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February 10, 2013

Frustration in Congress: Lawmakers Struggle Over Record Oil Profits

 

Americans are feeling the squeeze as prices at the pump continue to rise, further deepening the pockets of multinational oil companies. This has provoked the ire of some on Capitol Hill who feel these high fuel prices are slowing growth in their districts. Daniel Graeber of Oilprice.com notes:

“U.S. Rep. Ed Markey, ranking member of the House Natural Resources Committee, said he wanted lawmakers to repeal what he said amounted to a $7 billion tax break for energy companies.

‘I will soon be introducing legislation that will end Big Oil’s subsidies,’ he said in a statement. ‘As Congress works to address the numerous fiscal challenges facing our nation, it is time for Republicans in Congress to join me to end Big Oil’s subsidies, which is a common sense deficit reduction measure available right now.’

At the same time that BP was beating analyst’s expectations, motor group AAA said American consumers in February paid more for gasoline than what’s typical for this time of year. A decision by Hess Corp. to close a New Jersey refinery, followed by a fire that closed the Toledo refinery for PBF Energy, helped push gasoline prices higher in the United States. Crude oil prices above $100 per barrel, meanwhile, added to consumer woes.”

While lawmakers may squabble on the big issues, they are still far from coming to any sort of consensus over ways to bring fuel costs down for the average person. Plans for increased offshore drilling or new domestic pipelines face opposition both from Democrats in Congress and from President Obama. It is clear that for the time being, individuals and fleet owners alike will have to budget at the mercy of the market.

Filed under:Causes and Solutions,Fleet Managers,Fuel Budget,Fuel Cost Control,Gas price,Price Shocks | by Eyes on Energy @ 10:16 pm | 

February 8, 2013

February 08, 2013

 

Macroeconomic Factors

 

  •  The preliminary report on GDP for the 4th Quarter was -0.1% on an annualized basis. This week’s trade report suggests that the first revision to GDP will be an increase of about 0.7%. More recent data suggest — employment, ISM, and retail sales – all suggest that the economy continues to muddle along at a growth rate of 2% or so, significantly below long-term trends.

 

  • The bright spot continues to be in housing where there has been significant improvement in both sales and pricing as well as a reduction in inventories. Chinese economic reports also show a rebound. And of course we have worldwide stimulus from central banks, now including Japan.

 

  • The biggest recession risk was the collection of expiring policies referred to as the fiscal cliff. Most of these were addressed in the January 1st compromise. This also removed much of the uncertainty for businesses and consumers.

Potential Risks

The monthly risk assessment has edged a bit higher.

Refinery maintenance

 

Problems with refineries have pushed prices higher, especially on the West Coast. Gas prices moved past the $4 mark in California’s Orange County this week, continuing a rise that has largely been attributed to recent setbacks in nearby refineries. According to the OC Register:

“The run-up in gas prices has hit Southern California especially hard. Refineries here have taken down production units for maintenance as they prepare for the summer rush, analysts said. That has created enough supply uncertainty for investors, betting on risk, to bid up the price.

Northern California hasn’t had as heavy a maintenance cycle at its refineries, said Denton Cinquegrana, the executive editor of the Oil Price Information Service. On Tuesday, drivers in San Francisco could buy gas for about a dime less than those in Santa Ana.”

Drivers elsewhere on the West Coast are also feeling the pain.

Other geopolitical risks:

“International concerns have been rising in recent months, amid signs that Tehran is edging closer to a nuclear capability. Diplomats acknowledge that if the two sides don’t make progress within the next few weeks there may be a long interruption in the talks because of the approach of presidential elections in Iran in June.

More promising news has helped to reduce some of the pressure on world oil prices. Talks are scheduled to continue on the subject of the Iranian nuclear program. If successful, negotiations could calm tensions over the contentious Strait of Hormuz. It is too early to tell if any progress will be made. The Los Angeles Times suggests an air of distrust surrounding the talks:

A senior U.S. official said the agreement was ‘positive’ but added that ‘we’ll be looking to see if they are prepared to engage seriously.’

But a senior Iranian official was quoted questioning Western motives in the negotiation, suggesting that some officials in Tehran may not be in a mood to make a deal.”

 

 

Pricing

The chart below shows the futures market for RBOB gasoline falling in the month of November, then bottoming out in December. Already, the curve for the end of January has risen significantly. In fact, the January curve has prices in upcoming months exceeding the highs from the spring of 2012. This clearly illustrates a market consensus not only for the expected seasonal increase in the spring, but also for prices to exceed the highs from last year.

To download a more detailed version of this report CLICK HERE

Filed under:Eyes on Energy | by Fuel Expert @ 4:32 pm | 

February 6, 2013

Talks to Resume Over Iranian Nuclear Program

 

In a potentially promising move, talks are scheduled to continue on the subject of the Iranian nuclear program. If successful, negotiations could calm tensions over the contentious Strait of Hormuz – but it is too early to tell if any progress will be made. The Los Angeles Times suggests an air of distrust surrounding the talks:

“International concerns have been rising in recent months, amid signs that Tehran is edging closer to a nuclear capability. Diplomats acknowledge that if the two sides don’t make progress within the next few weeks there may be a long interruption in the talks because of the approach of presidential elections in Iran in June.

A senior U.S. official said the agreement was ‘positive’ but added that ‘we’ll be looking to see if they are prepared to engage seriously.’

But a senior Iranian official was quoted questioning Western motives in the negotiation, suggesting that some officials in Tehran may not be in a mood to make a deal.”

As of this moment, the relatively promising developments on this front – along with the success of the French mission in Mali – seem to be keeping oil prices from spiking even higher. Given that we are expecting price increases as the spring months already, the prospect of the talks in Iran falling through shortly before their Presidential election in June could be devastating.

Filed under:Fuel Cost Control,Hedging,Price Shocks | by Eyes on Energy @ 1:52 pm |