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June 17, 2013

Rising Tensions in Syria Inch up Prices

 

In a change from the precedent set over the past several months, the Obama Administration determined late last week that the Syrian government of Bashar Al-Assad crossed a “red line” by using chemical weapons against opposing rebels. CNN Reports:

Syria has crossed a “red line” with its use of chemical weapons, including the nerve agent sarin gas, against rebels, a move that is prompting the United States to increase the “scale and scope” of its support for the opposition, the White House said Thursday.

The acknowledgment is the first time President Barack Obama’s administration has definitively said what it has long suspected — that President Bashar al-Assad’s forces have used chemical weapons in the ongoing civil war.

“The intelligence community estimates that 100 to 150 people have died from detected chemical weapons attacks in Syria to date; however, casualty data is likely incomplete,” Ben Rhodes, the deputy national security adviser for strategic communications, said in a statement released by the White House.

However, the conflict in Syria continues to be a source of geopolitical tension. Russian President Vladimir Putin responded to the US announcement by warning them not to support the rebels. Again from CNN:

Russian President Vladimir Putin warned the West on Sunday against arming Syrian rebels “who kill their enemies and eat their organs,” referencing a widely circulated video that purports to show a rebel fighter eating the heart of a dead soldier…

“I believe you will not deny that one should hardly back those who kill their enemies and eat their organs. … Do you want to support these people? Do you want to supply arms to these people?” Putin asked, speaking to reporters in London after meeting with British Prime Minister David Cameron.

Already, this is having serious implications for domestic gas prices. Syria’s proximity to nearby centers of oil production – along with its remarkably close ties with the state of Iran – makes it a focal point for potential price disruption. According to Access North GA:

Although Syria is not a major oil-producing country, it does boarder Iran and Iraq which produce about one-fifth of OPEC’s oil output. The value of the dollar fell last week, providing further support for the increase in oil prices…

“Motorists shouldn’t be surprised to see retail gas prices creep higher this week as tensions in the Mideast increase and create concerns of supply disruptions,” said Jessica Brady, AAA spokeswoman, The Auto Club Group. “Although pump prices are higher now than they were this time last year, the Energy Information Administration expects the summer average price for a gallon of regular retail gas to average $3.53, about the same as last year.”

While there are other encouraging signs for US drivers, it is imperative to keep in mind the very real possibility that international conflict could have on prices at the pump.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 1:00 pm | 

June 14, 2013

June 14, 2013

 

Macroeconomic Factors

  • The economic picture remains mixed, with below-trend U.S. growth of about 2%.
  • Despite the continuing fiscal drag from budget cuts, leading economic forecasting firms Moody’s Analytics and Macroeconomic Advisers both see the probability of a strong 2014 as the economy reaches “escape velocity.”
  • Chinese GDP is now projected to be somewhat lower, perhaps 7.7% growth instead of 8%.

Potential Risks

Refinery outages pushed gas prices higher in the Midwest last month, particularly around the Memorial Day weekend. Demand remained consistent as prices continued to soar – starting off the summer driving season with a sharp kick.

 

The USA Today reported:

 

“Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 40 cents a gallon the past week alone…

While the USA may be dripping in new found crude oil deposits and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

In Minnesota, regular, unleaded gas averaged $4.15 a gallon heading into the weekend — an all-time state record. With some Twin Cities outlets now selling gas for more than $4.50 a gallon, making Minnesota the priciest state for gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon. In oil-rich North Dakota, prices average $3.98, also a record-high.

Pricing

The curve for the month of June reflects anticipated higher prices moving into the summer driving season. Though higher than May, it is important to note that the forward curve had not reached the peak it did in April earlier this year. It is likely that speculation over geopolitical tensions is likely for the exaggeration in spring prices. Most importantly, you can see that there are still good opportunities to lock in prices for twelve-month periods beginning in October, 2013 or later.

To download a more detailed version of this report CLICK HERE.

Filed under:Eyes on Energy | by Fuel Expert @ 3:29 pm | 

June 12, 2013

The Worst May Be Over for Midwest Drivers

 

After weeks of pain brought on by a number of ill-timed refinery maintenance efforts, drivers in the upper Midwest may finally be seeing the light at the end of the tunnel. According to WANE.com, analysts project that the refineries in question are set to resume production at their normal levels shortly:

Analysts said one major Illinois refinery is back online and another big one in Indiana is on track to ramp up production again soon. The refineries’ ongoing maintenance — which led to reduced supply and higher prices — are the primary culprits for the surge at the pump.

“On balance I think the worst is over,” Tom Kloza, chief oil analyst at GasBuddy.com, said Tuesday.

Gasbuddy.com provides the data for wane.com’s Gas Gauge which shows that many stations are already lowering prices.

Exxon Mobil’s refinery in Joliet, Ill., was offline longer than expected, he said. Assuming there are no hiccups with BP’s plans to soon restart a crude unit at its refinery in Whiting, Ind., prices could drop below $4 a gallon within weeks throughout a five-state region stretching from Wisconsin to Ohio, according to experts.

“You just have one refinery issue after another. As they’re coming back on, that should be a big thing,” said Phil Flynn, chief energy analyst at Price Futures Group in Chicago.

However, consumers in Michigan still face some of the highest prices in the nation. Local news in Detroit reports:

“…gas prices are still averaging almost $4.18 for the state and $4.16 for the Detroit area. That’s over 50 cents more than the current national average of $3.64.

According to the website GasBuddy.com, Michigan currently has the third highest gas prices for any state in the country, behind only Hawaii and Illinois. The website also list Detroit, Ann Arbor, Kalamazoo, Lansing and Grand Rapids as all being in the top ten list of cities with the highest gas prices in the country.”

Allegations of price fixing and market tampering run rampant – but regardless it’s clear that consumers are still at the whim of extraordinary events and price shocks. As Gulf braces for a new hurricane season, it seems entirely likely that refinery shutdowns will remain an ongoing concern.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 1:59 pm | 

June 11, 2013

Earth May Have More Oil Than Previously Thought…

 

…The problem is more a matter of what it will take for us to access it. According to a new report by the Energy Information Administration, previous US government projections underestimated global oil reserves by as much as 10 percent:

“…estimates in the updated reporttaken in conjunction with EIA’s own assessment of
resources within theUnited States indicate technically recoverable resources of 345 billion barrels of
world shale oil resources and 7,299 trillion cubic feet of world shale ga sresources. The new global shale
gas resource estimate is 10 percent higher than the estimate in the 2011 report…
…Although the shale resource estimates presented in this report will likely change overtime as additional
information becomes available, it is evident that shale resources that were until recently not included in
technically recoverable resources constitute a substantial share of overall global technically recoverable
oil and natural gas resources. The shale oil resources assessed in this report, combined with EIA’s prior
estimate of U.S. tight oil resources that are predominantly in shales, add approximately 11 percent to
the 3,012 billion barrels of proved and unproved technically recoverable nonshale oil resources
identified in recent assessments.”

Trouble is, simply having more oil on the planet does little to alleviate pricing concerns in the short term. As MSN Money observes:

“…Oil sands just beneath Edmonton in Canada’s Alberta province hold an estimated 175 billion barrels, making it the third-largest oil reserve in the world. But it’s going to spend much of the near future untapped.

The problem is that even extraction methods like fracking are in their crudest stages and don’t come close to being adequate for most oil sand extraction. The oil in those shales isn’t easy to separate from the sand and water surrounding it and leaves huge waste pools in its wake. That mess costs money, and it’s only going to get messier as those oil numbers surge.”

Unfortunately for consumers, the peak oil problem ultimately still poses a number of challenges – particularly as long term trends in third-world development continue to drive demand higher. It is a troubling thought indeed that even today’s high prices may seem like a bargain in comparison to the not-so-distant future.

Filed under:Fuel Price Trends | by Eyes on Energy @ 9:23 pm | 

June 10, 2013

Manipulation Suspected in Highly Variable Gas Prices

 

Regulators from the European Union are nearly a month into their investigation of major companies including BP and Shell over suspicion of manipulating prices on an international index. CNBC reported on the initial launching of the investigation:

“Officials carried out unannounced inspections at the premises of several companies active in and providing services to the crude oil, refined oil products and biofuels sectors,” the commission said. The inspections took place in two European Union member states and one non-EU country, it said.

“The Commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” it said.

The commission also said companies may have prevented others from participating in the price-assessment process with the intent to distort published prices.

Allegations of large firms rigging prices are, of course, nothing new. Here in the US, a number of high ranking elected officials have introduced measures to protect American consumers from these kinds of abuses. In late May, ranking Energy Committee member Senator Wyden wrote to Attorney General Eric Holder to investigate corporations in the United States for similar offenses. According to The Hill:

Wyden said price fixing in commodity markets “has been an area of abuse within the U.S. in the past,” noting the Enron power market scandal.

“It is critically important to determine whether or not similar efforts have been made to manipulate U.S. oil indices by these firms or others,” he added.

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Wyden said.

Gas prices around the country remain highly variable. Americans should expect to remain at the whim of price shocks and larger trends for the forseeable future, and certainly through the summer driving season.

Filed under:Fuel Price Trends | by Eyes on Energy @ 11:57 pm |