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May 15, 2013

Illinois Refinery Shutdowns Boost Minnesota Prices

 

According to the regional American Automobile Association, the extended inactivity of two Chicago-area refineries is wreaking havoc on gas prices two states over. According to Minnesota Public radio:

“Gail Weinholzer, the director of public affairs for AAA Minnesota-Iowa, said due to the inoperative refineries, gas prices in the upper Midwest/Great Lakes region are spiking. She notes that the average price in Minnesota was $3.85 a gallon Wednesday morning, well above the national average of $3.59 a gallon.

‘We do not expect there to be any relief for the Upper Midwest/Great Lakes region until probably late June to early July,’ said Weinholzer.

Weinholzer said many stations in Minnesota are reporting prices over $4, including some in the Twin Cities charging $4.19 a gallon.

Unfortunately, there appears to be no hope for relief in the very near future. The Star Tribune elaborates on the depth and breadth of the problem:

…the high gas prices will remain with us for a while, possibly through the July Fourth holiday. Weinholzer [of AAA Minnesota] said reduced capacity due to the closures of two large refineries in the Chicago area is the main culprit in driving the prices up.

The two refineries, which supply much of the gas supply for the Upper Midwest, are offline and might not resume operations before Memorial Day, she said. Even then, there might not be any relief.

‘Restarting a refinery is not like flipping an electrical switch,’ she said. ‘It takes time to ramp up, and other issues, glitches can occur.’

Sudden price shocks like this serve as a persistent reminder to consumers and fleet managers everywhere. Although trends predict lower prices nationally through the summer, these common refinery problems can often cause large and unexpected fluctuations in prices all over a given region.

Filed under:Fuel Cost Control,Fuel Price Trends,Price Shocks | by Eyes on Energy @ 6:07 pm | 

May 14, 2013

US Gas Prices Expected to Remain Low Through Summer

 

The Energy Information Administration forecasts domestic prices at the pump to remain lower through the summer of 2013 as a result of a spike in supply over the last several months. The EIA projects:

“Falling crude oil prices contributed to a decline in the U.S. regular gasoline retail price from a year-to-date high of $3.78 per gallon on February 25 to $3.52 per gallon on April 29. EIA expects the regular gasoline price will average $3.53 per gallon over the summer (April through September), down $0.10 per gallon from last month’s STEO. The annual average regular gasoline retail price is projected to decline from $3.63 per gallon in 2012 to $3.50 per gallon in 2013 and to $3.39 per gallon in 2014.”

The ramped-up exporting of domestic petroleum will also serve to exacerbate this trend. NPR reporter Daniel Karson reports:

“… increased U.S. petroleum exports could keep domestic prices from taking a sharp dive, despite a slight slump in demand.

‘U.S. refineries are also exporting a record amount of diesel and gasoline to developing countries, including China, where demand for diesel is through the roof,’ Diane reports.

Oil industry analyst Patrick DeHaan tells Diane that if gas companies ‘build domestic inventories too much, it will hurt their bottom line. Maintaining exports while not allowing inventories to grow out of control, is what they’re likely trying to accomplish.’”

Still, it is imperative to mind the potential for geopolitical developments to undercut currently forecasted trends. As the EIA notes in its own report: “Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the projected levels.”

Filed under:Fuel Cost Control,Fuel Price Trends,Gas price | by Eyes on Energy @ 6:15 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 27, 2013

Talks to Resume Over Iranian Nuclear Program

 

Diplomatic talks have resumed this week over the ongoing nuclear weapons program in Iran. One would think this would be a good sign, as increased tension with Iran so frequently results in threats to close the extremely important Strait of Hormuz. However, it appears that nobody is expecting much to come from these negotiations. The New York Times reports:

When Iran’s nuclear negotiating team sits down with its Western counterparts in Almaty, Kazakhstan, on Tuesday, it will offer no new plans or suggestions, people familiar with the views of the Iranian leadership say. More likely, they say, the Iranian negotiators will sit with arms crossed, demanding a Western change of heart.

Iran’s leaders believe that the effects of Western sanctions have been manageable, and Iran continues to make progress on what it says is a peaceful nuclear energy program. And Iran’s leaders see that North Korea, which openly admits that it wants nuclear weapons, has performed three nuclear tests without suffering any real penalties.

As a result, Iran’s leaders feel that they, not the West, hold the upper hand in negotiations.

This attitude has reflected poorly on the status of the negotiations already. Again, the New York Times claims that all parties are skeptical that the talks will result in any fruitful negotiations.

The ultimate goal of talks with Iran is to get the country to comply with Security Council resolutions demanding that it stop enrichment altogether until it can satisfy the International Atomic Energy Agency that it has no weapons program and no hidden enrichment sites. In return, all sanctions — which have so far cost Iran 8 percent of its gross domestic product, sharply increased inflation and collapsed the value of the Iranian currency, the rial — would be lifted.

No one expects that kind of breakthrough in this round, especially with Iranian presidential elections coming in June and any major concession likely to be perceived as weakness. But the hope is for an incremental movement toward Iranian compliance in return for a modest lifting of sanctions.

…Senior Western diplomats have said that this meeting would be a low-level success if it produced a specific agreement to meet again soon, or to meet more often at the technical level, so that there would be an element of momentum to the negotiations.

The six nations talking with Iran have remained united and share an impatience over what they perceive to be its delaying tactics. The Russian envoy, Deputy Foreign Minister Sergei Ryabkov, who has been most opposed to increasing sanctions, said that time was running out for the talks. He told the Interfax news agency that easing sanctions would be possible only if Iran could assure the world that its nuclear program was for exclusively peaceful purposes.

“There is no certainty that the Iranian nuclear program lacks a military dimension, although there is also no evidence that there is a military dimension,” he said.

It could be expected that gas prices may move slightly higher if these talks do inevitably break down. However, as of this moment none of this appears to be having much of an effect on the market. Instead, fears of a cyclical price increase appear to overshadow any price shocks for the near future.

Filed under:Fuel Cost Control,Gas price,Price Shocks | by Eyes on Energy @ 1:37 am | 

February 11, 2013

Gas Prices Hit Record Highs

 

Gas prices across the nation have risen to their highest prices since October 2012, according to new reports from the Energy Informational Association. The USA Today reports:

“The price of a gallon of regular unleaded stands at $3.611 in the survey released today, up 7.3 cents a gallon from a week ago and 3.6 cents from the same week last year…Gas prices have steadily climbed since they hit a low of $3.254 for the week of Dec. 17. They haven’t hit $3.60 a gallon since Oct. 22, the EIA pricing history shows.

Prices typically climb as the nation comes into the spring driving season, but as the weather attests, we’re still a long ways off.”

However, the LA Times seems to suggest that this recent rise in pricing has more to do with speculating on the energy markets than consumer driving patterns. As they claimed this morning:

“Hedge funds, commodity pools and other high-roller investors have thrown close to $12.5 billion into a collective bet that gasoline prices will rise, and some analysts say it’s one reason why gasoline prices are at a record for this date in California and nationally.

The details were contained in the Commodity Futures Trading Commission report released Friday, showing that betting on higher gasoline prices was closing in on the highest level ever of $13 billion, set last March.

‘There has never been this much money bet on higher gasoline prices this early in the year,’ said Tom Kloza, chief oil analyst for the Oil Price Information Service.”

This pattern would fit with some of the most recent data analysis we at Pumps have been personally involved with. Every month we compare the forward price curve to the previous several months, thereby plotting the change in the futures markets over time. This most recent data showed that the futures market predicted prices for crude oil to exceed the highs of last spring.

Click to Enlarge.

Filed under:Fuel Cost Control,Fuel Price Trends,Gas price | by Eyes on Energy @ 11:34 pm |