Sticker Shock-$3 a gallon gas? Click the picture:
( Sign seen in Atlanta... )
Posted on 08/31/2005 7:07:49 PM PDT by Jomini
Crude oil prices turned lower Wednesday, after a top U.S. energy official said the government would release oil from its reserves. Prices had earlier climbed back above $70 per barrel on concern about the extensive damage Hurricane Katrina caused to oil platforms and refineries in the Gulf of Mexico.
The announcement reflected how seriously the U.S. administration viewed the situation -- the reserve is meant to cushion the nation against national emergencies.
U.S. Energy Secretary Samuel Bodman said the government would release an unspecified amount of oil from its strategic petroleum reserves, a move designed to give refineries in the Gulf Coast area a temporary supply of crude oil to take the place of interrupted shipments from tankers or offshore oil platforms affected by the storm.
Light sweet crude for October delivery on the New York Mercantile Exchange rose as high as $70.65 before slipping back after Bodman's comments to $69.29, down 52 cents from Tuesday's settlement price.
Still, the move would not remedy destruction to refineries churning out much of the unleaded regular and premium grade used in the United States. That damage was sure to cut into already tight supplies, driving prices up not only on the trading floor but also at the pumps.
In a reflection of what will soon hit car owners in their wallets, gasoline prices, which closed up 20 percent Tuesday, continued climbing Wednesday. Unleaded gasoline rose by more than 6 cents to $2.5350 per gallon (3.8 liters) by afternoon in Europe.
"Hurricane Katrina is going to cost everyone, no matter where they live," said Platts, an energy reporting agency. "It's just a matter of time before the effect will be seen on the pump price."
Heating oil fell nearly 3 cents to $2.0490 a gallon, reflecting expectations that U.S. figures due out later Wednesday will show an increase in stocks.
The U.S. Minerals Management Service said Tuesday that 95 percent of the Gulf of Mexico's oil output was out of service, with more than 4.6 million barrels of production lost since Friday.
October Brent crude fell 21 cents to $67.36 a barrel on London's International Petroleum Exchange.
Oil prices are about 60 percent higher than a year ago.
Still, with gasoline supplies already tight before the storm hit, analysts suggested that additional troubles caused by refinery shutdowns would be of most concern to U.S. drivers already beset by high prices.
"Crude is a sideshow here," said Paul Hornsnell, head of energy research at Barclays Capital in London. "We were expecting gas to spike even before the storm hit because the situation was already very, very tight -- refineries were having trouble increasing production and inventories were [already] at a 20-month low -- and that was last week."
Eight refineries were shut down due to Katrina -- half of them producing gasoline. Vienna's PVM Oil Associates additionally reported at least three others flooded and power failures sidelining others.
Hornsnell said the damage translated into an estimated 30 million-barrel loss in gasoline output -- a problem that cannot be solved by increasing crude.
"In the next few months, there's no upside," said economist Mark Zandi of Economy.com, an economic consulting service. "And this winter, we're going to feel it more noticeably as people pay record gas prices and record home-heating bills."
"While I am a staunch conservative who voted for GW twice, the house of cards that is soon to come down is that one from Crawford, Texas. GW has done nothing, absolutely nothing, to slow the rising price of crude."
ROFLMAO .... He's done nothing to control the price of broccholi either. What gives?
Supply and demand sent oil up to $70. It will send it back down again ....
"Since Jan 1 the price of world crude has gone from $43.40 to near $70 per barrel."
Yeah, and China, Nigeria, and other countries have more to do with that than what Bush does or doesnt do.
Global oil demand is behind this rise.
oh, one thing: Iranian threat ... so you think Bush should get the oil price down by backing down from confronting Iran over nuclear weapons. Think of what you are asking.
"
The first that I heard that he was doing something was tonight when he said that some SPR would be released to offset the Katrina loss."
Well, we didnt have a short-term loss before. Good call on his part.
" People are not going to be satisfied with $3+ dollars a gallon"
Why not? They pay more for bottled water.
If drivers dont like it, stop driving, the lower demand will lower the price.
"So far, Bush is doing and saying the right things. Releasing crude to refiners who need it buys time. And the President has said that government can provide only a limited amount of help and almost none in the immediate future."
Agree.
"Oil - unlike tulips - is an absolutely vital commodity and all indications "
Oil was similarly vital when it dropped from $60 to $10 a barrell back in the 1980s.
"all indications are that there simply is not enough to meet current demand and the future will only make the situation worse. "
Not true. OPEC President has said that $70 a barrel is way above what the real supply and demand situation would indicate.
http://money.cnn.com/2005/08/19/news/economy/merrill_oil.reut/
http://www.heraldsun.news.com.au/common/story_page/0,5478,16434348%5E1702,00.html
http://www.menafn.com/qn_news_story_s.asp?StoryId=105197#top
I'm betting hard money that oil will be lower next year.
Yes. But supply was much greater than demand back then. The Saudis had an ample cushion - and stagflation cut demand during the '70s while Volcker engineered a recession in the early '80s.
OPEC President has said that $70 a barrel is way above what the real supply and demand situation would indicate
The market doesn't believe him. Simmons doesn't believe him. I don't believe him.
I'm betting hard money that oil will be lower next year.
I've made a ton of money on Valero over the past year and I'm not planning on selling.
This doesn't mean there won't be ups and downs. You can bet prices will drop as soon as the Gulf facilities are restored. But they won't drop much and the next rise will be even more brutal - until demand is very seriously cut.
Of course, there are things that could be done to ease the pain. Serious conservation. Reorganization of society to cut distance traveled to work. Drilling and exploitation of known reserves. These aren't easy.
It's also possible there will be some unforeseen technological break-throughs. I wouldn't count on it.
The refiners who's facilities have been closed can begin importing refined product instead of crude. Imported gasoline could replace the losses quickly.
( Sign seen in Atlanta... )
"If drivers dont like it, stop driving, the lower demand will lower the price."
When I hear this kind of comment, I get really really annoyed. Ok, drivers, stop driving, and oh, by the way, you won't have your job anymore because you won't be driving to your place of employment if it isn't close to where you live. Most people of working age have to drive, period. You're lack of a grasp on reality is mindboggling. Like the Enviro's, I suppose you want everyone to walk or bicycle to work. Sure, right down the freeway from the suburbs to the city of Chicago. I would have had to bike 25 miles to work down an expressway, and would have died in the process because of physical concerns. Yeah, all the older people between 50-65 years old, still working, should jog to their jobs. All the truckers should say screw it to their bosses and stop driving, and if they own their own rigs, should just park them in their driveways and do nothing. Of course, they won't have any income coming in, but who cares, they won't be having to pay those high gas prices, which would be good as there would be no money to pay for it anyhow.
Let's see, more airlines go into bankruptcy, putting many in a worse situation then they are in even now. Stop driving those military vehicles, it will bring down the price at the pump. No caravans to the Hurricane Katrina areas with supplies, etc., just stop driving. That will show them, whoever them is. Tourist industry, just forget it. We're all going to stop driving, so you won't make any money as no one will be traveling. So you tourist industry people may as well just stop driving too. Sit at home. And you traveling salesmen, quit it. Go broke. It will bring oil prices down. Of course, all of this will eventually throw the country into a recession, but who cares, at least none of us are driving. But maybe, if we are lucky, the gas prices will come down soon enough before a heap of people are either broke, in bankruptcy, or wallowing in a recession. The funny thing is, I just retired, so I actually can stop driving. Lucky me.
It does seem a great mystery doesn't it? There must be money involved.
"When I hear this kind of comment, I get really really annoyed. Ok, drivers, stop driving, and oh, by the way, you won't have your job anymore because you won't be driving to your place of employment if it isn't close to where you live. Most people of working age have to drive, period. You're lack of a grasp on reality is mindboggling."
I'm not telling people not to drive if they must, I'm telling people if they find the price of gas unacceptable, dont accept it and find an alternative.
The price of gas is supply versus demand.
If you want a lower price, have lower demand or higher supply. No other answer.
Complaining about it without acknowledging that reality is pointless.
"Too bad the State of Alaska didn't negotiate something about that at the same time they worked out the royalty deal."
Devide that big check you get every year from the state by the # of gallons of gas you bought that year and deduct it from the price you paid and I think your price per gallon is not so bad.
I'm not telling people not to drive if they must, I'm telling people if they find the price of gas unacceptable, dont accept it and find an alternative.
The price of gas is supply versus demand.
If you want a lower price, have lower demand or higher supply. No other answer.
Complaining about it without acknowledging that reality is pointless.
Your comment is so foolish as to not be worth debating it. You just don't get it. And by the way, people complain all the time, including you. It's human nature. Another reality you don't want to acknowledge.
They built up China to the point that they are consuming huge amounts of oil, at our expense.
Just wait until we start needing steel, lumber, etc. for the rebuilding effort. There won't be enough for the Gulf coast, let alone the rest of the country. Just watch the steel prices...they will be absolutely prohibitive.
There is a REASON that we need to protect our country's ability to produce basic necessities. War is one...this is the other.
Jealous?
The West has never been more vulnerable...
I wonder if China will hit Taiwan soon.
"The price of gas is supply versus demand.
If you want a lower price, have lower demand or higher supply. No other answer.
Complaining about it without acknowledging that reality is pointless."
"Your comment is so foolish as to not be worth debating it."
LOL. translation: You cant argue facts or logic of it, so you'll plug your ears and call me names. Whatever.
>>I'm betting hard money that oil will be lower next year.<<
You're in very good company with that prediction.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.