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.




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