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.


Blogger 'Thought & Humor' said...

Thought I would stop in to say, "Hi"!!!


'Thought & Humor'
Harvard Humor Club

Thursday, April 14, 2005 9:16:00 PM  

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