Tuesday, April 26, 2005

Gas & Oil at a Glance: 04/26/05

When it was all said and done, the price of gasoline barely budged, ended up right where it started this past week. Selling for $2.23.7 on April 19, Regular Self Serve Unleaded trended a few cents lower before coming back to finish yesterday at $2.23.6, according to figures released by the EIA, known in long hand as the Energy Information Administration.

On the other hand, oil made a larger wave, rolling to the upside. On April 19, the West Texas Intermediate grade finished at $50.37 for a 42 gallon barrel. Yesterday, it was able to fetch $52.07, or $1.70more than it did the previous week.

There was also some variability taking place with the derivative statistics that I feature each week in these reports. The 'Spread' – the difference between what a gallon of gas and a gallon of crude costs - fell to by 4.15 cents to 99.62. At close to a buck though, that's still near the high end.

With the latest figure dividing out at 1.80, The 'Gas to Oil Price Ratio' is down some. As has been the case in recent times, this means that the cost of oil continues to consume a comparably large portion of the price being paid for gasoline. Even so, if seen in the context of $50.00 per barrel oil or more, the GOP Ratio appears in a different light. The 1.87 mark that it hit last week is the record high when crude has been so costly.

In and of themselves, the Spread and GOP Ratio numbers lead me to foresee lesser payouts at the pump, but, pretty much as I said last week, not in abundance and not for long. In my previous report on April 19, I was envisioning gasoline prices dropping in the few weeks to follow. At this time, I'm inclined to project that the ongoing slight decline will prevail over the next seven days or so before it ceases. It's difficult for me to anticipate that great a decrease, so save the unspent pittance that you've been budgeting for gumballs. It may once again be destined for other places.

My reasoning is simple: Whether one looks at the situation over the short or long term, the circumstance in which we've been stuck for some time now remains the same, with no change in sight: Increasing demand pushing up against limited supplies.

The guys and gals over at the EIA seem to have a good grip on the past and the reality to come. As they say in their April 20 edition of This Week in Petroleum, “Notwithstanding the recent price drop, we continue to see a tight global oil supply and demand balance through 2006, especially highlighted by strong demand growth and limited spare crude oil production capacity. As long as global demand continues to grow at 2 million barrels per day or more without a comparable increase in crude oil production capacity, there is little reason to expect a sustained fall in crude oil and petroleum product prices.”

If you didn't catch the graphic via the link in the previous paragraph, you can view it separately by clicking here. This visual provides an unpretty but persuasive picture as to how oil availabilities stand in relation to those in the que to use it.

Just so you're not in the dark about my previews on petrol's near term trek – that not everybody thinks like me - the highly respected and often quoted Trilby Lundberg doesn't see a bounce quite so soon, believing that it is going to be a while longer before gasoline relaunches towards the upper stratosphere.

In any case, it won't be long before we find out whose view over the next hill has a bit more clarity.

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

Tuesday, April 19, 2005

Gas & Oil at a Glance: 04/19/05

After eight consecutive weeks of gasoline price rises, a bit of expected relief came about. Still selling for a near record average of $2.23.7 for a gallon of Regular Self Serve Unleaded in the USA, the going rate at the pump did drain down by 4.3 cents, compared to last week. Likewise, the cost for crude oil dipped by $3.34 for a 42 gallon barrel of the West Texas Intermediate grade from seven days ago. That's now down $6.33 since it hit a nominal record high on a week to week basis on April 4 of this year.

Relatively speaking, that leaves the two specialty statistics that I derive at extreme levels. The Gas to Oil Price Ratio – GOP Ratio - now divides out at 1.87, the highest that it has ever been with crude selling for $50.00 or more.

The 'Spread', the difference between the cost of gas and oil for one gallon of each commodity, stands at 103.77 cents as of yesterday, the largest it has ever been with oil in the $50.00 range. And in a larger context, the Spread remains extraordinarily high, regardless of oil's going rate. Among 760 data points that I have available for evaluation going back to August 20 of 1990, it has exceeded this figure on only eight occasions.

While my technical indicators are up, leading me to believe that additional downward pressure on gasoline prices is due to come, what about the supply situation? The consensus that I 've encountered seems to be well expressed within This Week in Petroleum, the Energy Information Administration's most recent report dated April13: “Recent EIA weekly data show ample gasoline inventories and strong gasoline production as refineries emerge from turnarounds. In addition, petroleum markets have begun to focus on high and still rising U.S. crude oil stocks, which along with comfortable levels inEurope, provide evidence of high production by OPEC members.”

Thus, given my standard disclaimers that no one – myself especially – can foretell the future for sure and that all bets are off should a supply shock of some kind transpire, a further relaxation in what we pay for gasoline in the next few weeks seems to be in the cards. Unfortunately, I doubt that it's going to be all that much, perhaps no more than a dime. Remember, available petroleum stocks remain fairly tight and I am aware of no compelling signs implying a large falloff in demand.

A little further out, in the next couple of months, I'll be paying attention to the demand situation. With supplies at this time about as stable as one could wish, it's going to be interesting see for the extent to which the summer driving season drives up petrol purchases. If we do see the generally expected increase, then look for gasoline to ascend again, within the $2.30 to $2.50 range. I'm just wondering if we may be reaching the point in the U.S. where discretionary activitiesinvolving the use of energy may become suppressed to some extent.

One last thought: Who has a vested interest in keeping oil from inflating far beyond its present levels? The Organization of Petroleum Exporting Countries and almost everyone else who provides us with oil. As I've been following ebb and flow of oil prices, I get the impression that the talk of raising output heightens whenever it's selling in the mid 50's or above – thereby influencing lower prices - and diminishes as they head south towards the half century mark.

My view is that OPEC and their colleagues will be pleased as punch to keep selling oil at or near $50.00. Indications are that world markets have tolerated these charges, their profits are more than adequate and they have a motive to keep their black gold from rocketing higher. Not that these guys necessarily have our well being at heart, but they are very aware that their product becoming too pricey will stifle economic growth, and that consumer adjustments will take place at an accelerated pace. In those conditions, a severe reduction in oil's value would not be out of the question, a circumstance they want to avoid like the plague. If nothing else, OPEC's present posture islikely to help keep the worst case from happening.

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

Thursday, April 14, 2005

Nevada's 'Tyranny Protection Act' Sails through Judiciary

The Senate Judiciary Committee of the Nevada Legislature rolled over yesterday, giving a pass to an amended version of Senate Billl 150, what I call the 'Tyranny Protection Act', the proposal making it a crime to lodge a 'false' accusation against a public employee. According to reports from the Las Vegas Review-Journal **, there were two changes, both ostensibly intended to render this unconstitutional conception sound. One modification excludes those holding political office. The second alteration would limit the scope of accusations, making the law applicable only when any charges deemed untrue against a bureaucrat are directed to his or her employer.

Quoted Wednesday in the R-J, Judiciary chair Senator Mark Armodei, if not apologetic in tone, certainly seemed tentative, after his committee extended the bill's life: "I'm sure the issue will be litigated even if this passes," Amodei said. "I guess this represents our best attempt at attempting to respond to the public safety concerns."

In a time when it appears that most of those elected and employed in the public sector are pleading poverty, isn't it ironic that they don't give all of the costs that would emanate from SB 150 becoming law one whit of recognition? Who is going to foot the bill for the expenses incurred, for the additional time and attention it will demand from legislators, for the arrests and probable incarcerations, not to mention for all of the required lawyering - not only that which is seen in court, but what takes place behind the scenes - when in all likelihood, this law will ultimately be struck down?

Despite Mr. Armodei's misgivings, SB 150 evidently cleared the hurdle handily, passing by a six to one margin. Only Terry Care, a Democrat from Las Vegas, deserves kudos, earning the distinction as the single lawmaker to have voted against this atrocious idea. Personally, there was no reassurance for me in learning that an individual I believed to be a truly principled conservative, Maurice Washington, a Republican from Washoe County, voted in its favor.

So far, 14 members of the Senate, including the bill's instigator Vegas Democrat, Senator Maggie Carlton, have let the light be green for SB 150. This includes members of the Government Affairs Committee, the panel that originally received the draft, before shuffling it on to the folks at Judiciary.

To its credit, the Review-Journal, Nevada's largest newspaper, has consistently sided with the citizens on its editorial and op-ed pages. Today, the newspaper appropriately slammed Senator Carlton, noting that, ". . . Ms. Carlton's concern for government employees outweighs her devotion to the Nevada taxpayers who pay their salaries or to the First Amendment."

Appropriately, the R-J also alluded to the fact that SB 150 is a wasteful exercise in futility. "Lawmakers passed a similar bill in 1999, only to see the federal courts toss it out as unconstitutional. A similar fate awaits this measure if it survives the process. The Republicans who allowed it to emerge from the committee -- what was Judiciary Chairman Mark Amodei, R-Carson City, thinking? -- deserve to be pilloried."

One reason this kind of pap gets so far is because self centered, whining lobbyists from organizations with a constituency that is taxpayer supported - take the Las Vegas Police Protective Association and the Nevada State Education Association for example - are the ones blessed with access to the legislators most of the time.

Despite the exemplary efforts of some in the media, it will take a public outcry to ensure that this act lands where it belongs, right in 'file 13'. You are thus encouraged to share your commentary with these politicians.

It's my objective to give this matter the ongoing attention it deserves. The article immediately prior to this one gives direct contact links to those who have been involved with SB 150 to this point. The first two pieces on this topic, filled with generous contributions from Juli Alexander of Redress, Inc., are available for your perusal. One is titled Stifling Citizen Complaints and the second The Tyranny Protection Act: More on SB 150.

**Since the Review-Journal now has a policy of charging for stories older than seven days, it makes no sense to link those particular items.

Tuesday, April 12, 2005

Gas & Oil at a Glance: 041205

Even though oil prices diminished by $3.15 per barrel over the week ending Monday, the average price for gasoline in the United States – Regular Self-Serve Unleaded – set another new high, jumping 6.3 cents to $2.28 per gallon. Yesterday's oil price was taken from Bloomberg.com's energy page, showing the going rate for West Texas Intermediate crude, traded in Cushing, Oklahoma ended up at $53.71. The mean for gasoline comes from the Energy Information Administration, posted on their Gasoline and Fuel Price Update web page.

At this point, gasoline has risen 50 cents a gallon since the beginning of 2005, looking at the data from one week to the next. Over the last 14 plus years, I found no instance when it has ratcheted up this radically over a comparable time frame.

Also up by an extremely large margin was a number I feature in these reports, the 'Spread'. That's the difference between the price of a gallon of gasoline at the pump and the charge for the same amount of oil. This week, for the first time in the 12 weeks that oil has sold above the $50 mark, the Spread surpassed one dollar. That is an enlargement of almost 14 cents, compared to last week. With one exception, going back into the latter part of 1990, this is the largest leap ever seen.

The other instance was way back in 1990, during the week of October 22, when the Spread inflated an unheard of 23.31 cents, as markets were gyrating over Sadaam Hussein's invasion of Kuwait. A swing of 10 cents or more is not standard fare, as the Spread has varied up or down to this extent only 14 times over the period for which I have data.

The other specialty statistic that I derive for this report, the 'Gas to Oil Price Ratio', is now the greatest that it has been whenever oil has sold above the $50 per barrel barrier. This week, it calculated out at 1.78. In the other 11 instances when crude has sold for so much, the next largest GOP Ratio has been 1.67. As this figure goes, I consider that a meaningful difference.

The good news - if a consumer of petroleum products can find any at present - is my impression that we are near the end of this history making escalation in gasoline prices. The available stocks of crude oil appear to be in relatively good shape. And, at one buck, the Spread is well beyond its usual level. The bad news is that even though I think that gas is more likely to drop than it is to rise over the next month or so, I doubt that it's going to be all that much. Having said all that, keep in mind what is becoming my routine caveat: If a disruption in the supply of oil comes about – and although it has improved, inventory is still tight - we're almost certain to see prices on the move to the upside again, maybe with a vengeance.

One last thought: Do you recall the widespread rumor in 2004 that the Saudis had committed to keep oil prices reasonably low in order to help George Bush get re-elected President? If in fact they made such a pledge, it's obvious that they did not or could not keep their word, as before the voting, oil was then selling for more than it ever had. But could 'Dubya's' cronies, the fuel refiners and marketers, have done their part to keep him in office?

Ever the one to suspect political conspiracies, I checked it out. But alas, there was no smoking gun. In the 13 weeks leading up to the election, the Spread worked out to an an average of 78.3 cents, and the Gas Oil Price ratio was 1.7. In the 23 weeks that have followed Bush's victory, both numbers have stayed amazingly close. So, while I remain no big fan of George Bush, the data makes no case for the oil people doing him any favors.

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

Tuesday, April 05, 2005

Gas & Oil at a Glance: 040505

Early last week, I had the sense that oil prices were going to be easing off a bit. In fact, I still do. But, as we all know, that didn't happen in the last seven days.

As has been occurring a lot lately, marks never before seen were reached. Crude oil surged, approaching the $60.00 per barrel price, later slacking off to close at $57.01 when trading ended yesterday. Regular Self Serve Unleaded gasoline also continued its flow uphill. According to the Energy Information Administration's survey, the mean for gas nationwide set another nominal record, coming in at $2.21.7 as of yesterday.

Since the beginning of 2005, when gasoline dipped to $1.77.8 – at the time it was a nine month low - it has now escalated a robust 43 cents in a time frame just barely exceeding 90 days. Taking a quick look at the numbers going back to the later months of 1990, I was not able to find such a substantial rise over so short a period.

One of the statistics that I look at for this report, the 'Gas to Oil Price Ratio' diminished ever so slightly, meaning that crude is taking a somewhat larger share of the money spent for petrol at the pump. But that difference is so minimal as to not be significant. Last week the GOP Ratio stood at 1.67, and this week it eased to 1.63.

With the price for gasoline rising, the 'Spread' - the cost for a gallon of gasoline after the amount paid for a gallon of oil is subtracted – stayed just about the same as last week, going down by less than a penny to end Monday at 85.96 cents.

This suggests that there is still more room for gasoline to rise further, as long as oil sells in the middle to high 50's. Over the last five years, the Spread in the second quarter of the year has varied considerably, from 76.24 cents in the recession year of 2002 to 101.09 in a more prosperous 2004. The average for the entire period has been 88 cents.

Given that the U.S. and the world economies are presently in a mode of expansion, the Spread data leads me to think that perhaps there's room for another dime upward for gasoline. It's my guess that the Spread won't test $1.00 or more as it did last year, because from what I'm picking up, supplies of both oil and gasoline are believed to be in decent shape.

In the midst of 'headline shock' stimulated by a reputable source, Goldman Sachs, with the firm saying that oil has the potential to gush above $100 a barrel, the obvious question becomes: Where crude oil will be going from here? Note that, in the context of this ruckus raising prediction, according to AMEInfo, the investment banking firm was posing such a prospect as “part of a multi-year period of high prices”, not as a train wreck due to happen beyond the next curve.
Incidentally, Goldman's revised estimate for oil prices in 2005 was $50 per barrel and $55 in 2006.

Overall, the consensus seems to be that supplies are adequate at the moment. Plus, I don't get the feeling that, even with the amplified call for petroleum products, it is not to the extent that oil will be driven to extreme heights. There also seems to be an enlarged element of speculation driving events at this point, such as what appears to be panic buying on the part of some airlines and fuel distributors, as was noted in a DetroitNews article.

My bottom line: I think that oil prices will stay close to or within the $50.00 range, but barring a significant disruption in production, will not go a whole lot higher. With respect to gasoline, although it is certainly possible that we will see $2.50 a gallon in the months to come, if it happens, it won't last forever. Citing how consumption was crimped during the middle of last year when gas prices soared, IFR Energy Services analyst Tim Evans, quoted in the Detroit News story mentioned earlier, says that, ". . . we could see retail gasoline prices rise to the $2.30-2.40 level on a nationwide average, but (retreat) back to less than $2.00 by the 4th of July." That's the general direction of my thinking.

One parting note: If you were wondering, as I have, what Americans are anticipating in terms of their energy costs, a Gallup poll released on March 29, 2005 reveals that three-fourths of those surveyed believe the high prices are here to stay. Sorry, for the lack of a link to this report. A few days ago, I was somehow able to access the document and took a couple of notes. Later, I couldn't get back into it again. The second time around, I was informed that a paid subscription was required.

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.

Monday, April 04, 2005

Practical Patriotism: A Timely Answer to the Agony of Oil

For more than 30 years, the distress over our dependence on foreign oil has stayed with us like a sticky goo. During these past 12 months, once again, even greater discomfort from this addiction is felt every time we confront the gas pump. Worse yet, as the Partners for Affordable Energy estimates, in the United States, “…we import more foreign oil today - about 60 percent of the oil used domestically - than we did in the 1970s when the Arab Oil Embargo shocked our economy into a tailspin”.

The costs of dependency on foreign oil are numerous. The extra dollars that most of us shell out each week may be a drag on our finances, but that hardship pales in comparison to more serious matters. How secure are we in the USA, when the sources of supply are so tenuous, based upon factors largely beyond our control?

Many credibly argue that oil issues juxtapose with the 'geopolitical' turmoil that exists today. Besides the unproductive diversion of our attention, threats of and actual conflicts are draining our national wealth. Of even greater distress are the highest prices being paid by thousands in this country, those who have lost their limbs if not their lives, as well as those who are now living with loved ones lost.

What are our options? How much better would you feel, and how much better off would the United States be, if we actually could cut our use of oil, say by 15 percent? That would translate to a need for one fourth less petroleum from overseas sources. Projecting from data provided by the federal government’s Energy Information Administration for the year 2002, if that were the case, there would no longer be a need for imports from any Arab OPEC country, nor from the United Kingdom, or the nation of Norway. Would that make your day, so to speak? What would that do for our country's foreign policy, not to mention our national psyche?

What if there was something that you could do to help make this ostensibly impossible dream happen, not next week, next month or next year, but today? What's more, what if you would find yourself rewarded for your action, not at some time far off in the future, but in the very near term?

Progress towards the goal of reducing our dependence on foreign oil by 25% could be accomplished by encouraging every consumer of gasoline and diesel fuel to take advantage of EnviroMaxPlus (EMP), a revolutionary and easy to use fuel catalyst that has been made available to the mass market within the last year. It is offered exclusively by a forward thinking company, Extreme Research Corporation.

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For more on the topic of energy, the environment and EnviroMaxPlus, please see my previous articles, Saving Energy, Saving Lives and Gas & Oil: A View of the Future. Also, every Tuesday, please check back here for my unique approach to reporting and evaluating current gasoline prices.