10-04-07 by dugan
Are we being set up for an even earlier, bigger gasoline price spike next spring? Sure looks like it. Gasoline prices are 47.8 cents a gallon above the U.S. average at the same time last year. The latest federal Energy Information Administration report shows weekly gasoline supplies for September at their lowest point since 2000–even lower than Sept. 2005, right after Hurricane Katrina. Supplies are more than 10% below what they were last year at this time.
Gasoline supplies are down over last year in all regions except the Gulf Coast.
Even in Sept. 2005, the worst possible example of a supply shortage, gasoline supplies averaged 194 million barrels. Way, way back in 1990, the average weekly supply for the same period was 219 million barrels of gasoline with much lower demand.
Refinery utilization, which measures how much of their capacity refineries are using to make fuel, heating oil and other products, is down around 87%. Just to keep up with current average yearly demand, they have to run at 92% So it’s clear that refiners are not building up stocks now to smooth out any price spike next spring.
So even if today’s excuse for rising gasoline prices is the price of oil, reductions in supply like this, if they continue, will lead in early 2008 to the next big fuel price spike. And as for those oil prices, analysts have stopped trying to find logical reasons and are simply pointing to speculative trades.
Here’s from an AP story on the latest EIA reports:
"Oil’s true value is closer to $65 a barrel, said Tim Evans, an analyst at Citigroup Inc. in New York, instead of at the near $80 a barrel or higher range it has been trading.
"Many analysts feel oil prices have been driven up by speculative buying, and they argue that the market’s underlying supply and demand fundamentals do not support the record prices of recent weeks.
"However, while many analysts expect oil prices to begin a seasonal decline into winter, few are willing to predict when that slide will begin. Oil prices normally drop off every year toward the beginning of winter in the Northern Hemisphere."
And here’s the plainspoken analysis of our old friend Insider, who’s been through this supply manipulation before:
"Consumers cut back on consumption this summer in response to the prices
exceeding $3 per gallon and inventories of refined motor fuel started to
increase. In response, many of the companies either chose to slow down
production and/or undertake refinery maintenance earlier than normal.
The decrease in inventories (supply) that has occurred stopped the
downward trend in prices in September and sets the stage for prices to
go back up again earlier next year than normal. Same ole price spike
game, just a month earlier than before."