Posts tagged “gas prices”
In the previous article, I graded the 2013 predictions that I made a year ago. I scored well on the direction of oil and gas prices, the shrinking Brent-West Texas Intermediate (WTI) differential, and continued growth in US oil production (although it grew even faster than I expected). My only complete miss was that I expected approval for the northern leg of the Keystone XL pipeline. (The southern leg, incidentally, is scheduled to begin shipping oil this week from the major crude oil storage hub at Cushing, Oklahoma to the Gulf Coast near Houston).
Today I offer up my predictions, and the reasoning behind them, for what I think will transpire in 2014. One thing I have learned in making predictions is that they must be specific, and not subject to interpretation at the end of the year.
“The US oil industry will continue to thrive” is much too vague. “The price of crude will rise” is also too vague, because perhaps crude rises for part of the year, or perhaps some crudes rise and some don’t. On the other hand, “The average price of Brent crude will be higher in 2014 than in 2013” is specific and measurable. CONTINUE»
Attention Shifts to Pipeline’s Potential Benefits
Over the weekend the New York Times carried an interview with President Obama in which he commented on the merits of the Keystone XL pipeline project. The Washington Post suggested that these remarks “give opponents reason for hope.” While confirming that the White House’s main objective criterion for making this decision was still the pipeline’s greenhouse gas impact, the President also speculated about the project’s job-creation potential and the ultimate destination of the crude oil it would carry. This appeared to endorse arguments raised by opponents of the project. These issues deserve more than the dismissive treatment they received in the interview.
Estimating Keystone’s Employment Impact
With regard to the number of direct construction jobs that the northern leg of the Keystone XL Pipeline (KXL) might create, I don’t know whether the right number is the 2,000 the President cited or the tens of thousands estimated in an earlier State Department study. Either way, his administration lacks credibility on this subject. This is the White House that devised a new metric of “jobs created or saved” for assessing the impact of its 2009 stimulus measures. It has also routinely touted projects with “green jobs” potential, not just in terms of their direct employment gains, but also their indirect job creation estimated via generous multiplier effects.
Either indirect jobs are always relevant, in which case KXL would create far more jobs across the economy than the President seems willing to admit, or they also aren’t relevant to justifying clean energy and other, more favored infrastructure projects. In any case, his reported ”chuckles” at 50-100 new permanent jobs struck me as unseemly for a President still contending with unemployment over 7.5 percent in the fifth year of this recovery.
Which Oil Price to Watch?
Some economists and consumers are bracing for a sharp uptick in gasoline prices, because the price of crude oil has shot up by $10 per barrel in the last month. Except that it hasn’t, at least not if we’re talking about the global price of crude oil that’s factored into the price of the petroleum products sold in much of the US, especially along the coasts.
The global oil market, reflected in the price of UK Brent crude, is only up about $5 per barrel this month, mainly due to the situation in Egypt. A big part of the jump in domestic oil prices reflects the closing of a historically anomalous gap as US oil moves back into line with the rest of the world.
Such an increase in oil prices does not automatically herald a rise in gasoline prices, especially if it mainly erases a discount that benefited refiners in one region of the country. Moreover, gasoline and crude oil as commodities move in separate markets, linked but not in lock-step. Over the medium-to-longer term they must clearly be connected, but in the short term each responds to distinct forces of supply, demand, inventories and expectations.
What is DOE’s New “eGallon” and Why is it Useful?
I’ve been looking through a new website developed by the US Department of Energy (DOE) to assist consumers in comparing the energy costs of driving an electric vehicle (EV), relative to posted gasoline prices in their state. I heard about this site at the US Energy Information Administration’s (EIA) annual energy conference in Washington, DC earlier this week. It sounded like a handy feature for both current EV owners and those considering buying one, but I couldn’t help thinking about it in the context of a presentation I saw at the same conference on the cost effectiveness of federal tax credits for EV purchases. A key question in both instances concerns just what kind of car is being replaced by that new EV.
The website uses simple math, together with the EIA’s continuously updated data on gasoline and electricity prices around the country, to come up with a national and state-by-state price for an “eGallon”. That imaginary construct is essentially the quantity of electricity that would take a typical EV as far as a gallon of gasoline would take the average new conventional car. As the text points out, it’s hard for consumers to do this for themselves. They see gasoline prices everywhere they drive but must dig through their utility bills to find their electricity price–not always obvious–and then might not know how to compare the two.
The price for a gallon of gasoline has continued its decline in the United States, but analysts fear that unrest in the Middle East could encourage it to reverse its downward trajectory before long. The average price of a gallon of gas dropped 7 cents over the past two weeks across the country, bringing the cost to consumers to $3.47 per gallon for regular fuel, $3.65 for mid-grade fuel, and $3.78 for premium fuel, while diesel dropped 4 cents to an average of $4.04 per gallon. The latest surveys show that Memphis, Tennessee is enjoying the lowest prices at only $3.04 per gallon, with Long Island, New York, a region still recovering from the devastating effects of Hurricane Sandy, suffering… Continue»
Social media is picking up where more official sources for fuel are leaving off by necessity, resulting in a gray market that is seeing residents of hard hit New York and New Jersey paying up to $100 for five gallons of gasoline.
While complaints of price gouging are greatly centered on gas, they also extend to items like matches, batteries, food, generators, and even water. Most items are being offered by unscrupulous citizens on those popular online platforms, requesting everything from high prices to sexual favors in return for the goods. (Read More: Gas Prices Keep Falling, Survey Shows)
A combination of the effects of a fall in California pump prices, the reduced demand caused by the fuel shortages seen in the aftermath of Hurricane Sandy, and lower crude prices have led to the most substantial drop in gas prices seen in the United States since 2008.
Down an average of 20.75 cents since October 19, the average price at the pump across the country now stands at $3.54 per gallon.
When Hurricane Sandy was forecast to make landfall on the East Coast, I advised people to top off their automobiles with fuel. There were a number of reasons for that, and some people in New York and New Jersey are learning those reasons the hard way.
When a hurricane hits an area, it can damage refining infrastructure, fuel terminals, and service stations. Prolonged electrical outages can make fuel deliveries next to impossible, which has been the case around New Jersey since the hurricane hit. Any of these conditions can lead to fuel shortages. CBS News reports:
Gas is being rationed in parts of New York and New Jersey. The pumps are running on empty — and so is patience. According to the motor club AAA, 60 percent of the gas stations in New Jersey and 70 percent on New York’s Long Island are now closed.
One fuel buyer said, “This is crazy, it’s like post-apocalyptic scenarios, you know with this gas. It’s as important as food and water to people. It’s a dogfight out here.”
With five refineries lying in the path of Hurricane Sandy when it made landfall earlier this week, there were fears that gasoline prices across the country would jump due to a stoppage in production, but reduced demand in the wake of the storm promises to help keep those prices moving steadily downwards.
With excellent warning of the storm’s approach and meteorological models that proved to be highly accurate, East Coast refineries were also able to take preemptive action by either reducing operations or temporarily closing altogether. (See more: Why Sandy’s Impact Will Differ From Katrina)
While most hurricanes and tropical storms that make landfall in the United States have an effect on gas prices that consumers are unhappy with, the projected path of Hurricane Sandy and its causing of decreased fuel demand could actually help to continue to push gas prices lower around the country.
The entire northeastern part of the nation is currently locked down as nearly 70 million people brace for Hurricane Sandy, a complicated system that is growing ever larger as it merges with existing wintry cold fronts. This has included a temporary stoppage of transit services in New York City and a mandatory evacuation order of hundreds of thousands of coastal residents across several states. (See more: Falling Gas Prices Could Hurt Romney Campaign)