Tuesday, May 03, 2005

Gas & Oil at a Glance: 05/03/05

For the third straight week, gasoline prices held steady, averaging out at $2.23.5 per gallon across the United States for one gallon of Regular Self Serve Unleaded, based upon figures released by the Energy Information Administration.

The West Texas Intermediate grade of crude oil, which has been sloshing around in the lower 50's for a 42 gallon barrel for these three weeks, actually broke through the $50 mark in the last seven days before recovering to end at $50.92. That is a $1.15 loss from $52.07, the going rate during the previous week.

The two statistics that I derive to give a little more context to gasoline prices are currently at high levels, in relative terms. The Gas to Oil Price Ratio is presently at 1.84, with just one exception, the largest that it has measured during the 14 weeks in which oil has sold for $50 or more. At 102.26 cents, the 'Spread', the difference between the price of a gallon of gas and the cost for the same quantity of oil, also is the second highest that it has ever been when the going rate for oil is $50 or greater.

In my April 26 post, I probably tried to get a bit too fine in anticipating the future, calling for a slight decline during this past week, and anticipating that petrol prices would begin rising again was we rolled into early May. At this point, I'm not so sure. One trend that I've noticed as I pay attention to the petroleum markets has been the tendency for the GasPriceWatch.com service's daily average prices to exceed their counterparts by several cents either way.

For instance, as I write this article very early on Monday morning, the more established and more widely referenced American Automobile Association's Fuel Gauge Report shows a national mean of $223.5 for gasoline, in exact agreement with the number released by the Energy Information Administration. On the other hand, GasPriceWatch is some 4.5 cents lower, revealing a $2.19 national average.

What is compelling about this difference is that, as long as I've been watching, the prices paid for gasoline have gone in the direction indicated by GasPriceWatch, for the very most part. That would be one sign of slightly lower pump prices in the immediate future. Couple that with my own two specialty stats being at rather high levels, and there is further reason to believe that a small measure of relief is likely.

On the other hand, while availabilities of hydrocarbon stocks are ok at this time, they may be less so soon. The vaunted 'Summer Driving Season' is fast approaching, when demand typically increases and the capacity of refineries is taxed, factors leading to a renewed surge in the toll for petrol. What may moderate this anticipated increase is the fact that the rate of economic growth is slowing in the U.S., accompanied by the suggestion that the early 70's nemesis known as 'Stagflation' is again rearing its ugly head.

What makes the most sense to me at this point: We will see payouts at the pump probably diminish by a few pennies during the month of May. Going into June, I'm expecting to see gas prices back on the rise. The silver lining in this dark cloud is that, while I had been envisioning $2.50 a gallon gasoline as a distinct possibility during the summer of 2005, right now that strikes me as less of an eventuality, since all things financial are not moving along at the faster pace that has prevailed during the last couple of years.

To those hoping for any kind of real relief, with gasoline retreating to well under $2.00, short of the world's business activity diving head first into the dumper, that's not in the cards. We are simply in a long term context in which more people desire a commodity that is limited in availability. If you didn't click on the link in this feature last week, I encourage you to take a look at a graphic provided by the Energy Information Administration. As one picture that is in fact worth a thousand words, it gives a good visual perspective about where available petroleum supplies stand and have stood in the past, compared to demand.

As my ongoing disclaimer, the circumstance that could bring about an extraordinary elevation in petroleum prices is a disruption in the comparatively tight inventories of oil and gasoline, a condition that we've been living with for some time. Thankfully though, all appears well on this front, at least for now.

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


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