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October 22, 2013

October 22, 2013

 

 

Macroeconomic Factors

  • Data from the last month does not show much change in world economic prospects.
  • The employment situation has been strong when measured by layoffs (ignoring the shutdown) but modest in terms of net job changes.
  • European economies are somewhat stronger as is the Euro.
  • Chinese growth is over 7.8% for the third quarter, much better than those who expected a “hard landing.”

Potential Risks

Over the past month, gas prices have fallen to their lowest levels in over a year. A number of factors contributed to the move, included what would normally be expected from a seasonal shift.

The National Journal reports:

“A number of factors have spurred the decline, including the seasonal shift to cheaper fuel blends at the end of the summer driving season, decreased likelihood of U.S. intervention in Syria, and booming domestic oil production.

‘Consumer demand is at its highest in the summer, when folks take vacations. In the cooler months, kids are back in school, people go back to work full time, and there’s less of an opportunity for recreational consumption,’ said Tom Kloza, chief oil analyst for GasBuddy.com, a gas pricing and information website.”

Pricing

Earlier in the month, October futures had dropped dramatically from the levels seen in September. This strongly suggested that a significant number of geopolitical issues have been addressed to the general satisfaction of financial markets. However, increased uncertainty due to the US federal government shutdown – as well as a number of terrorist attacks in East Africa – brought the forward curve back to levels indistinguishable from September and August.

 

To download a more detailed version of this report CLICK HERE.

Filed under:Fuel Price Trends | by Fuel Expert @ 1:28 pm | 

August 7, 2013

Uncertainty in Data Clouds Oil Market

 

Short term oil pricing is uncertain leading into mid-August. The Washington Post reports that market trading volume has decreased in anticipation of new reports from a number of sources.

“The U.S. Energy Department, the International Energy Agency and the Organization of the Petroleum Exporting Countries all this week release their latest assessment of the energy markets, which includes a forecast for worldwide demand for oil. Analysts are anticipating some downward revisions, given a slowdown in China’s economy.

‘The slowed Chinese growth will be demanding of additional downward adjustments in global demand estimates by the various agencies,’ wrote Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.

The market did have a swing of about $2 during Monday’s trading. A week ago, oil jumped nearly $5 on Wednesday and Thursday as the global economic picture seemed to brighten, even as central bankers in the U.S. and Europe indicated they’d maintain programs that helped to keep interest rates low. Then Friday, disappointing figures on hiring in the U.S. pushed oil down by 95 cents, though it still ended the week with a gain of more than $2 a barrel.”

We at Pumps are monitoring this incoming data closely and will follow the market moves as more information as it becomes available. Contact us to sign up for our monthly report with a review of the most influential stories so far in August.

Filed under:Fuel Price Trends | by Eyes on Energy @ 3:57 pm | 

July 18, 2013

CNN Projects Further Rise in Prices

 

Unfortunately for consumers and fleet managers, the variety of forces combining to drive up prices at the pump show no sign of slowing. A number of media outlets project that the price hike will continue through the end of the summer driving system – at least. An article in CNN explains why analysts see this as the most likely short term move:

Here’s a breakdown of what’s driving the recent gas spike, and what drivers should be worried about later this summer:

Political turmoil

The toppling of the government in Egypt and some other political upheaval in North Africa hasn’t significantly cut into U.S. oil supplies yet. But it’s made oil traders wary, which itself has been enough to raise the price of oil. Oil futures are up $4.72 a barrel, or 5%, to nearly $106, since the protests that toppled Egyptian President Mohammed Morsi started in late June.

“I think that’s the biggest factor,” said Kloza.

Upheaval in the commodity markets

Since investors started worrying about the Federal Reserve cutting back on stimulus, the prices of safe-haven commodities such as gold have plunged. Much of the money that came out of gold seems to be flowing into oil futures, driving up those prices, Kloza said.

“Commodity investors have the largest bullish position (in oil) we’ve ever seen,” he said. “It’s quite bubbly at the moment.”

Americans hitting the roads

Americans are hitting the highway this summer, meaning gasoline consumption is way up. That has taken crude oil inventories down by 24 million barrels since the end of May, which is 24% more than supplies of oil fell in the same period last summer. And a tighter oil supply equals higher prices.

“There’s been a real driving surge, whether because of pent-up demand or what, I’m not sure,” said Kloza.

Troubles ahead: Refinery problems and storms

Right now, North American refineries are operating at close to peak capacity, as refinery operators try to do every summer. But getting through a summer without problems can be the exception, not the rule.

Kloza said there is buzz in the industry that the Irving Oil refinery in St. John, New Brunswick, Canada, might need to shutdown for some unscheduled maintenance. That could send gas prices sharply higher in the Northeast U.S., since the refinery is one of the ten largest in North America. Irving Oil did not return a call requesting a comment on those reports.

In sum, this more or less captures the pressures driving up the fuel market at the expense of the average consumer. As the market climbs this wall of worry, the best we can hope for is that prices revert to the mean based on their season cycles.

Filed under:Fuel Price Trends | by Eyes on Energy @ 6:49 pm | 

July 17, 2013

US Consumers Continue to Struggle With Mounting Prices

 

Despite significant progress in improving domestic supply, American consumers are still suffering with gas prices at the pump. In large part, this reflects ongoing market uncertainty surrounding geopolitical developments – particularly in the Middle East. The Boston Globe asserts:

Even though oil imports are approaching 20-year lows, and the United States is enjoying a boom in new fuel sources, gasoline prices are soaring again because of political troubles halfway around the world. The civil unrest and military coup in Egypt — a relatively small exporter of crude oil — and the ongoing in-fighting in Syria have energy markets worried that the unrest could spread to other oil-producing countries in the region, disrupting supplies…

…And though the flow of imported oil has been steadily falling, the United States remains a huge consumer of foreign fuel and will continue to be subject to global events, said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.

“It’s still a global market,” said Schenker, whose financial consulting firm monitors the global oil industry. “We’re subject to global demand because we’re still importing millions of gallons per day from overseas.”

An article by ABC News corroborates this interpretation.

…unrest in the Middle East that is creating instability in the global oil markets. “Anytime Egypt gets in trouble, knee jerk reaction is go out and buy some crude oil. And the price of crude has shot up, finally kicking in at the pump,” said Jeff Macke from Yahoo Finance.

However, a CNBC article points to a different, but equally significant factor in gas prices: hurricane season.

“The 500-pound gorilla that’s ready to walk in the door is the upcoming peak of hurricane season” in August, DeHaan said. After Hurricane Katrina damaged refineries in the Gulf of Mexico in 2005, spiking prices and stretching supply, major storms moving in that direction generate concerns. And that can edge crude prices up.

All in all, a number of factors have combined to shoot up prices at the pump. Consumers and fleet managers most sensitive to these drastic moves would be wise to lock in prices in the late fall as they reach their typical lowest point.

Filed under:Fuel Price Trends | by Eyes on Energy @ 5:09 pm | 

July 16, 2013

CNBC Covers Nationwide Price Spike

 

CNBC had a segment last night noting that gas prices this year are a notable 20 cents higher per gallon than they were last summer.  The full video is available below, followed by a notable excerpt.

The following exchange between the host, Patrick Deehan, and Stephen Shork stands out from the rest of the segment.

Host: So here is the question, Patrick. It used to be that four bucks a gallon was the break even point. How do we know that’s not the case? Americans are very adept at dealing with new things. Is there a breaking point for the average American family? Five bucks? X bucks?

Patrick Deehan of Gasbuddy:  There certainly is. Five bucks is the next psychological breaking point. We’ve seen it in some rural stations or perhaps in California and isolated basis, but about not even in Chicago have we seen regular gas over $5 a gallon. So that is the next breaking point. How close are we? That’s a discussion for another day. But for now I think that is the next point where you see demand start to crumble.

The segment goes on in an attempt to put current gas woes in context. How big of a dent has the recent spike put in the average American budget? Why are some areas of the country affected more than others.

Host: There are parts of America, Hawaii, you can understand why prices are so high. They have to get the fuel there. But then there are certain areas like Charleston, South Carolina which is the lowest price but there is not a lot of fuel terminals necessarily near there. Is there any rhyme or reason to gas pricing in your mind?

Stephen Schork of The Schork Report: Well, you do have a state by state basis the taxing information where of course taxes in South Carolina will be much lower relative to Illinois. Illinois has the double whammy of a higher tax policy and a significant amount of refinery downturns this spring and into summer. We have a ton of oil, we just don’t have the capacity to turn it into gasoline. Minneapolis and Chicago, have seen massive spikes.

Gasoline right now at $3.61, you know, is cheaper today than it was in 1981, adjusted for inflation. So at that point, we also have personal consumption expenditures. A lot more of other money was going to gasoline in ’81 than it is today. So you put together that gasoline prices today especially at $3.61 is are not as dear as they were 30 years ago and less of our dollar goes towards energy, demand is strong because US consumers can afford these prices.

We felt this was one of the rare occasions in which CNBC offered some significant insight into current events regarding fuel prices. We hope you found it useful.

Filed under:Fuel Price Trends | by Eyes on Energy @ 6:21 pm |