From the Dallas Morning News:
Jul. 9–Consumers watching the news about soaring crude oil prices normally would expect to pay for those increases at the pump. But since May, that has not been the case.
Oil prices have passed $70 per barrel for the first time this year, but gasoline prices for the area have been on the decline, dropping almost 17 cents in the past month.
The two prices often travel together, and that was the case for the first five months of the year. Since then, the numbers have mostly gone in opposite directions.
Analysts said the supply, demand and stability of each product have caused the opposite trends.
Supply of gasoline is up from the spring because the country’s oil refineries are recovering from outages and other problems, which forced the refineries to keep lower levels than they normally would during that time. As they bounce back, they put more gasoline on the market.
The FTCR made such a fuss earlier when oil prices were flat and gasoline prices shot up. Where are they now? Oh, right. Claiming that oil companies are trying to influence the energy bill by dropping gasoline prices. Some day they will learn that they can gauge gasoline prices based on what inventories are doing, and that is influenced by demand, imports, and refinery utilization – not by the whims of oil companies.
But there is disagreement as to whether prices have peaked:
“The inventories are definitely up, and they’re within a range that is still on the low side but adequate for the rest of the season,” said Ken Miller, vice president of international energy consulting firm Purvin & Gertz in Houston.
Prices headed back up slightly at the end of the week because of a malfunction at the ConocoPhillips refinery in Borger, Texas, on Thursday.
He also said that the peak gasoline season ended after July 4, and as a result, demand will fall.
This dual effect is resulting in lower profit margins for the refineries, Mr. Miller said, a trend that he thinks will continue, at least for the short term. He said that gas prices should continue to fall in the near future.
What? I thought refiners just dialed in whatever margins they felt like. Maybe they just feel like giving a little back. Or maybe margins don’t work the way some seem to think they do.
That opinion is not shared by another industry analyst, Peyton Feltus, president of Randolph Risk Management in Dallas.
Mr. Feltus agreed that the lull in gas prices is caused by an increased supply out of the refineries, but he said that high prices are just around the corner because of the country’s insatiable appetite for gasoline.
“The consumer of these products holds their own price destiny in their hand,” Mr. Feltus said. “Consumption of gasoline is growing at a rate of 1 to 1.5 percent year to year. Anybody can understand that if consumption is going up, it’s putting upward pressure on price.”
Yeah, but ethanol is going to put a stop to that growth rate. 🙂
Of course to be fair and balanced, there’s this story:
Sorry, there’s no gas-price conspiracy
Remember those big headlines and loud evening news telecasts this spring about soaring gasoline prices reaching record highs? Remember the calls for investigations and the drum-beating for government action to end so-called “price gouging”?
Well, you haven’t read or heard such stuff lately because gasoline prices have declined for six consecutive weeks, and are still dropping. Since peaking in May, gasoline prices have dropped 30 cents per gallon in California, and 25 cents nationally, according to the San Francisco Chronicle, citing figures from the Automobile Club.
Have you noticed the dearth of headlines and protesters? Have you observed the lack of calls for an investigation into this downward swing? If the increase in prices was alarming, shouldn’t a decrease be greeted with cheers?
Of course, the conspiracy enthusiasts, and indeed most of us, are indifferent when things go well. It’s almost as if we consider more affordable prices the way things are supposed to be, as if it’s something we are entitled to.
Now that’s my kind of sarcasm. 🙂
Robert,
Great to see you back blogging and I hope the family is doing great!
EIA’s gasoline price path, since early May or earlier has been the following:
Prices continue increasing and peak around Memoriall Day (they peaked the week before). Then prices were expected to decline through the month of June and into July, with the high prices encouraging more supply and slighly less demand growth (this appears to have been the case). Then, as we head into the latter part of July and into August, prices would rise again, as demand increases (people squeeze in one final vacation) and more thunderstorms increase the probability of temporary refinery outages due to power outages (this forecast assumes no hurricane damage to refineries). This second price rise may be starting 1 or 2 weeks earlier than predicted, but so far this summer, prices are going along as supply and demand forces would indicate. The question for us is not wether prices will rise again this summer, but by how much.
Doug, that is pretty much what I think as well. Some people have suggested that the 4th of July is the peak of driving season, but July and August are both very high demand months. Because inventories are still low, I expect prices to head back higher before they fall back off in September. And of course with inventories where they are, the price associated risk from a hurricane disruption is very high.
Good to see you back. Do you feel the September – October price fallback will be deep like last year’s? Thank for the answer.
Do you feel the September – October price fallback will be deep like last year’s?
Sorry I missed this before. No, I don’t expect the fall back to be nearly as deep this year.