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August 21, 2013

Egyptian Turmoil Unlikely to Impact Gas Prices

 

In something of a counter intuitive move, it appears as though recent developments in Egypt are unlikely to directly impact prices at the pump in the United States. According to CBS News’ Washington affiliate:

Jeff Colgan is an assistant professor at the School of International Service at American University. He watches the oil markets globally and that means keeping close tabs on the Middle East since so much oil is either produced or flows through that region. He says Egypt does not produce much oil so the turmoil there will likely have little impact on gas prices.

Colgan tells us, “What’s happening in Egypt is bad for a lot of reasons but the price of gas is probably not going to be one of them.”

But there is the Suez Canal which is a vital and heavily used passageway to transport oil and other goods around the world.

If something forced the closure or delayed ships traveling the canal – it raises the possibility of gas prices increasing. Still, Colgan says the canal is too important to the economy of Egypt and beyond to let anything that drastic happen.

“Typically the government wants to keep the canal open but one could imagine rebels who are trying to force the hands of the government could try but that is one scenario but militarily not likely,” he said.

Meanwhile, oil prices have slumped along with the market as a whole over the course of the last week. It remains to be seen whether the Suez Canal comes into play as the conflict between the Egyptian military and the Muslim Brotherhood intensifies.

Filed under:Causes and Solutions,Price Shocks | by Eyes on Energy @ 3:11 pm | 

July 2, 2013

Gas Prices Down Prior to July 4 Holiday

 

In a remarkable departure from the precedent set by significant increases shortly before Labor Day, gas prices around the nation are dropping in the run up to Independence Day. It appears the reason for price trends relates directly to the elimination of the factors that pushed it higher one short month ago – as opposed to a simple supply/demand calculation. According to Fox Business:

“AAA spokesman Michael Green said Monday the national average has been on the decline for nearly three weeks running. Gas prices had previously been on the rise as a result of regional supply disruptions in May and early June, first in the Northwest and then the Midwest.

Despite the recent reprieve, prices traditionally rise as summer demand heats up. The national average climbed 17 cents a gallon in July 2011 and 16 cents in July 2012, Green noted.”

This difference is particularly apparent in Michigan, which was among the Midwest states hardest hit by the sharp increase in prices in late May. The Mining Gazette reports:

Michigan gasoline prices have dropped 80 cents per gallon in less than a month, just in time for the Fourth of July travel season.

According to AAA’s daily fuel gauge report, today’s state-average price of $3.43 per gallon is the lowest in a steady stream of price declines from $4.23 on June 6.

“The last couple months there have been major issues at two of the bigger refineries,” said Nancy Cain, spokesperson for AAA Michigan. “They’ve been back online, and we started seeing prices dropping. There’s no issues right now at any of the refineries.”

If nothing else, the current decrease in prices illustrates clearly just how significant price shocks are in determining the prices at the pump for millions of Americans. Consumers and small business owners alike would be wise to keep this lesson in mind in the future.

Filed under:Causes and Solutions,Gas price | by Eyes on Energy @ 10:41 pm | 

May 13, 2013

Domestic Reserves Tamp Down May Prices

 

The best way to look at energy prices is through what is called the forward curve.  This is much more informative than the popular media reports of the front month spot price.  Sometimes the front month price moves, but the rest of the curve does not.

The curve for the month of May has moved to one of the lowest points seen so far this year, rivaling only March. Bank of America’s research division reports that low prices in much of the US can be attributed to an increase in domestic oil inventories.

Commercial crude stocks in the US are sitting at 395 million bbls, an all-time high level and only 37 million bbls away from what we estimate to be tested maximum storage capacity. True, stocks at Cushing, OK-the pricing point for WTI-fell to 49.8 million bbls in the last available report, briefly pushing prices above $96/bbl. But as other sites fill up, the Oklahoma hub may now hold nearly 45% or 16 million bbls of the country’s total tested spare capacity. As storage tanks continue to fill up, we see growing downside risks to WTI crude oil prices and timespreads Meanwhile, crude oil imports into the US are being displaced by domestic barrels.


Filed under:Causes and Solutions,Fuel Price Trends | by Eyes on Energy @ 1:31 pm | 

March 5, 2013

Odd Inconsistencies in March Pricing

 

The American Automobile Association reports gas prices have dropped significantly over the last month, though the market remains exposed to significant risk. According to the Lincoln Journal Star:

“…regular unleaded gasoline was selling for just under $3.72 a gallon on average in Lincoln as of Monday. That’s 7 cents less than a week ago and three cents cheaper than a year ago. However, it’s 17 cents higher than a month ago.

That’s not a whole lot of relief, considering the huge surge in prices to start the year, but there is likely to be some more coming in the next couple of weeks.

AAA Nebraska spokeswoman Rose White said oil and gas prices have been very volatile and unpredictable lately, but signs point to prices dropping further in the next week or two. Crude oil prices have fallen about $8 a barrel in the past month, and prices dropped below $90 a barrel Monday for the first time this year. White also said there was an additional two-cent drop in wholesale gasoline prices on Monday.”

At the same time, these price moves are not what analysts would generally expect heading into the summer. The Christian Science Monitor explains some of the cyclical moves in seasonable pricing:

“Two critical specifications that need to be met for each gasoline blend are the octane rating and the Reid vapor pressure (RVP). Octane rating is important for avoiding engine knocking. But the octane rating for a gasoline blend is consistent throughout the year, and is not the reason for the seasonal price fluctuations.

The RVP spec, however, does change with the seasons and this change can have a major effect on the price of fuel. The RVP is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F…

In the summer, when temperatures can exceed 100 degrees F in many locations, it is important that the RVP of gasoline be well below 14.7 psi. Otherwise, the fuel may build pressure in fuel tanks and gas cans, and it can boil off lighter components in open containers. Gas that is vaporized ends up in the atmosphere and contributes to air pollution.

Therefore, the Environmental Protection Agency (EPA) has declared that summer gasoline blends may not exceed 7.8 psi in some locations, and 9.0 psi in others.”

However, it is important to keep these things in context. In Illinois, gas prices were higher at the beginning of March than they ever have before. The Chicago Tribune reports:

“AAA said Monday that has prices in the state started at their highest point ever for March, with drivers paying an average of $3.92 per gallon.

The average price of gas has risen by 59 cents per gallon in Illinois since the beginning of the year, a record acceleration.

Beth Mosher, a spokeswoman for AAA Chicago, said the sharp spike is due to a decline in refinery production and downtimes for maintenance. Refineries often perform maintenance at this time of year as they transition to produce summer gasoline blends.

Those summer blends are to meet higher environmental standards during the year’s heavy drive times. They’re also more expensive than those blends produced in the winter, so AAA warns that the region won’t get relief from increasing prices any time soon.”

Filed under:Causes and Solutions,Energy,Fuel Cost Control,Fuel Price Trends | by Eyes on Energy @ 1:00 am | 

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 |