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August 21, 2013

Egyptian Turmoil Unlikely to Impact Gas Prices

 

In something of a counter intuitive move, it appears as though recent developments in Egypt are unlikely to directly impact prices at the pump in the United States. According to CBS News’ Washington affiliate:

Jeff Colgan is an assistant professor at the School of International Service at American University. He watches the oil markets globally and that means keeping close tabs on the Middle East since so much oil is either produced or flows through that region. He says Egypt does not produce much oil so the turmoil there will likely have little impact on gas prices.

Colgan tells us, “What’s happening in Egypt is bad for a lot of reasons but the price of gas is probably not going to be one of them.”

But there is the Suez Canal which is a vital and heavily used passageway to transport oil and other goods around the world.

If something forced the closure or delayed ships traveling the canal – it raises the possibility of gas prices increasing. Still, Colgan says the canal is too important to the economy of Egypt and beyond to let anything that drastic happen.

“Typically the government wants to keep the canal open but one could imagine rebels who are trying to force the hands of the government could try but that is one scenario but militarily not likely,” he said.

Meanwhile, oil prices have slumped along with the market as a whole over the course of the last week. It remains to be seen whether the Suez Canal comes into play as the conflict between the Egyptian military and the Muslim Brotherhood intensifies.

Filed under:Causes and Solutions,Price Shocks | by Eyes on Energy @ 3:11 pm | 

July 15, 2013

Price Shocks Ripple Throughout Country

 

Gas prices around the country have spiked in the last week, after settling down in the wake of the July 4th holiday. While the recent political unrest in Egypt seems unlikely to effect control of the Suez Canal, analysts claim international turmoil is in large part responsible for the price increase. Bloomberg reports that production difficulties in Libya are more directly relevant to US consumers:

Production dropped 16 percent to 1.13 million barrels a day last month, the lowest since January, according to data compiled by Bloomberg. The decline is partly because power shortages are disrupting the pumps that lift oil from beneath the ground, said Abdel Jalil Mayuf, a spokesman for state-run Arabian Gulf Oil Co., which pumps crude in eastern Libya.

“The country has been through a tumultuous time,” said Sana Abid, an oil analyst at KBC Energy Economics. “It looks bleak for Libya at the moment. They are going to struggle and that’s reflected in declining output.”

Austrian producer OMV AG (OMV) said today its fields in Libya, which produced 30,000 barrels a day last year, have been shut since June 25 because of the political situation.

The Libyan government is trying to address the problems facing oil producers, quadrupling the size of a special guard to protect the industry from attacks to 12,000 people this year.

Despite the fact that there is no easy end in sight, prices are expected to decline in the fall according to yearly trends. Nevertheless, this is yet another stark reminder that the potential for unforeseen international events to disrupt domestic markets is significant.

Filed under:Fuel cost,Price Shocks | by Eyes on Energy @ 4:26 pm | 

June 17, 2013

Rising Tensions in Syria Inch up Prices

 

In a change from the precedent set over the past several months, the Obama Administration determined late last week that the Syrian government of Bashar Al-Assad crossed a “red line” by using chemical weapons against opposing rebels. CNN Reports:

Syria has crossed a “red line” with its use of chemical weapons, including the nerve agent sarin gas, against rebels, a move that is prompting the United States to increase the “scale and scope” of its support for the opposition, the White House said Thursday.

The acknowledgment is the first time President Barack Obama’s administration has definitively said what it has long suspected — that President Bashar al-Assad’s forces have used chemical weapons in the ongoing civil war.

“The intelligence community estimates that 100 to 150 people have died from detected chemical weapons attacks in Syria to date; however, casualty data is likely incomplete,” Ben Rhodes, the deputy national security adviser for strategic communications, said in a statement released by the White House.

However, the conflict in Syria continues to be a source of geopolitical tension. Russian President Vladimir Putin responded to the US announcement by warning them not to support the rebels. Again from CNN:

Russian President Vladimir Putin warned the West on Sunday against arming Syrian rebels “who kill their enemies and eat their organs,” referencing a widely circulated video that purports to show a rebel fighter eating the heart of a dead soldier…

“I believe you will not deny that one should hardly back those who kill their enemies and eat their organs. … Do you want to support these people? Do you want to supply arms to these people?” Putin asked, speaking to reporters in London after meeting with British Prime Minister David Cameron.

Already, this is having serious implications for domestic gas prices. Syria’s proximity to nearby centers of oil production – along with its remarkably close ties with the state of Iran – makes it a focal point for potential price disruption. According to Access North GA:

Although Syria is not a major oil-producing country, it does boarder Iran and Iraq which produce about one-fifth of OPEC’s oil output. The value of the dollar fell last week, providing further support for the increase in oil prices…

“Motorists shouldn’t be surprised to see retail gas prices creep higher this week as tensions in the Mideast increase and create concerns of supply disruptions,” said Jessica Brady, AAA spokeswoman, The Auto Club Group. “Although pump prices are higher now than they were this time last year, the Energy Information Administration expects the summer average price for a gallon of regular retail gas to average $3.53, about the same as last year.”

While there are other encouraging signs for US drivers, it is imperative to keep in mind the very real possibility that international conflict could have on prices at the pump.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 1:00 pm | 

June 12, 2013

The Worst May Be Over for Midwest Drivers

 

After weeks of pain brought on by a number of ill-timed refinery maintenance efforts, drivers in the upper Midwest may finally be seeing the light at the end of the tunnel. According to WANE.com, analysts project that the refineries in question are set to resume production at their normal levels shortly:

Analysts said one major Illinois refinery is back online and another big one in Indiana is on track to ramp up production again soon. The refineries’ ongoing maintenance — which led to reduced supply and higher prices — are the primary culprits for the surge at the pump.

“On balance I think the worst is over,” Tom Kloza, chief oil analyst at GasBuddy.com, said Tuesday.

Gasbuddy.com provides the data for wane.com’s Gas Gauge which shows that many stations are already lowering prices.

Exxon Mobil’s refinery in Joliet, Ill., was offline longer than expected, he said. Assuming there are no hiccups with BP’s plans to soon restart a crude unit at its refinery in Whiting, Ind., prices could drop below $4 a gallon within weeks throughout a five-state region stretching from Wisconsin to Ohio, according to experts.

“You just have one refinery issue after another. As they’re coming back on, that should be a big thing,” said Phil Flynn, chief energy analyst at Price Futures Group in Chicago.

However, consumers in Michigan still face some of the highest prices in the nation. Local news in Detroit reports:

“…gas prices are still averaging almost $4.18 for the state and $4.16 for the Detroit area. That’s over 50 cents more than the current national average of $3.64.

According to the website GasBuddy.com, Michigan currently has the third highest gas prices for any state in the country, behind only Hawaii and Illinois. The website also list Detroit, Ann Arbor, Kalamazoo, Lansing and Grand Rapids as all being in the top ten list of cities with the highest gas prices in the country.”

Allegations of price fixing and market tampering run rampant – but regardless it’s clear that consumers are still at the whim of extraordinary events and price shocks. As Gulf braces for a new hurricane season, it seems entirely likely that refinery shutdowns will remain an ongoing concern.

Filed under:Gas price,Price Shocks | by Eyes on Energy @ 1:59 pm | 

May 23, 2013

‘Sticky’ Gas Prices to Plague Midwest

 

Record high prices in much of the Midwest – including a 60 cent per gallon increase in Minnesota alone – have put a strain on many Memorial Day travelers. However, once the increased demand from this weekend dies down, it is unlikely that prices will follow it exactly. CBS News in Minneapolis explains:

“‘You do tend to see a delay when there’s a reason to drop price,’ said Akshay Rao, a pricing researcher and professor at University of Minnesota’s Carlson School of Management.

Rao said when refineries catch fire or go down, prices should go up right away, so gas stations have cash to buy the next delivery.

‘My current inventory has to take into account what the market is doing,’ he said.

But when fires go out and supply starts to climb, we don’t notice.

‘It’s less visible, less salient, and consumers are not hammering saying, ‘Hey supply went up, prices should be dropping,’’ Rao said.”

Unfortunately, the same inelastic demand that causes rapid increases in price helps to keep it that way. This only serves to exacerbate the already dismal situation for the average Midwestern consumer.

Filed under:Price Shocks | by Eyes on Energy @ 12:07 pm |