You Heard it Here First

As I warned on Saturday:

Gas Prices Climb Quickly as Refineries Remain Closed

At least 14 Texas refineries, representing nearly a quarter of the nation’s refining capacity, will probably remain shut for the next week or more. Three more Louisiana refineries may be damaged from widespread flooding.

“It may not be possible for us — and other manufacturers — to maintain normal supplies in the coming days,” Chevron stated in a bleak assessment on its Web site on Sunday, warning of “severe supply disruptions in the wake of Hurricane Ike.”

Hopefully you heeded the warning and got yourself some gasoline on Saturday. If you didn’t – especially if you live in the South – you are probably going to pay a lot more for it now.

The situation looks to be tight for at least another 2-3 weeks:

Senator Kay Bailey Hutchison, Republican of Texas, said on CBS’s “Face the Nation” on Sunday, “We are looking at another week or eight or nine days before refineries are up and going, so refined gasoline is going to be in a shortage situation because of the power outages and flooding.”

“It is going to be felt for the next week that we have gasoline shortages,” Ms. Hutchison said, “so people need to be prepared for that.”

Plan on at least 3 weeks of this. Limit your gasoline consumption whenever possible and hope that another hurricane doesn’t enter the gulf before hurricane season ends.

41 thoughts on “You Heard it Here First”

  1. Except that NYMEX gasoline for October delivery closed down $0.2082 at $2.5614 following crude down $5.70 per barrel to $95.71.

    Higher retail gasoline prices may reflect the added costs of getting supplies into the area and responding to short term shortages. It also depends on what is happening in Europe and if additional imports are available.

    The refineries are in the process of starting up again. It shouldn’t be more than about 2 weeks to see lower prices.

  2. Oil dumping hard.
    The lower prices, in a crazy sort of way, may bring more supplies to market.
    Call it a backward bending supply curve. If you were paid $2,000 an hour, would you work more, or less, hours a year?
    In economic theory, you would work more….but in real life, you might decide to kick off after 1000 hours a year, or about one-half you do now. That’s called a backward bending supply curve. Thats why famous movie stars work half the year (and cry about that).
    Mexico, Venezuela, many other thug states are fat and happy with oil income — why expand production, at $147 a barrel?
    That may soon end. Mexico may actually have to do something about Canterelli production. Russia may let some deals go through, instead of bickering. KSA may pump even more. (They are targeting 12.5 mbd). Kuwait also, Libya too. Brazil for sure.
    US production is a small fraction, maybe 7 percent, of world production, and we are high-cost producer. Our wells may shut it at $30 a barrel here (though I doubt it), but other countries may have to ramp up. Russia for sure. No way they can become a world player at $30 a barrel, unless they start pumping bigtime.
    Anyway, oil is down enough now I think we see a speculative snowball meltdown.
    Remember, the speculative price is thre world market price. More than 80 percent of contracts traded are by speculators, and oil demand is (short-term) inelastic. Therefore, wherever speculators set the price, between $10 and $147, is the price on that day. They can sustain prices at the extremes, but anywhere in the middle can holds for months or years.

  3. Oil is now trading $94/$95. How low will it go?

    Oil sands, natural gas, coal companies got slaughtered. Solar companies got killed today. ESLR down 28%. JASO down 20%. VC funding for clean tech companies has started to tightened up.

    Long term forecasts for electricity prices seem to be dropping, causing solar companies and the energy demand response companies (ENOC, COMV) to plummet.

  4. In anyone cares, my last sentence should have read, “Speculators cannot maintain prices at the extremes ($10 or $147), but anywhere in the middle can be held for months or even years.”

  5. Excuse me if I seem like I should know this stuff but I want to ask a few questions.

    With oil at 95 dollars a barrel now, where should the price of gas be? Or is this a tough question to answer? When oil was 147, I paid 4.40, but now oil is under 100 and I’m paying 4.40. Now I understand that right now, the high gas prices are due to issues with refining the oil due to Ike. But, even when oil was hovering around 100 the past few weeks, gas was still 3.90-4.00 around here.

    How is this determined is what I’m asking? I hear people saying 200 dollar oil was be disastrous and I don’t buy it. I mean gas was 4.40 at 150, it would probably be only 5 dollars at 200, correct?

    I guess I’m throwing a lot of things out there and seeing if maybe I hit something that you could answer, haha. I apologize but I’m just trying to learn. Thanks!

  6. Higher retail gasoline prices may reflect the added costs of getting supplies into the area and responding to short term shortages.

    That is what happened following Katrina. There was a giant sucking sound across the country as gasoline rushed to fill the void. It ended up driving up prices across the country.

    What is the situation right now in Houston? Are stations out of gas now?

    Cheers, Robert

  7. With oil at 95 dollars a barrel now, where should the price of gas be? Or is this a tough question to answer?

    It’s a very tough question to answer. I have written several essays in the past about gasoline pricing, and why it can diverge from oil pricing. Factors impacting this include gasoline imports, gasoline storage in inventory, and refinery utilization.

    A barrel of oil contains 42 gallons. You can approximate by assuming that this makes around 42 gallons of diesel and gasoline. Thus, every 42 gallons adds about a dollar per gallon to the price. That’s a very rough way to look at it, and would only be valid if the other considerations (like refinery utilization) weren’t such major factors.

    Cheers, RR

  8. I didn’t notice any stations,or even pumps,out of fuel this morning. Almost every station in the area had at least one or two pumps closed over the weekend. Some were closed altogether. They seem to all be open now….and there weren’t lines anywhere. Guess everyone tanked up already. Even odder,the price seems to have dropped a bit. Go figure…

  9. “NYMEX gasoline for October delivery closed down $0.2082 at $2.5614”

    That will put prices in the $3 area at the pump kingofkaty. About 38 cents for taxes and another nickle or so station mark-up. Louisiana passed a law mandating a minimum 6 cent mark-up,because Walmart and Albertsons were luring customers in with wholesale prices. That,along with some of the highest state gas taxes in the country,means our gas costs more at the pump than a lot of states,even though much of the oil is produced and refined here. Unlike Alaska,we don’t get a royalty each year. What we do get is high taxes and lousy services. Corruption and ineptitude sucks,but if he’s nicknamed Bubba or Booby,we’ll re-elect him every time…LOL.

  10. The Westbank side of New Orleans anonymous. We get most of our gas from the BP refinery in Belle Chasse and the Murphy Oil refinery in Chalmette. Norco(ten miles away) has four refineries,but I don’t see their trucks tanking up much around here.

  11. Maury – term limits took care a lot of your “Booby’s”. So far I’ve been impressed with Jindal. Except maybe for the pay raise and the intelligent design fiasco.

    Last night I took the scenic route home to survey the local service stations. I saw prices from $3.39 to $3.79. Only about half the number of stations are up and operating. We have power most places out in Katy, but not all the stations are open. I would say there isn’t any price gouging I can see. Lines are maybe 8-10 cars long at each pump.

    I heard an ad on the radio for . They were promising 3 day delivery on generators to Houston.

  12. One thing I never see mentioned in the gasoline scare stories is how much gasoline might be in the actual stations. There are 200,000gas stations in America, and I think they have about 30,000 gallon capacities. That amount does not seem to be counted in the inventory figures. Assuming 30,000 gallons per gas station, that’s another 6 billion gallons of supply. If we assume stations are half-empty, that’s 3 billion gallons more.
    For that matter there are 200 million cars in America, and they have gasoline in ’em too.
    plenty of gasoline in California.

  13. Oil dumping again!
    Now, I think we see a full on rout. Too many speculators took long postions north of $100. They are going to get creamed. They will liquidate, driving the market down more.
    The sword cuts two ways. Speculators drove this price up, and now they will watch the house of cards crumble. Okay, I mix my metaphors.

  14. “So far I’ve been impressed with Jindal.”

    That’s the general feeling here in Louisiana too kingofkaty. He was impressive as hell at those press conferences for Gustav and Ike. We had something of a fiasco for a couple days at the emergency food stamp centers,and the head of Health and Human Services was asked to resign. Imagine that….accountability. I don’t know who took her place,but it’s been smooth as silk since.

  15. I saw the generator guy on local TV news. He really exists. He is selling Titan generators in a shopping center in Brazoria county. Only he is selling them BELOW suggested retail price.

  16. Benny,natural gas is dumping even faster than oil. Close to a 50% haircut now. I’ve got a hunch the wheels have come off the Chinese economy. They just announced a cut of the recent price hikes on fuel products,along with an announcement that the focus was now on boosting growth….instead of slowing growth…LOL. I think they caused the bubble in commodities and killed the dollar in the process. The recent recovery in the dollar was probably the first sign that they either don’t have as many dollars to blow,or they’re buying treasury notes instead of commodities. We may never know which,because they tend to fudge the hell out of statistics.

  17. Prices went up 10-15 cents here (NW of San Antonio) over the weekend. I just noticed a Chevron station back to pre-Ike price on the way home this evening.

    Refinery utilization was what, 70-something percent last week? I don’t think a few refineries down a week or two will cause mass shortages. Spot shortages, perhaps.

  18. doggy – The lines at service stations here on the west side of Houston are much shorter this morning. I’ve seen prices anywhere from $3.33 to $3.97. The lower prices tend to be the big chain outlets or company owned stores who are probably taking a loss on replacing gasoline. (Kroger, Sam’s Club, ConocoPhillips, ExxonMobil, etc.) The independent retailers are the highest price. I understand that, they are small business people. There appears no real shortage of gas, still just a problem with power at some service stations. I would say maybe 1/2 of all the stations are open.

  19. Oil prices — when a storm temporarily knocks out about one fifth of US refineries, closes LOOP, etc, wouldn’t that mean a whole fleet of inbound tankers suddenly needs to find new places to unload their cargoes? Couldn’t this drive down the spot price of oil for a short while? Just wondering.

  20. There are 20 days worth of gasoline sitting in storage. It shouldn’t matter if 14 refineries are down for less than 20 days. I know it does….but it shouldn’t. One thing is certain. Refineries increased their margins. With oil down 40%,you’d think gas would be down at least 10%. Maybe someday…

  21. Kingofkaty–
    Okay, I’ll take the bait.
    Actually, I think GM is making a mistake. The Volt styling is so blah I could die.
    In Detroit, they just can’t think about sex and fuel economy at the same time. GM says anybody looking for an EV or high mpgs must be a 52-year-old unmarried aunt.
    The concept Volt was a bit sexy.
    This real Volt will cost about $10k more than otherwise, due to the battery.
    That $10k not a deal-breaker — look at the $70k BMWs, Mercedes, Cadillac Escalades etc thick on L.A. roadways. But those cars are sexy (to the buyers).
    The Volt will look like a $25k bubble-mobile compact, but sell for $35k. Maybe $40k.
    You have to be very practical and non-style conscious to buy this car — except if you are practical, you will buy a much cheaper Ford econocar.
    GM should have gone upscale, and made the Volt into a sexy, luxury sedan. You pay for the luxury of turning your nose up to those smelly gas stations. The Volt should be electrifying.
    The battery should be a luxury feature, for those-in-the-know.
    But, it is not to be. GM will be selling a bubble-car for a lot of money.
    For people who commute about 40 miles a day, the car may make sense, and they may buy it. I hope they do, and I think evey Volt is worth two tanks and one fighter plane, when it comes to national security.
    If gas prices rise above $5 a gallon, and the Volt battery works, we can expect EVs to commercialize rapidly. Maybe then we will see luxury EVs, and small sporty EVs.
    This first Volt is a bit left-footed. We will see how it sells.
    By the way, with all the bad financial and weather news, I hope everyone reading this blog is dodging the bullets.
    This is as ugly as any time since the 1970s. The lack of leadership is appalling.
    McCain, the Republican nominee, is running as the opposition party — that’s how bad it is.
    Obama looks like a guy who had all his campaign speeches stolen. He doesn’t know what hit him. McCain is lionizing the working man, and demonizing Wall Street, and Palin is slamming Big Oil. And these are the Republicans.

    I’m voting for RR.

  22. Benny, the schoolboy-sketch Volt concept never had a prayer of seeing production. The concept body wasn’t even designed by the Volt team, they hijacked it at the last minute so Bob Lutz would have something to stand in front of while he talked. It was a mistake. They could have designed a decent looking, aerodynamically correct production car starting from a clean sheet, but they were stuck with what they’d already shown. So they tried to glom a few styling cues from the concept-car onto an aerodynamic body.

    Should they have gone upscale? How many LS600h’s does Toyota sell? An E-Flex Caddy would cost $55k instead of 35k and GM would sell one tenth as many. That’s no way to have a meaningful impact.

  23. Doggy-
    I don’t know squat abut cars and price points. But, jeez look around. People spend big money on sexy cars. Huge SUVs, Cadillacs, MBs, BMWs. Corvettes.
    Maybe a sexy Volt would not sell, at $50k, like you say.
    I gotta wonder if a $40k bubble-bore econobox will sell either.
    The only thing that will make the Volt sell now is $6 a gallon gas. Maybe that will happen.
    My guess is that EVs have a huge future. If the Volt works, it is an engineering marvel. A terrific mass-production accomplishment.
    But Detroit has to make it look fun, sexy, cutting edge to win commercial fame.
    At $4 a gallon, who would buy a Volt?
    Especially, if regular ICEs come along and get 40 mph? Sheesh, we were making econobox ICEs back in the early 1980s that were getting 45 mph.
    The old Nash Metropolitans (1950s) got more than 30 mpg if you stayed under 60 mph.

  24. The owner that wouldn’t buy the $5 gas opened his pumps today with $3.49 regular. That’s the lowest this area’s seen since oil was $120….and on its way to $147.

  25. Benny said: The Volt will look like a $25k bubble-mobile compact

    Sort of like the Toyota Pious

    You have to be very practical and non-style conscious to buy this car

    Like the typical Pious owner.

    except if you are practical, you will buy a much cheaper Ford econocar.

    Unlike the Pious owner who has no clue how to run economics.

    GM should have gone upscale, and made the Volt into a sexy, luxury sedan.

    That would make it the Tesla.

    Seriously Benny. I don’t think the production model looks that bad – certainly not as cool as the concept version. But everyone was afraid it would look too much like a Pious. Not so much. It does have a modified Kammback design. GM says it will integrate the GPS into the fuel management system (great idea).

  26. I agree, I do not think the production model looks all that bad. I’m actually looking forward to hopefully buying it in 2 years.

    That is why I was asking Benny if that was his big thing he saw wrong with the Volt.

  27. Caddy could sell $50k+ sexy Volts, they just couldn’t sell 100,000+ per year. GM’s goal has always been to leapfrog Toyota, who will sell 250k hybrids in the US this year, 2/3rds are Priuses. They’ll sell a lot more next year (assuming they fix their battery supply problem). You can’t take them on with a 5-10k unit niche-mobile.

    The $40k+ numbers you hear are based on Lutz comments about first year, low volume production. There’s some padding in there — e.g. Lutz said they budget one battery replacement under warranty for every car. EVs are dead if that actually happens and battery makers swear it will not. But GM is angling for tax credits and gov’t loans. And since they could pre-sell all 10,000 2011 models at $39,995 tomorrow, there’s not much incentive to talk down the price.

    Real production (60k 2012s and 100k+ 2013s) will probably be the cost-reduced 2nd gen drivetrain. Remember the 2nd gen Prius? It was bigger, faster and got higher MPG than Gen 1 yet it cost Toyota LESS to make. GM knows they have to get customer cost (after tax credits) below $30k to sell in high volume. They just want to lose as little money as possible in the meantime.

  28. The Volt would need to sell for somewhere in the $30-$40k range to achieve any kind of market success.

    The conventional Pious sells for around $22k, with $10k needed to convert to a PHEV. That seems pretty comparable.

    The EV1’s imputed cost from the lease payments were $34k-$44k in 1996 $. So $40k for the Volt wouldn’t be unreasonable.

    Does anyone know what the Cd of the production Volt is? I have to think that was a major consideration in restyling the Volt.

    I’ve heard that the EPA may be screwing up the Volt by mandating the way the EPA highway mileage is calculated. If EPA gets its way, the Volt’s mileage would end up around 50 mpg measured like a conventional hybrid, rather than a range-extended vehicle. The Volt would get NO credit for the stored electricity in its batteries and the fact that it runs without gasoline for the first 40 miles or so.

    No good deed goes unpunished by the Gov’t.

  29. Frankie-King-Doggy-
    Yeah, I guess my big issue is the blah-blah looks of the Volt. I quickly concede one man’s pitbull is another man’s beauty queen. Especially after the lipstick is applied.
    I marvel at the Volt engineering. 40 miles on a charge and then 50 mpg. I take my hat off to GM on this. (I am a guy who never really became proficient at woodworking, so my judgement on engineering accomplishments may be limited).
    My marketing instincts — and here I think we all are on a somewhat level playing field — is that the car will look blah, but cost like a car that should have sex appeal.
    Moreover, the goody-two-shoes who buy a car to make the environment better will always buy Hondas, Toyotas, or Swedish cars.
    So, who will but a blah-looking Volt for $40k?
    I don’t advocate hat it be priced like a Tesla. Maybe at $45k but red-hot looking. After all, the lease payment will not be the much higher, and offset by lower gasoline bills. That’s the sales pitch anyway.
    In the bigger picture, what matters is that the Volt works in engineering terms. If it does, we have a terrific future in front of us. Our oil consumption will go down every year, while our city air gets cleaner, and streets quieter.
    It would not surprise me if in 30 years ICE’s were banned fom central cities. What gives anyone the right to pollute the air other people breath?
    And, as a matter of national security, I would think every Volt is worth two tanks and one fighter jet. But lots cheaper.

  30. “It would not surprise me if in 30 years ICE’s were banned fom central cities”

    We could ban them from car lots today Benny. Electric cars dominated American roads 100 years ago. And that was before voltage and outlets were standardized. I could get behind a ban on internal combustion engines. Yeah,it’s big government regulation,BUT its better than being caught with our pants down when the shiite hits the fan. All it takes is a storm,or a coup,or peak oil to bring everything to a halt as things stand. And our politicians yap on…

  31. Suppose Congress decided to ban everything but PHEV’s and ELEV’s from new car lots beginning 2011. The used car market could cater to people that wanted to hug their ICE’s a bit longer. That would give automakers a couple of decades to extend battery life.

  32. That is actually a pretty brilliant idea. Why not ban all ICEs from new car lots by 2012. Even if we still only have the 40 mile per charge Volt, it would force people to either relocate or become more energy minded with what they have. GM, Toyota and virtually every other car maker would have to put forth all of their time and effort into the EV, rather than a more fuel efficient ICE.

  33. I have an idea. The Volt has an ICE/alternator. Provide an optional inverter you could hook into the Volt so that it could provide 120/240 V AC power to act like a portable generator. I bet such a feature would be really popular in Houston about now!

  34. kingofkay,I’ve got a 110 outlet in the Oddysey. Unfortunately,it’s only 1000 watts. Still,it’ll handle a dozen 60 watt bulbs,or even a low-power hair dryer,LOL. I actually ran a cord into the house after Katrina. It was that or make a 150 mi. round trip for fuel for the generator.

  35. Frankie, Nissan says they’ll have an electric car for sale in 2012. The Prius PHEV should be ready by then also. Toyota,GM,Ford,BYD Auto,Fisker Automotive,Aptera Motors,and Volkswagen all claim a PHEV is on the way. Honda would have something to sell if NG vehicles were allowed. Right now,they won’t sell the Civic GX outside of California and New York. For that matter,any gasoline or diesel engine can be converted to run on NG,so dealer lots wouldn’t necessarily have to look much different in 2012. It’d be nice if the next President would reach down and find some balls…but I won’t get my hopes up.

  36. Provide an optional inverter you could hook into the Volt so that it could provide 120/240 V AC power to act like a portable generator.

    This is an extremely popular idea on every Prius board I visit. I don’t get it. Why use a $25-35k car to replace a $500 generator? And what happens to the food in your fridge when you need to go somewhere?

  37. Doggy – You haven’t been without power for very long then. In the case of Hurricane Ike, we all had a curfew after the hurricane passed, so nobody could go anywhere anyway. And even if you could, nothing was open for 2-3 days. So NOT having a car wasn’t as big a deal. We got around on our bicycles. Add to that you want to conserve gas as much as possible, so you don’t drive very much.

    Besides, we have more than 1 car. Not to mention that if I’m driving in my car I can’t be watching TV or sitting in front of an electric fan in my house. Thus why would i need to generate power while I’m driving?

    We ended up using a power inverter hooked to the car to watch TV. we were limited by the wattage on the inverter (300 W). You don’t need to have power 24/7. If you could run a couple of appliances, that would be enough. As long as you don’t open the door often, you can conserve the cold in a refrigerator or freezer by running it for a few hours a day.

    A water-cooled generator (like the one in the Volt) is more efficient than an air-cooled engine. A comparibly sized generator would run you much more than $500. It would be a nice feature that wouldn’t cost much to implement.

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