Burbank gas stations, yet it's $4 dollars or more in Hollywood.

It's less expensive in Beverly Hills than Hollywood. It's just bizarre.

If the people keep paying the higher price, why would they drop it? The gas tax is around a quarter higher in CA than say KS, so you are paying almost $2 more just because.

[DaneMcCloud]

Originally Posted by Donger

It's probably a combination of two things:

1) Possible local taxation varies between the two.

2) It's more likely that for some bizarre California reason, people are willing to pay more in Hollywood than Burbank. I've said it before, but we have a station that is always $0.40 higher than two other stations a mile down the road. They can charge that because it's located very conveniently for all the MILFs in the neighborhood who will pay another $0.40 for the convenience. Or they simply aren't aware that their prices are high...

Interesting. You'd think that with an app like Gas Buddy, prices would fall because there are less expensive options less than a mile away. Either that or it's the convenience factor.

Call it a character flaw, but I have real difficulty paying a higher price for goods and services when I'm aware they're less expensive elsewhere. I've had this conversation with my 7 year old many times, when she's asked about purchasing items.

Daughter: Daddy, can we get this?

Me: No, it's not on sale and it's cheaper at Coscto/Target/Amazon than here.

Daughter: I feel like all you ever care about is price.

Me: Someday, you will, too.

[Donger]

Welp, crude closed down 79 cents, or 1.8 percent, at $43.87 today. That's a slide of 7% on the week and 26 % in the last six weeks. We could be looking at $35/barrel or lower before this stabilizes.