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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 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 | 

January 11, 2013

Department of Energy Forecasts Drop in Oil Prices

 

In light of weaker demand and more-than-adequate gasoline supplies, the Department of Energy is forecasting that prices at the pump will fall in 2013. If these predictions come true, then the national yearly average will decrease for the first time in the years.

However, there are some important caveats to keep in mind with this type of forecasting. The Huffington Post reports:

“Forecasters caution that they can’t predict other factors like Middle East tensions, refinery problems or hurricanes along the U.S. Gulf Coast – in other words, the same events that caused gasoline prices to spike in 2011 and 2012. Any or all of those troubles could crop up again in 2013 and push pump prices above last year’s record average of $3.63 a gallon.

The government expected gas to average about $3 during 2011. Then came the Arab Spring, which included the shutdown of Libya’s oil production. Oil prices shot up, and gasoline averaged $3.53 for the year. The government’s forecast for last year also turned out to be too low, by 18 cents per gallon.”

Considering the ongoing turmoil in Syria and Iran, uncertainty about consumer confidence, and of course the ever-present potential for natural disasters – perhaps it’s best to take these forecasts with a grain of salt.

Filed under:Energy,Fuel Price Trends,Gas price,Price Shocks | by Eyes on Energy @ 5:18 pm | 

January 9, 2013

Gas Prices Rise as New Year Sinks In

 

Those who pay close attention to energy prices are familiar with the cyclical nature of oil and gas prices. Prices rise as demand increases in the spring and summer, then fall in the autumn and winter. This is to be expected.

What is somewhat surprising, however, is how energy prices are already increasing through the month of January.  The below chart illustrating the futures market for oil and gas hints at some unusual results:

This chart shows what the forward price curve for energy prices were as of the 15th of each respective month. Clearly, it shows a decline in forward prices throughout the fall. However, the most recent curve from this January suggests that forward prices have already bottomed. Generally this kind of pattern would not emerge until later in the spring. While this almost certainly will lead to higher prices for consumers, it is worth noting that the forward price curve remains significantly lower than it was in the April of 2010.

In fact, Americans are already feeling more pain at the pump than usual. According to the LA Times, analysts for the the popular gas-hunting smartphone application “Gasbuddy” have made the following predictions about energy prices in 2013:

  • “The value of the U.S. dollar over the course of the year: ‘When the dollar loses value, crude oil climbs higher and Americans pay more for gasoline.’
  • Uncertainty over the level of U.S. fuel exports in 2013: ‘As of January 2013, the Energy Information Administration reports that exports have risen 217% in the last 10 years, most recently rising to nearly three million barrels per day. The amount of products exported amounts to over 16% of what Americans consume everyday.’
  • The effects of hurricanes that may threaten fuel infrastructure along the Gulf Coast and the Eastern Seaboard: ‘Hurricane season has brought significant harm to oil infrastructure in the last decade, and while hurricanes are not guaranteed to impact such facilities, such an event could interrupt notable infrastructure.’
  • The dependability of the nation’s refineries after several problems in 2012: ‘We’ll also see whether refineries have sufficiently addressed the weaknesses that were exposed last year.’”

If these predictions are accurate, it could mean a significant increase in prices at the pump for the year. According to one Gasbuddy analyst, “‘The saying goes that all you can be sure of in life is death and taxes. I’d add the seasonal run-up in fuel prices every spring as something I’m sure of in life.’”

Filed under:Energy,Fuel Cost Control,Gas price,Price Shocks | by Eyes on Energy @ 4:30 pm | 

October 23, 2012

Update on Rapid Drops in Price of Gas

 

Yesterday we reported that gas prices around the nation were set to drop rapidly as the winter quickly approached. Today’s trading only intensified this shift to lower prices. According to the Associated Press:

“Benchmark oil dropped $2.32, or 2.6 percent, to $86.29 in afternoon trading in New York. It’s lost about 6 percent in the past three trading sessions.

That’s starting to mean more relief at the gas pump for U.S. drivers. The national average for a gallon of regular gasoline dropped 2 cents overnight to $3.65. The price has fallen 17 cents in the past 12 days.”

A variety of factors on both the demand and supply sides of the market are contributing to this drastic drop in price. The debt crisis in Europe depressed worldwide demand while US stockpiles reached the highest levels in months. If these trends continue, as they are expected to, it is likely that Americans will experience an extra thirty cent price drop by Thanksgiving.

Filed under:Causes and Solutions,Energy,Fuel cost,Fuel Price Trends,Gas price | by Eyes on Energy @ 10:21 pm |