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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 | 

February 6, 2013

Talks to Resume Over Iranian Nuclear Program

 

In a potentially promising move, talks are scheduled to continue on the subject of the Iranian nuclear program. If successful, negotiations could calm tensions over the contentious Strait of Hormuz – but it is too early to tell if any progress will be made. The Los Angeles Times suggests an air of distrust surrounding the talks:

“International concerns have been rising in recent months, amid signs that Tehran is edging closer to a nuclear capability. Diplomats acknowledge that if the two sides don’t make progress within the next few weeks there may be a long interruption in the talks because of the approach of presidential elections in Iran in June.

A senior U.S. official said the agreement was ‘positive’ but added that ‘we’ll be looking to see if they are prepared to engage seriously.’

But a senior Iranian official was quoted questioning Western motives in the negotiation, suggesting that some officials in Tehran may not be in a mood to make a deal.”

As of this moment, the relatively promising developments on this front – along with the success of the French mission in Mali – seem to be keeping oil prices from spiking even higher. Given that we are expecting price increases as the spring months already, the prospect of the talks in Iran falling through shortly before their Presidential election in June could be devastating.

Filed under:Fuel Cost Control,Hedging,Price Shocks | by Eyes on Energy @ 1:52 pm | 

January 30, 2013

Bank of America Reports Pop in Oil Prices

 

A Bank of America commodities memo from January 29 reports a jump in oil and gas prices, led primarily by RBOB Crude Oil.

“The oil complex, led by RBOB, ripped higher yesterday on news that Hess would be closing its Port Reading, NJ refinery by the end of February. RBOB prompt cracks rallied $2/bbl and Cal13 structure gained 5 cents/gallon when the news hit the wire. The closure takes 50-60k bbls/day of gasoline production out of Padd 1 going into the summer, with Girard Point already going into turnaround for 45 days on Wednesday. Though not a game changer, this exacerbates the already short supply situation in Padd 1, a region that typically cannot resupply itself during the summer. With demand performing decently well and production clearly on the seasonal down slope, the Padd 1 gasoline outlook is very strong. Heating was initially dragged higher on the news but was sold quickly, with cracks closing at previous lows and spreads nearly unchanged.

WTI and Brent followed RBOB as well, gaining 90c and 50c, respectively. However, crude too was unable to hold the gains, coming off $1.20-$1.30 from the highs as producers took advantage of the spike to sell flat price. Crude eventually rallied back to unchanged over the remainder of the session, settling up 56c in WTI and 20c in Brent. WTI Dec13/Dec14 continues to rally, widening by another 20c, its highest since September 2012.”

In doing so, the Bank of America highlights something that we at Pumps have been saying for a long time. Underlying supply issues in gas and oil markets continue to expose themselves whenever the smallest of price shocks occur. Even during what ought to be a cyclical period of relative decline, prices continue to shoot up at unpredictable intervals. What is predictable, however, is the need for protection against these events.

Filed under:Causes and Solutions,Fuel Cost Control,Fuel Price Hedging,Gas price,Hedging | by Eyes on Energy @ 9:48 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 | 

November 2, 2012

Can the President Control Gas Price at the Pump

 

Bloomberg Businessweek contributor Roben Farzad discussed this very question on NPR’s ‘Solve This’ series.

The short answer is, No. But of course this does not stop candidates from talking about it,

Oil and its various products are traded in a global market. All the oil we have been pumping right here in the USA doesn’t make a bit of difference. Oil producers want to sell their product for the highest prices available. That may not mean to US buyers and it’s not something the President and/or Congress can demand.

Read the whole transcript for the complete explanation. You can also listen to the story.

Filed under:Fuel cost,Fuel Cost Control,Gas price,Presidential Election | by Pump Girl @ 4:13 pm |