12-29-07 by dugan
I see the stars aligning, not for a lucky New Year but for $4.00 gasoline prices this spring. In fact, it’s already started. Regular is back over over $3 a gallon nationally, 69 cents a gallon above a year ago, according to AAA. California is nudging $3.30, even though demand in the state keeps sinking. The Oil Price Information Service predicts pump prices will peak at up to $3.75 a gallon in the spring. It’s a sure bet that California will top $4.00 a gallon and the rest of the country may well follow. The pattern has much more to do with oil companies’ control of the gasoline supply than the price of oil, as OilWatchdog showed in a study last July.
Oil companies have cut their crude oil inventories to a three-year low and keep reducing their refineries’ gasoline production, at a time of year when they historically raised their production of gasoline to meet spring demand. It’s all part of a profitable recent new business pattern: Constantly adjust production to stay at or below demand (even if you know your ancient, shabby refineries will break down in spring and produce another record price spike).
From Marketwatch: "US crude oil inventories have fallen further below their 5-year average, having now fallen in absolute terms by more than 60 million bbl since the end of June," said Paul Horsnell at Barclays Capital Inc., London. US crude stocks "are still falling relative to normal seasonal patterns despite the continuation of low refinery utilization rates," he said.
Unless there’s a full-blown recession (due in part to high energy prices), consumers can expect another wallet-cleaning, courtesy of Big Oil, in 2008. The glimmer on the horizon: a presidential election, which should have the oilies quaking in their boots. It wouldn’t take much in the way of refinery regulation and oversight to lay bare the new production-cutting business pattern that has turned $3.00 gasoline into a low price. Even better if it’s combined with regulation of energy futures markets to shine a spotlight on crude oil prices shoved up by traders, not market conditions.