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By Samuel R. Avro on Feb 23, 2009 with no responses

Gas Prices Rise But Some Relief May Be in Sight


By Tom Kloza, Chief Oil Analyst, Oil Price Information Service

From New Year’s Eve through Presidents’ Day, gasoline prices surged by 35cts gal nationwide, with some West Coast states moving as much as 50cts gal above their December multi-year lows. A panic-prone public inaccurately concluded that we could be looking once again at $3.00 gal fueling costs as early as May.

A funny thing happened last week, however. Wholesale prices for gasoline dropped by as much as 30-35cts gal, depending on the regional market. Retail prices gave up more than 5cts gal of the gains that accrued in January and February, and may soon flirt with levels below $1.90 gal.

December 30, 2008 Retail Unleaded Regular – $1.616 gal

February 15, 2009 Retail Unleaded Regular – $1.966 gal

February 22, 2009 Retail Unleaded Regular – $1.917 gal

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Eleven states — Alaska, Arizona, California, Connecticut, Hawaii, Maine, Nevada, New York, Oregon, Washington, and West Virginia — count average gasoline prices above $2.00 gal at the moment. This number may actually decline before March commences. That’s not to say that March won’t deliver some madness in volatile fuel price swings  — that is the template even when the economic backdrop is sleepy.

Public and private companies like to segregate their performances in calendar quarters. But we’ve completed an eighth of 2009 — it’s been a good 8th for refiners; a miserable 8th for most oil producers; a very rough 8th for gasoline retailers; and a numb 8th for the panoply of end-users of fuel.

Scary Skinny?

The severe winter temperatures in the northern hemisphere fade into history each March. This winter has been colder than normal. That has hidden some considerable flaws in the commercial and industrial economies.

Think about it this way. If you run into Lindsay Lohan in the depth of winter on the streets of New York, you are likely to see her clothed in heavy garments — fashionable, of course — and think that nothing is amiss. Similarly, the Olsen Twins might be clad in an assortment of heavy coats, scarves, and layers when they venture into the city to check on the tens of millions of dollars they made on the backs of Moms and Dads paying for G-rated videos that could keep their toddlers off the streets. (I am a bitter parent)

As long as it’s cold, the clothes obscure what’s underneath. With warmer temperatures come more revealing garments. Already, there is concern that Ms. Lohan is “scary skinny” according to those impeccable scribes at E! Online, The New York Daily News, and even The Times of India.

When winter ends, we’ll find that demand for fuel such as transportation diesel, kerosene, and jet fuel is also anorexic. The cold temperatures have led some of this fuel to be burned to generate heat — for example, when Vladmir Putin shut off natural gas to the Ukraine in January (“Those Ukraine girls really knock me out,” he is rumored to have said at the time) barrels of diesel or jet kerosene were diverted to boilers.

The scary skinny numbers for the middle of the petroleum barrel — the distillates such as diesel and kerosene — will be revealed in the next 30 days. Diesel prices have been in a virtually uninterrupted downtrend since last July — the average price of all nationwide pumps has dipped below $2.27 gal and many truckstops are a dime lower. Demand is poor, awful, or “scary skinny” on any scale.

Note: The above post was republished with permission from the author who maintains his own blog called Speaking of Oil.

Tom has been writing about downstream oil markets since 1975 and was among the founders of OPIS over 25 years ago. A magna cum laude graduate of St. Francis University, Tom has a degree in English and has covered and analyzed crude oil, refined products, and gas liquids for more than 30 years. He has written about oil for a number of publications including Oil Buyers’ Guide, Petroleum Intelligence Weekly, Convenience Store News, CSP, and Convenience Store Decisions. He has also written commentary for Marketwatch and is a regular guest commentator for Bloomberg Financial Markets and NPR Marketplace.

He provides expert commentary for print and electronic media during times of oil volatility, and is regularly quoted in USA Today, the Wall Street Journal, the New York Times, Chicago Tribune, BusinessWeek, Newsweek, and numerous other periodicals throughout the country. He has commented specifically on OPEC matters and U.S. gasoline and diesel prices for the BBC, CBS, NBC, CNN, MSNBC, CBS News, and ABC. He is also a frequent guest lecturer on fuel price economics at a number of colleges and universities as well as for key petroleum associations. He has also appeared live on camera in energy forums for CNBC, Nightline, the CBS Morning Show, and Good Morning America.