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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 | 

October 31, 2012

A Look at the Forward Price Curve

 

As part of our ongoing commitment to monitoring patterns in fuel pricing, we at Pumps are going to start posting regular updates showing changes in the forward price curve for RBOB Gasoline. Today we will look at the change in the forward price curve over the month of October.

(Click to Enlarge)

Clearly, this chart shows a drop in future wholesale prices that is consistent with the seasonal trading pattern seen in crude oil trading. We have come well off of the Summer highs and expect to hit the lows at some point in the middle of Winter. We expect to see more interesting patterns in the future due to price shocks and other unexpected events, but for the moment this is the trend we would expect for the Fall season.

Filed under:Fuel Budget,Fuel Price Trends | by Eyes on Energy @ 2:10 pm | 

October 18, 2012

Exxon Continues to Invest in North American Oil

 

In an effort to compete with Chinese and Russian companies for oil rich land in Western Canada, Exxon Mobil agreed today to buy Canadian oil and gas exploration company Celtic for $3.1 billion. According to the New York Times:

The takeover is the latest effort by major oil concerns to tap the oil-rich rock formations of North America, including the province of Alberta, where Celtic is based. In July, the Chinese company Cnooc bid $15 billion for Nexen, a significantly bigger explorer based in Calgary, in large part to get in on the shale boom.

This is part of a larger move made on the part of Exxon to tap into oil reserves that currently exist in North America, but are as of yet inaccessible. Anticipating that it would be necessary to acquire this harder-to-reach oil, Exxon acquired a natural gas company named XTO in 2009 in order to utilize its advanced drilling technology.

These moves reflect a larger reality in the world of fossil fuels. If demand for oil remains constant – and all indications are that it will for the forseeable future – then gas giants like Exxon Mobile will have to resort to increasingly more complicated methods of extraction. This could only mean extra prices will be passed on to the consumer, making now the time to lock in before the next spike.

Filed under:Causes and Solutions,Energy,Fuel Budget,Fuel Cost Control,Gas price | by Eyes on Energy @ 12:07 am | 

October 15, 2012

Price Asymmetry Responsible for Slow Decline

 

According to many experts, the reason why gasoline prices are rising much faster than they fall is due to an economic concept known as “price asymmetry” – perhaps better known as “sticky” prices. Back in 1999, the US Energy Information Administration found that “data confirms the notion that retail gasoline prices appear asymmetric, typically rising more quickly than they fall.” This phenomenon is certainly nothing new, but appears particularly frustrating to more and more Americans still struggling with weak economic growth and high unemployment.

An article in today’s LA Times attempts to account for the recent price surge in California, noting:

Since the state’s one-week price surge of about 50 cents a gallon, California’s average price for a gallon of self-serve regular gasoline has declined 3.6 cents to $4.623, according to the Energy Department’s weekly survey released Monday, and 6.2 cents to $4.609, according to AAA‘s daily survey. The two surveys use different methodologies but usually move in the same direction and report averages within pennies of each other.

The price surge, nicknamed “Gasageddon” by analyst Tom Kloza, started Oct. 1 with a power failure at Exxon Mobil Corp.‘s Torrance refinery. Ordinarily, the disruption wouldn’t have been a big deal because the plant was back to normal a few days later.

But based on updated statistics received Friday by the California Energy Commission, it became clear that the refinery went down when the state was near the bottom of its five-year averages in fuel supplies, fuel production and in the stockpiles of components needed to make the state’s expensive blend of clean-burning gasoline, said Gordon Schremp, the agency’s senior fuels analyst.

“We have seen low inventories like this, but we didn’t have a price spike then because we didn’t have another refinery problem,” Schremp said. “Here, we had a significant refinery problem.”

The Torrance refinery is the fifth largest of 14 gasoline-producing facilities in California. What’s more, the state’s third biggest refinery, Chevron Corp.’s plant in Richmond, has been in limited production since a fire in August.

That explains the rocket phase. The feather stage happens because once the crisis has passed “there’s always a reluctance among gas station owners to drop prices too quickly,” said Kloza, chief oil analyst for the Oil Price Information Service.

Another reason, Hahn said, is that the expensive gasoline has to be sold before cheaper supplies can be purchased.

This phenomenon of “downward stickiness” in the price of gasoline is yet another reason why locking in gas prices when they’re low would do so much to help small businesses as well as everyday people.

Filed under:Fuel Budget,Fuel Cost Control,Fuel Price Trends,Gas price,Price Shocks | by Eyes on Energy @ 10:58 pm | 

August 28, 2012

Hurricane Isaac Bears Down on New Orleans

 

Shortly after being officially declared a Category 1 Hurricane, Isaac hit the gulf coast this Wednesday. While most of the news coverage is fixed on comparisons to Hurricane Katrina and the Republican National Convention, the fact of the matter is that Isaac has wreaked havoc on the nation’s gas prices – even when it was only a tropical storm. Just yesterday we at Pumps posted that the storm had driven up prices 2.5% since the end of the week.

The US government already said that daily oil production in the Gulf would be cut by almost one fourth over the weekend, bringing national gas production down a total 8%. The most current updates indicate that Hurricane Isaac is both slowing down and becoming stronger, which will mean more serious damage to New Orleans and the surrounding area than some may have expected.

“Noting that the storm was moving west and threatening to grow more powerful, energy giant BP evacuated all its installations and temporarily halted production in the Gulf Sunday. Earlier, it had pulled workers from its massive Thunder Horse platform in the eastern Gulf.

Royal Dutch Shell is withdrawing all workers and suspending production in the eastern Gulf. It is pulling out all but essential personnel and cutting production in the central Gulf.

Apache Corp., a Houston oil services company, is withdrawing 750 workers and contractors from its installations in the eastern Gulf. It is also cutting production of oil and natural gas. Other energy companies have also been evacuating their platforms and rigs in the Gulf.

Murphy Oil Corp., based in El Dorado, Ark., said Sunday that it is pulling out all workers and suspending operations in the Gulf.

Overall, oil companies pulled workers off 39 (7 percent) of 596 production platforms and eight (11 percent) of 76 Gulf oil rigs, the U.S. Bureau of Safety and Environmental Enforcement reported Sunday.”

Given that Hurricane season officially lasts until the first day in November, Isaac serves as a powerful reminder of how unpredictable – yet inevitable – price shocks are in the energy markets.

Filed under:Causes and Solutions,Energy,Fuel Budget,Gas price,Price Shocks | by Eyes on Energy @ 7:29 pm |