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February 27, 2013

Talks to Resume Over Iranian Nuclear Program

 

Diplomatic talks have resumed this week over the ongoing nuclear weapons program in Iran. One would think this would be a good sign, as increased tension with Iran so frequently results in threats to close the extremely important Strait of Hormuz. However, it appears that nobody is expecting much to come from these negotiations. The New York Times reports:

When Iran’s nuclear negotiating team sits down with its Western counterparts in Almaty, Kazakhstan, on Tuesday, it will offer no new plans or suggestions, people familiar with the views of the Iranian leadership say. More likely, they say, the Iranian negotiators will sit with arms crossed, demanding a Western change of heart.

Iran’s leaders believe that the effects of Western sanctions have been manageable, and Iran continues to make progress on what it says is a peaceful nuclear energy program. And Iran’s leaders see that North Korea, which openly admits that it wants nuclear weapons, has performed three nuclear tests without suffering any real penalties.

As a result, Iran’s leaders feel that they, not the West, hold the upper hand in negotiations.

This attitude has reflected poorly on the status of the negotiations already. Again, the New York Times claims that all parties are skeptical that the talks will result in any fruitful negotiations.

The ultimate goal of talks with Iran is to get the country to comply with Security Council resolutions demanding that it stop enrichment altogether until it can satisfy the International Atomic Energy Agency that it has no weapons program and no hidden enrichment sites. In return, all sanctions — which have so far cost Iran 8 percent of its gross domestic product, sharply increased inflation and collapsed the value of the Iranian currency, the rial — would be lifted.

No one expects that kind of breakthrough in this round, especially with Iranian presidential elections coming in June and any major concession likely to be perceived as weakness. But the hope is for an incremental movement toward Iranian compliance in return for a modest lifting of sanctions.

…Senior Western diplomats have said that this meeting would be a low-level success if it produced a specific agreement to meet again soon, or to meet more often at the technical level, so that there would be an element of momentum to the negotiations.

The six nations talking with Iran have remained united and share an impatience over what they perceive to be its delaying tactics. The Russian envoy, Deputy Foreign Minister Sergei Ryabkov, who has been most opposed to increasing sanctions, said that time was running out for the talks. He told the Interfax news agency that easing sanctions would be possible only if Iran could assure the world that its nuclear program was for exclusively peaceful purposes.

“There is no certainty that the Iranian nuclear program lacks a military dimension, although there is also no evidence that there is a military dimension,” he said.

It could be expected that gas prices may move slightly higher if these talks do inevitably break down. However, as of this moment none of this appears to be having much of an effect on the market. Instead, fears of a cyclical price increase appear to overshadow any price shocks for the near future.

Filed under:Fuel Cost Control,Gas price,Price Shocks | by Eyes on Energy @ 1:37 am | 

February 25, 2013

Oil Company CEOs Officer United Front on Oil Drilling

 

On Monday, the organization known as Business Roundtable released a detailed brief to the Obama Administration outlining precisely what the broader business community sees as the future of gas and oil utilization in the United States. According to McGraw-Hill Company’s website Platts:

“A national association of CEOs on Monday called on the federal government to ease oil and gas permitting, re-evaluate the impact of regulations on the electricity industry, and gradually eliminate wind power subsidies as part of a broad national energy strategy.

…the Business Roundtable also recommended increased incentives for state-level energy efficiency programs and increased federal funding for ‘pre-commercial’ energy research and development.

‘America is on the threshold of a historic, long-term energy boom, but what is holding us back is the lack of a national strategy for taking advantage of this vast opportunity,’ John Watson, the CEO of Chevron, said during a phone call with reporters.

‘It is vital that the government work with us to develop a policy framework that supports investments by expanding access to public land, onshore and offshore, streamlining approval processes for major energy projects such as the well-known Keystone pipeline, creating regulations based on sound science and thorough cost-benefit analysis and recognizing and respecting the roles of state and federal government, particularly in the area of shale gas development,’ he said.”

However, there was significantly more contention over the idea of exporting natural gas around the world. Reuters reports:

“New technology has already put vast natural gas reserves within reach – unlocking shale deposits and creating a sudden glut of the fuel – but executives stayed silent on whether that bounty should be exported.

Energy interests hope natural gas sales abroad will help their bottom line while some domestic industries fear exports will rob them of cheap fuel that could expand the nation’s manufacturing base.”

Given that these remarks are being released so shortly after President Obama’s most recent State of the Union Address, it appears as though this is the business community’s attempt to put on a fully unified front. It has long been postulated that increased domestic oil drilling would help reduce prices at the pump for the average American. However, if the export of some of these resources has the effect on the economy that some seem to suggest, it is possible Americans could soon find themselves in the opposite situation.

Filed under:Alternative Energy,Energy,Fleet Managers | by Eyes on Energy @ 11:55 pm | 

February 23, 2013

National Average Prices Drop One-Tenth of a Cent: Does it Matter?

 

American Automobile Association found the national average gas price dropped for the first time in 36 weeks.  However, it only dropped a remarkably modest tenth of a cent. Is this actually a significant move in prices? According to CNN:

“The national average price for regular unleaded gas dropped on Saturday by a 10th of a cent, snapping a streak of 36 consecutive daily increases…During that stretch, the average price increased 48.8 cents or 14.82%. The price fell to $3.78 Saturday.”

While it’s dubious whether such a small decrease could really be as drastic as “snapping” at 36 week streak, it is worth looking more closely at regional patterns. For example, a recent report from the AAA branch in the Mid-Atlantic seems to contradict the idea that national averages are on the decline:

“…the average price of a gallon of regular gasoline in New Jersey on Friday was $3.63, up 6 cents from last week. That’s also higher than the price from a year ago, when motorists were paying $3.54.”

Furthermore, the same report points out that the one-tenth decrease in price may not be significant in the context of larger trends – and for good reason:

“[The national average is] higher than the national average from a year ago, when motorists were paying $3.61. Analysts say the higher gas prices are mainly due to the trend of refineries across the U.S. performing seasonal maintenance and making the switch-over to summer blend gasoline production earlier than normal.”

It appears that in their haste to break news, this CNN blogger has overhyped a report that is – in fact – consistent with our expectations based on seasonal patterns. As with all things, it is absolutely necessary to base conclusions off of the best data available, and not to fit any sort of agenda.

Filed under:Fuel cost,Fuel Price Trends,Gas price | by Eyes on Energy @ 8:02 pm | 

February 15, 2013

Seasonal Shift Signals Coming Rise in Price

 

A spokesperson for the American Automobile Association announced today that their organization has predicted prices at the pump to increase steadily in coming months. Kearny Hub reports:

“Mid-February typically is when gas prices begin to move higher in advance of summer’s increased demand, said AAA spokesman Gene LaDoucer of North Dakota. The switch to more expensive summer blends also is under way, he said. Fortunately, the pace of price hikes should slow.Experts expect this year’s national average to peak below $3.80 per gallon, well off 2012’s average high of $3.94, LaDoucer said.”

This prediction is in line with current patterns, as frequent drivers would be keen to notice. Southern California is one of the hardest hit areas of the country. There, prices have continues to rise for three straight weeks – with no indication of stopping. According to ABC News:

“According to figures from the AAA and Oil Price Information Service, the average price has increased 47.2 cents during the 22-day streak, the longest since a 27-day-long period of price increases from Feb. 7 to March 4.

The average price for a gallon of regular gas in the Los Angeles and Long Beach area is now $4.22 per gallon, which is up 53 cents since last month. In Orange County, drivers are paying $4.21 a gallon. In the Inland Empire, the average is $4.18. In Ventura County, the average hovered near $4.21.

Analysts say the increase is the result of low levels of production in Southern California due to refinery maintenance.”

While market forces are driving the current price increase, there is always the potential for unforeseen events to cause sudden spikes. All things considered, the ability to lock into today’s prices would be an enormous benefit to drivers and fleet managers alike.

Filed under:Fleet Managers,Fuel Price Trends,Gas price | by Eyes on Energy @ 6:43 pm | 

February 11, 2013

Gas Prices Hit Record Highs

 

Gas prices across the nation have risen to their highest prices since October 2012, according to new reports from the Energy Informational Association. The USA Today reports:

“The price of a gallon of regular unleaded stands at $3.611 in the survey released today, up 7.3 cents a gallon from a week ago and 3.6 cents from the same week last year…Gas prices have steadily climbed since they hit a low of $3.254 for the week of Dec. 17. They haven’t hit $3.60 a gallon since Oct. 22, the EIA pricing history shows.

Prices typically climb as the nation comes into the spring driving season, but as the weather attests, we’re still a long ways off.”

However, the LA Times seems to suggest that this recent rise in pricing has more to do with speculating on the energy markets than consumer driving patterns. As they claimed this morning:

“Hedge funds, commodity pools and other high-roller investors have thrown close to $12.5 billion into a collective bet that gasoline prices will rise, and some analysts say it’s one reason why gasoline prices are at a record for this date in California and nationally.

The details were contained in the Commodity Futures Trading Commission report released Friday, showing that betting on higher gasoline prices was closing in on the highest level ever of $13 billion, set last March.

‘There has never been this much money bet on higher gasoline prices this early in the year,’ said Tom Kloza, chief oil analyst for the Oil Price Information Service.”

This pattern would fit with some of the most recent data analysis we at Pumps have been personally involved with. Every month we compare the forward price curve to the previous several months, thereby plotting the change in the futures markets over time. This most recent data showed that the futures market predicted prices for crude oil to exceed the highs of last spring.

Click to Enlarge.

Filed under:Fuel Cost Control,Fuel Price Trends,Gas price | by Eyes on Energy @ 11:34 pm |