Gas Prices Soar as Refiners Cut Production

venturacountystar.com ^ | April 5, 2008 | John Wilen

[kellynla]

NEW YORK — Retail gas prices surged to another milestone, rising above $3.30 a gallon Friday, and appear poised to rise further in coming weeks as supplies tighten.

Oil prices, meanwhile, supported the gas price rally by jumping more than $2 a barrel after a dismal employment report sent the dollar lower.

At the pump, gas prices rose 1.4 cents overnight to a national average of $3.303 a gallon, according to AAA and the Oil Price Information Service. That's the latest in a series of records, and about 60 cents higher than a year ago.

In Ventura County, the average price of regular unleaded hit a record $3.68 a gallon Friday, according to the Automobile Club of Southern California.

During the past week, prices in the county have been climbing by a few cents per day.

A few weeks ago, Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., said he expected prices to fall as oil speculators backed off.

Now, he's not so sure.

"We could very likely see $4," he said. "It's going to be painful."

As investors are fleeing to commodities such as oil, gold, wheat and corn, people are starting to look at Washington, D.C., to curb speculation, Kyser said.

"You have speculators globally now," Kyser said.

"This is going to be a tough time for anybody who has to use an oil-based product. We've already seen chaos in the aviation industry, with Aloha and ATA going out of business."

While oil's surge above $100 over the past month has boosted gas prices so far this year, analysts now expect gas prices to continue rising regardless of what direction crude takes. The Energy Department expects prices to peak near $3.50 a gallon later in the spring, but many analysts predict that the spike could approach $4.

That's because gasoline supplies are falling, in part because producers are cutting back on output of the fuel because of the high cost of crude — the more expensive crude is, the more refiners have to pay and the lower their profits are.

They're also in the process of switching from producing winter grades of gasoline to the less polluting but more expensive grade of fuel required in the summer.

"That cuts back on some of the supply and helps to pump up the price," said Mike Pina, spokesman for AAA.

The margin between the price that refiners pay for crude and receive for selling the products they make from it is about $11 to $12 a barrel right now, according to the Oil Price Information Service.

However, that margin has occasionally slipped into negative territory in recent weeks and is well below margins of $37 a barrel that refiners earned last spring.

In futures trading, meanwhile, oil futures rose Friday after the Labor Department said employers cut payrolls by 80,000 jobs last month, much more than analysts had expected.

The unemployment rate rose to 5.1 percent.

That news sent the dollar lower and pushed light, sweet crude for May delivery up $2.40 to settle at $106.23 a barrel on the New York Mercantile Exchange.

Gasoline futures for May delivery rose 3.24 cents to settle at $2.7567 a gallon.

Gasoline futures were also boosted Friday by a fire that shut down part of a refinery in Torrance.

[CRBDeuce]

Right you are!...both McCain AND Gingrich have been bitten by the terminal ‘green bug’...go figure! and I used to think at least of the two, Gingrich had a brain, AND understood history. To make that jump, he leapfrogged Nader to the left! that’s quite a stride....

Gas prices...Walmart, Apollo Beach, FL $3.21...20 cents a cup!

[CRBDeuce]

“It is a fact that fully a 1/3 of the run up of the cost of crude oil is directly tied to the drop in the value of our dollar.”....because half is imported. Produce it in the USA, that problem goes away. so a simple solution in the near term is more rigs in the USA (like Natural gas, still cheap)...and less imports. Today, Cuba is stealling Florida’s oil....we could wait til it’s all gone to drill, look at it as indirect aid to a communist.

[EnigmaticAnomaly]

Nice...;-)

[thackney]

Today, Cuba is stealling Florida’s oil....

Florida's domain doesn't extend out 45 miles from their shores. The oil in the Gulf of Mexico at the border of the US and Cuba's EEZ is Federal; it belongs to all of us. However, the influence of Florida politicians keeps us from producing our resource.

[mvpel]

Keep threatning your child they will be punished for bad behavior is meaningless without action. The child soon realizes they can ignore the threat. We see the same thing with our lousy congress folks call oil barons on the carpet. All we get are insults to our intelligence.

Yeah, those naughty oil companies! How dare XOM pay $100+ billion a year in taxes worldwide, employ tens of thousands of people in high-paying skilled labor, wrest raw materials from below miles of solid rock, and convert them into products that provide manifest conveniences to our comfortable, cushy lives!!

They should be ashamed of themselves!!

[rednesss]

"Produce it in the USA, that problem goes away. so a simple solution in the near term is more rigs in the USA (like Natural gas, still cheap)...and less imports."

Uhh, inflation is inflation. It doesn't matter where it's produced, the dollar only has a certain buying power. And oil is still traded globally, at the global trading price. This isn't that hard of a concept.

[rednesss]

Another interesting aspect that I was researching. England is almost entirely energy independent. According to the CIA World Factbook:

Oil - production: 1.861 million bbl/day (2005 est.)
Oil - consumption: 1.82 million bbl/day (2005 est.)
Oil - exports: 1.956 million bbl/day (2004)
Oil - imports: 1.654 million bbl/day (2004)

Now admittedly these numbers are a little old. But even so they show that England produces most of their energy requirements. Yet right now they are paying $8.55/gallon for diesel ( Link). Now they have huge taxes on their fuel, so without taxes they are paying approx. $3.50/gallon for diesel. See this website for a breakdown of taxes paid in England for fuel. http://www.abd.org.uk/taxtable.htm

So in comparison, we in the U.S. import 60% of our energy needs and produce 40% of it domestically, yet we pay about $3.99 a gallon for diesel right now including taxes. Diesel taxes average about $0.45/gallon in the U.S. so an untaxed gallon of diesel is about $3.54/gallon.

So a developed Western Super-Power country like England that is almost entirely energy independent pays about $3.50/gallon for diesel, and the U.S. a developed Western Super-Power pays about $3.50/gallon for diesel.

How do people think that by simply producing more of our own oil, that it will lower prices if it hasn't for England???????

I'm just asking. I think it's too simplistic to believe that the price of oil will plummet if we suddenly started to produce 60% of our own oil. I think there are other factors at work here.

[kindred]

[They’re also in the process of switching from producing winter grades of gasoline to the less polluting but more expensive grade of fuel required in the summer.]

Another Congressional maneuver and I wish the Congress would never convene again as every thing they do is destroying our economy daily.

[CRBDeuce]

It doesn't matter where it's produced

uhmmmm.....to those who struggle with economics, that may be true! For the rest of us....we will continue to produce where the costs are the lowest! Right now, that's the good ole USA! Watch as factories open right before your eyes! Europe is the HIGH COST producer, partly because of socialism, partly because the only thing that the ECB chases is inflation! They really don't get the concept of marketing...not at all! Especially Germany, where marketing is as foreign a concept as Freedom!

[CRBDeuce]

You’re probably right.....the great thing about energy is that we can produce more Coal, Natural Gas, and Nuclear, and yes, even renewables (not wind), then oil imports can be reduced to a manageable percentage! Looking forward to filling up with Switchgrass/Waste Grease Biodiesel! At 60 MPG, the Jetta will feel like a Nadermobile!

[CRBDeuce]

Don’t know about the math in your equation, but conceptually, I agree totally!

[CRBDeuce]

Another Congressional maneuver and I wish the Congress would never convene again as every thing they do is destroying our economy daily

a Kindred spirit agrees!

[rednesss]

I wasn't referring to the costs of manufactured goods. Oil is a fungible commodity that is traded globally almost exclusively in U.S. Dollars. There is nothing to warrant speculation that a barrel of oil pulled out of the ground in Texas will cost the U.S. consumer anything less than a barrel of oil pulled out of the ground in Saudi Arabia. Chevron, Exxon, etc. will still get the NYMEX going rate for the oil that is under it's control. Why would they sell a barrel of domestically produced oil for $60 to the U.S. consumer when they could sell it to India for $110???? They are beholden to their stockholders not the American public.

Widgets are an entirely different matter. As our currency falls against the Euro, our widgets become an increasingly better buy to Europe. Thus we would look to see an uptick in our exports of Widgets to foreign markets.

[thackney]

The 45 miles is just the split between the closest point of Cuba to Florida.

EEZ’s extend out 200 miles until they intersect another countries EEZ, like between Florida and Cuba. When the separation is less than 400 miles, the difference is evenly split unless some prior agreement had settled on another value.

Given complicated shorelines and islands, it can become a curvy line.

[dan1123]

I Am Legend predicts gas prices

[JoanneSD]

Good ideas for stickers.. I am going to copy some of them off, and send them in with every letter I mail to creditors and etc.. and also to all the pre paid envelopes I get from offers and banks and etc....I will tuck one in them as well..