Tuesday, March 22, 2005

Gas & Oil at a Glance: 032205

Gasoline prices at the pump were up another 5.3 cents over last week, as crude oil rose in tandem. The average price for Regular Self Serve Unleaded across the U.S. is $2.11, according to figures released on March 21 by the Energy Information Administration. Crude ended yesterday up $1.67 over the seven day period, when it closed at $56.62.

Proportionally, the cost of oil increased right along with gasoline. On March 14, the Gas to Oil Price Ratio stood at 1.57 and was virtually unchanged yesterday, calculating out at 1.56. The 'Spread', the total going to the refiners, marketers and the tax man after deducting for the cost of oil, rose slightly, up a little more than one and a quarter cents to 76.09 cents. It has steadily been creeping up over the last month however. On February 21, it stood at 69.07 cents.

Along with just about every report that I'm coming across, it looks to me as if the record prices that we now have are due to be broken soon. Most often cited is price pressure because of refiners reorienting their facilities for the production of summer blends, putting a strain on capacity for formulas that are more expensive to produce.

From another perspective, one which can be gained by studying the spread data, the conclusion is the same. Looking over the last four years, from 2001 through 2004, the average spread during the second quarter, from April through June, has been 88.87 cents, nearly 13 cents more than it is now. If oil continues to sell in the mid 50's, it suggests that another 10 to 15 cents per gallon for gasoline is in the cards for the coming weeks and months.

In comparison, the spreads have been notably greater during the second quarter during the 2001-2004 period. In other quarters of this recent era, they have averaged 75.2 cents during the first quarter, 81.77 in the third quarter and 75.17 in the fourth.

What's more foreboding: the spreads have been known to balloon well above their average in spring time and early summer. Just last year, for a few weeks, from late May through the middle of June, they were in the $1.10 range. Should this recur, with oil remaining in the neighborhood of its current level, we've got gasoline approaching $2.50 a gallon.

Let's pray that we have no problems with refineries or with the already generally acknowledged tight supplies, or it could get worse. The real blessing would be the cost of crude dropping off, but little that I have come across anticipates that eventuality any time soon. Give it some more time however, say several months down the road, and I have the feeling that consumer adjustments in response to the higher prices and the transition into the fall will combine to soften demand for oil. At that point, a decrease at the pump, with gas retreating somewhat below $2.00 could become a reality.

By the way, with respect to the surprisingly wide differences that I have been seeing between the various organizations that report average national gas prices, up to eight cents per gallon, they have diminished. As I publish this post, the AAA reveals this figure to be $2.095, with GasPrice Watch at $2.12. Trilby Lundberg along with the Energy Information Administration came in between those two numbers.

To get a sense of where I see gasoline prices going, sooner as well as later, and why I believe we all have more control over them then we give ourselves credit for, please take a look at this article, just posted within the last 48 hours.

For further background about this report, including a description of the methods that I use for it, please refer to this post. See ya next week.


Blogger Terry Finley said...

Nice Blog. Thank You.

I think the gas prices are
(legal) robbery.

Check out my site.

Terry Finley

Monday, April 04, 2005 7:34:00 PM  

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