[Rushtalk] Bend over summer gas is coming

Carl Spitzer cwsiv at juno.com
Thu May 24 10:24:49 MDT 2018


Market Insider 

Gasoline prices could see summer spike, with prices at 4-year highs and
record demand

      * Gasoline prices are expected to reach $3 as a national average
        for unleaded gasoline this summer, a four year high. 
      * But there are heightened risks gasoline could spike higher on a
        geopolitical event or some other issue, given the fact demand
        should be at record highs and refineries are running full
        throttle..  
      * The average family could pay several hundred dollars more for
        fuel during the summer driving season May through September. 
Patti Domm | @pattidomm 
Published 3:34 PM ET Fri, 11 May 2018 Updated 7:25 PM ET Fri, 11 May
2018 CNBC.com

   
Patti Domm | CNBC
A Sunoco gas station showing rising gas prices in New Jersey.
Already expected at four-year highs,gasoline prices could be be
especially vulnerable to spikes this summer, with demand at record highs
and refineries running full throttle.

Gasoline prices are expected to peak at a national average of around $3
per gallon by the Fourth of July holiday. But with summer driving season
officially kicking off on Memorial Day about two weeks from now, the
average price of unleaded gas is already at $2.85 a gallon, according to
AAA.

Nineteen states are already above the national average, with nine
averaging above $3 a gallon, and California heading toward $4 per
gallon. Drivers in 25 cities are already paying 70 cents a gallon more
than this time last year, according to GasBuddy.com.


"In recent weeks, we've seen 10 million barrels a day of gasoline
production. It continues to run very high. You're not talking a lot of
breathing room. If there's a big refinery that goes down in the heat of
the summer driving season, you can still expect a pretty big reaction,"
said Patrick DeHaan, senior energy analyst at GasBuddy.com.


show chapters 
Average family to pay $200 more for gas: Expert    4:37 PM ET Tue, 8 May
2018 | 02:25
But it's not just the potential hiccups at domestic refineries and
pipelines, and even summer hurricanes that analysts say could threaten
to send U.S. prices even higher. It's the fact that for the first time
in a while, geopolitics has been driving oil prices higher.

With oil prices at a four-year high, gasoline prices are climbing too,
and analysts are carefully watching developments with Iran in the Middle
East and the continued decline of Venezuela's oil production.

This summer, the average family could pay about $1,318 for gasoline from
May through September, compared to $1,070 in the same period a year ago,
according to Tom Kloza, head of global energy analysis at Oil Price
Information Service.

In 2014, when gasoline prices were last at $3 per gallon, the average
family paid about $1,600 for the summer season. Drivers this year,
however, should see the national average peak at about $3 to $3.10 per
gallon, but not stay at or above that level as they did in 2014, Kloza
said.


State-by-state gas prices as of May 11



Source: AAA

Gasoline demand, meanwhile, was at a high 9.8 million barrels last week,
just shy of the record of 9.86 million barrels, and it is expected to
rise during the summer. Analysts say low unemployment and tax breaks
could be pushing up demand as more people drive to jobs and vacations.

"Certainly, we could see several weeks this summer where gasoline demand
is in excess of 10 million barrels a day…We could see new weekly records
set this summer," said Andrew Lipow, president of Lipow Oil Associates.
Refineries are running at a high level, and utilization has been running
over 90 percent.

Gasoline prices have been rising steadily, with the national average up
about five cents per gallon in the last week and 20 cents in the past
month. Last year, at this time the average was $2.33 per gallon,
according to AAA.

The highest prices ever for unleaded gasoline were in the summer of
2008, with national prices for unleaded averaging $4.11 per gallon. Oil
that year spiked above $145 per barrel, double current levels.

Fuel prices have been climbing this year, along with crude, which is up
about 18 percent year-to-date. Oil prices have jumped recently as
President Donald Trump moved to withdraw the U.S. from the Iranian
nuclear deal. Trump dropped out of the agreement this week, and shortly
after, there was the first direct military confrontation between Israel
and Iran, with Iran aiming rockets at Israeli forces. Analysts said if
that type of activity continues or intensifies, it could drive crude —
and gasoline —prices even higher.

West Texas Intermediate crude futures Friday were at about $71, up more
than 3.5 percent in the last two weeks. Gasoline futures were up about 6
percent in the same period.

"It's possible I would say we could have a spike if the tensions in the
Middle East heat up to the point where it begins to impact crude oil
supplies. If that's the case, the oil market would respond accordingly,
and you could see $3.50 a gallon for gasoline," Lipow said. "I would say
the probability is less than 25 percent, but that could easily change."

Venezuela's dwindling production, now at about 1.5 million barrels a
day, is about 1 million barrels a day less than last year, and more
declines are expected.

The future output of state-run Petroleos de Venezuela, called PDVSA, is
even more unclear now that ConocoPhillips is seeking the company's
Caribbean assets in return for a $2 billion arbitration award related to
Venezuelan's seizure of Conoco assets in 2007.

A number of ships headed for PDVSA Caribbean operations recently have
been diverted to avoid seizure of their cargoes. Other companies are
expected to lay claim on PDVSA assets, including Canadian miner Rusoro
Mining which is seeking Citgo assets.

"We're looking at a possible implosion, not only of their crude oil
exports, which are pretty low but of their refineries. Maybe they're
operating at 30 percent of capacity," said Kloza.

He notes that PDVSA was a chief supplier of fuel in Central and South
America but its problems might mean the U.S. steps up to be "a larger
supplier if things continue to get run down in their refining
operations."

The U.S. exported 1.9 million barrels per day of crude last week, and
another 4.8 million barrels of refined products, including 581,000
barrels a day of gasoline. The U.S. also imports some gasoline into the
East Coast from Europe and Canada, but it has become a net exporter of
refined products with a substantial amount of diesel exports.

"The U.S. is now exporting more crude oil than Venezuela," GasBuddy's
DeHaan said. "That's a stark turnaround. Even a year ago, it just seemed
impossible…That's a situation that's not going to be reversed."

Kloza said if oil prices do spike, Trump can release oil from the
Strategic Petroleum Reserve or press Saudi Arabia to return some oil to
the market.

U.S. oil drillers continue to increase their output, but Kloza said
inadequate pipeline capacity is one factor that could limit the increase
of U.S. crude. U.S. production is continuing to grow, hitting a record
10.7 million barrels a day last week and is expected to top 11 million
by year end.

But Kloza said the U.S. also produces light sweet crude, while the Gulf
Coast refineries process heavier crudes, like that from Venezuela.

"We have just too much light and sweet. That's why we're going to be
exporting it to places like China and India, and in some cases here to
refineries that can run more light crude. This is why Venezuela is such
a big deal," he said.







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