To set the stage, we have all time record high unemployment. We have crude oil building every week. OPEC people mad that they are not making money. So in the end what could happen? Who knows?
The U.S. people have gotten very good with their fuel management. It might be due to a change in driving habits from when prices were at record highs or it might be because they have been fired and have no place to go. Data released this morning showed the number of people receiving unemployment benefits has reached an all-time record. The Labor Department reported the number of Americans continuing to claim unemployment insurance for the week ending January 17th was a seasonally adjusted 4.78 million, the highest on record dating back to 1967.
As fuel prices stay the coarse not really going up or down but staying around $40 a barrel for oil. Crude inventories continued their climb last week, rising by a higher-than-expected 6.2 million barrels nationwide, according to government data on Wednesday. This plays back into the hands of good fuel management by the U.S. people and companies or an overall total slow down or stop. I am betting on a little bit of everything.
OPEC Secretary General Abdullah al-Badri, at the World Economic Forum in Davos, Switzerland, said the Organization of Petroleum Exporting Countries would not hesitate to act again, if the oil price remained low. OPEC next meets on March 15. They have basically said in past reports that they must get $70 a barrel in order for fuel prices to make them money. Is that true? I don’t know. I always found crude oil cheap compared to other items that we buy.
Now today the postal service says it delivered 4.5% less mail during the 12 months ended Sept. 30, a decline of more than 9 billion pieces, Bloomberg reported. That drop combined with high fuel prices added up to a loss of $2.8 billion, greater than expected. This is a prefect demonstration on why a department as big as this should be run by a private company. It’s true that the USPS is not run by the government but certainly the government has its hands all around this program. The Sokolis Group has talked and met with the United States Postal Service about their fuel management and fuel buying practices. People within the organization know they could buy better if it wasn’t for the bureaucracy.
The other question you have to ask the USPS is, have they ever heard of email? Paying bills on-line? Direct deposit, facebook. All of these areas that would reduce the amount of mail that flows through the postal system. They should be prepared for part of that, plus you throw in a slower economy and there you have a $2.8 billion dollar loss. Should they cut back to 5 days a week and no Saturday delivery? Sure, if you’re in business to make money or at least not to loose $2.8 billion dollars, you have to make changes.
Will any of us really miss the mail on Saturday?
To help reduce your fuel prices and provide your fuel savings, reach out to the Sokolis Group for your Fuel Management and Fuel Consulting needs at (267) 482-6155.
Thursday, January 29, 2009
Tuesday, January 27, 2009
Anyone's Guess
As I watched CNBC today, I saw a friend of mine Joe Petrowski, CEO of Gulf Oil and Cumberland Farms say that he thinks the market could move into the $20 a barrel range with $1.00 gas prices. I like Joe but I don’t know if this market will get much below the high 20 dollar a barrel range. I predicted that it would and it would happen at the end of this week but I might be a few weeks early in my prediction.
Venezuelan President Hugo Chavez said in a state radio program yesterday that he is ready to trim crude output further in order to boost oil prices. Despite the strong front that OPEC is putting up, I do not believe for a second that they are staying with their quotes. Listen if these country’s say that can’t make money at $70 a barrel crude under normal product, how can they make money at $40 a barrel and producing less oil? My view is if they are even close to the production cuts they are all on the high side of them.
The EIA data is forecast to show that U.S. crude oil stockpiles rose a further 2.7 million barrels last week, the fifth straight week of gains.
Colder weather is expected to help draw down distillate stockpiles by 800,000 barrels but that is not nearly enough to give the market any boost. Let’s face it, we are in the dead of winter and there should be draws.
Gasoline stockpiles are likely to have risen by 1.3 million barrels.
"Unless OPEC production cuts in January were substantially greater than what we have assumed, it is still too early to be calling an end to this current bear market," Goldman Sachs said in a research note.
Oil's supply/demand picture remains weak, pointing to a large counter-seasonal stock build in the United States and extremely weak demand in China, the world's second largest energy consumer.
So the fuel beat will go on for another day. With EIA Data due out tomorrow and a snowstorm hitting the Northeast, who know what will help. One thing is for sure, it's always interesting.
Venezuelan President Hugo Chavez said in a state radio program yesterday that he is ready to trim crude output further in order to boost oil prices. Despite the strong front that OPEC is putting up, I do not believe for a second that they are staying with their quotes. Listen if these country’s say that can’t make money at $70 a barrel crude under normal product, how can they make money at $40 a barrel and producing less oil? My view is if they are even close to the production cuts they are all on the high side of them.
The EIA data is forecast to show that U.S. crude oil stockpiles rose a further 2.7 million barrels last week, the fifth straight week of gains.
Colder weather is expected to help draw down distillate stockpiles by 800,000 barrels but that is not nearly enough to give the market any boost. Let’s face it, we are in the dead of winter and there should be draws.
Gasoline stockpiles are likely to have risen by 1.3 million barrels.
"Unless OPEC production cuts in January were substantially greater than what we have assumed, it is still too early to be calling an end to this current bear market," Goldman Sachs said in a research note.
Oil's supply/demand picture remains weak, pointing to a large counter-seasonal stock build in the United States and extremely weak demand in China, the world's second largest energy consumer.
So the fuel beat will go on for another day. With EIA Data due out tomorrow and a snowstorm hitting the Northeast, who know what will help. One thing is for sure, it's always interesting.
Tuesday, January 20, 2009
God Bless America
As our 44th President of the United States of America is sworn in today, I can’t even imagine what must be going through Barack Obama head. This is only the 44 President in our entire history of the U.S. Think about it for just one moment. Think about the things that have happened in a quick snap shot: several wars and peace keeping missions, electricity, automobiles, stock exchanged was formed, a man to the moon, slavery, computers, indoor plumbing and numerous other events without enough paper to list them all. All under just 44 people who have lead our nation.
Have other Presidents come into power with more problems? I don’t know, I will let historians decide on that but what I will say is the country has over 300 million people today more than any other President has had to govern. We deal in a global economic world, much more extreme than even when JFK was President.
I have become a fan of our new President. The last time I was a fan of a President was Ronald Reagan. He came into office with issues and what people believed to be a lack of experience for the position. Who can have the experience for this position? Who? How would you get it? A textbook? Being the number two person as Vice President? No, I don’t think so, it take a certain special person for this position and to be good at it, a very special person. Reagan had it, Barack Obama has that in my view. Both men had special people skills of communicating. Reagan took our country out of the cold war era, double digit interest rates, high unemployment and now its time for Obama to do it. It will take a little bit of time for him and his Senior Staff to start to make a difference but they will.
Fuel today closed down 4% in light trading today. The March contract for crude oil takes the main contract starting tomorrow.
Tomorrow, wow. Most of us will wake up and do things very similar to what we have done for a long time. Wake up and your last name is Obama and your first name is Barack, it’s a whole new story. The market closed under 8,000 today.
We turn a page in history today and see a whole new future. Only in America.
God Bless America!!
The Sokolis Group will help reduce your fuel related expenses through our management and consulting services.
Sokolis Group can be reached at (267) 482-6155 or www.sokolisgroup.com for fuel management and consulting.
Have other Presidents come into power with more problems? I don’t know, I will let historians decide on that but what I will say is the country has over 300 million people today more than any other President has had to govern. We deal in a global economic world, much more extreme than even when JFK was President.
I have become a fan of our new President. The last time I was a fan of a President was Ronald Reagan. He came into office with issues and what people believed to be a lack of experience for the position. Who can have the experience for this position? Who? How would you get it? A textbook? Being the number two person as Vice President? No, I don’t think so, it take a certain special person for this position and to be good at it, a very special person. Reagan had it, Barack Obama has that in my view. Both men had special people skills of communicating. Reagan took our country out of the cold war era, double digit interest rates, high unemployment and now its time for Obama to do it. It will take a little bit of time for him and his Senior Staff to start to make a difference but they will.
Fuel today closed down 4% in light trading today. The March contract for crude oil takes the main contract starting tomorrow.
Tomorrow, wow. Most of us will wake up and do things very similar to what we have done for a long time. Wake up and your last name is Obama and your first name is Barack, it’s a whole new story. The market closed under 8,000 today.
We turn a page in history today and see a whole new future. Only in America.
God Bless America!!
The Sokolis Group will help reduce your fuel related expenses through our management and consulting services.
Sokolis Group can be reached at (267) 482-6155 or www.sokolisgroup.com for fuel management and consulting.
Monday, January 19, 2009
You Heard It Here First For Fuel
It was just a few weeks ago that we told you that the Gaza war would end before Barack Obama took office. Along those same line we believe Russia would come up with an agreement with the Ukraine. In our view we related these events to the events from 1981 when President Ronald Reagan took over the office from Jimmy Carter. Carter was viewed as weak, the economy was terrible and we had hostages in the Middle East.
Here we are 28 year later and we have similar not exact but similar situation. What was announced today. Russia and Ukraine were aiming to sign an agreement on Monday to restart gas flows to Europe through Ukraine after finally agreeing a price for 2009 supplies. And Gaza's streets brimmed with energy Monday as people picked up the pieces of their lives, while Israeli officials said they planned to pull all troops from the territory by Barack Obama's inauguration as president of the United States on Tuesday.
Of coarse the recession has not gotten any better yet nor does anyone expect it to anytime soon but we have plenty of oil.
The deep contango price trend is encouraging more traders and refiners to
store crude on board ships for up to six months, but a longer term play could be
tricky because of the difficulty to secure loan, maintaining fluid cash flow
and the high financing cost.
The estimated volume of crude oil stored on ships has shot up to as much as
100 million bbl or 50 ships, double the volume seen in early January.
Expect $29 a barrel by the end of the month.
Sokolis Group for all of your fuel management and fuel consulting needs.
www.sokolisgroup.com or call (267) 482-6155
Here we are 28 year later and we have similar not exact but similar situation. What was announced today. Russia and Ukraine were aiming to sign an agreement on Monday to restart gas flows to Europe through Ukraine after finally agreeing a price for 2009 supplies. And Gaza's streets brimmed with energy Monday as people picked up the pieces of their lives, while Israeli officials said they planned to pull all troops from the territory by Barack Obama's inauguration as president of the United States on Tuesday.
Of coarse the recession has not gotten any better yet nor does anyone expect it to anytime soon but we have plenty of oil.
The deep contango price trend is encouraging more traders and refiners to
store crude on board ships for up to six months, but a longer term play could be
tricky because of the difficulty to secure loan, maintaining fluid cash flow
and the high financing cost.
The estimated volume of crude oil stored on ships has shot up to as much as
100 million bbl or 50 ships, double the volume seen in early January.
Expect $29 a barrel by the end of the month.
Sokolis Group for all of your fuel management and fuel consulting needs.
www.sokolisgroup.com or call (267) 482-6155
Sunday, January 18, 2009
Fuel Bulls or Fuel Bears?
The market contango is also extraordinarily wide, also provoking covering here," referring to the March NYMEX contract's $6 premium over February. Contango is a state of the market when further months out are higher than current moves. In short most believe that they price will rise as time goes on but will it?
World oil demand will contract sharply in 2009 as the global economic slowdown further erodes consumption, the International Energy Agency (IEA) said on Friday.
The Paris-based agency joined the ranks of forecasters predicting a fall in global oil demand this year, revising its previous 2009 estimate by 940,000 barrels per day (bpd) to 85.3 million bpd -- a 500,000 bpd year-on-year fall.
The price of a barrel of oil could slump toward $25 and even lower as the economy continues to falter, Phil Roberts, technical analyst from Barclays Capital, told CNBC Friday.
“We're still getting bearish signals, the implication is - this moves not over,” Roberts said. Roberts' near-term view for the oil price is $29, but his “slightly longer-term” outlook is for $25 a barrel or lower.
“In the first quarter of 2009, you're in to the final phase of the down leg in the business cycle. So what we’re looking for is this to slow, the downtrend to slow. Where it's going to stop – best guess would be maybe between $17 and $25 a barrel,” he said. Roberts said he would even be wary of buying at $17 a barrel.
Ok, so predictions are World Oil demand is going to go down. The technical analyst believes short term $29 (which we already, see earlier blogs) but $17 and wary at buying at that, we don’t think so. You might be saying I hear crude is going down but why is gas and diesel going up at the pump? We are over supplied with crude oil; plenty of it in storage so much so several ship that hold millions of barrels of crude are parked out at sea. Oil refiners to help keep the price higher so they can make a profit have been trying to make less gas and diesel. Short term solution to their problem, as crude continues to build because you just can’t turn off the barrels being reduced, we will see gas and diesel make a reverse to a downward trend like we had during the last several weeks of 2008. Diesel the world’s most popular product will continue to see at a premium to gas but we believe that we should see $1.75 to $2.00 a gallon. This is a far cry from the $5.00 diesel customer were paying just 7 months ago.
That leaves me to being over confident. How can anyone that over the last year has seen economies make dramatic turns, oil prices go from record highs to loosing over $110 a barrel fee so sure about what the future long term is going to be. No, I never liked the number 17 much (even growing up as a child, old enough to drive but not old enough to vote) and I certainly would not bet that a barrel of oil will get to $17. Everyone can guess and you can be sure the crazier the guess the more attention the press will give someone.
For all you fuel management and fuel consulting help, reach out to the Sokolis Group. www.sokolisgroup.com.
World oil demand will contract sharply in 2009 as the global economic slowdown further erodes consumption, the International Energy Agency (IEA) said on Friday.
The Paris-based agency joined the ranks of forecasters predicting a fall in global oil demand this year, revising its previous 2009 estimate by 940,000 barrels per day (bpd) to 85.3 million bpd -- a 500,000 bpd year-on-year fall.
The price of a barrel of oil could slump toward $25 and even lower as the economy continues to falter, Phil Roberts, technical analyst from Barclays Capital, told CNBC Friday.
“We're still getting bearish signals, the implication is - this moves not over,” Roberts said. Roberts' near-term view for the oil price is $29, but his “slightly longer-term” outlook is for $25 a barrel or lower.
“In the first quarter of 2009, you're in to the final phase of the down leg in the business cycle. So what we’re looking for is this to slow, the downtrend to slow. Where it's going to stop – best guess would be maybe between $17 and $25 a barrel,” he said. Roberts said he would even be wary of buying at $17 a barrel.
Ok, so predictions are World Oil demand is going to go down. The technical analyst believes short term $29 (which we already, see earlier blogs) but $17 and wary at buying at that, we don’t think so. You might be saying I hear crude is going down but why is gas and diesel going up at the pump? We are over supplied with crude oil; plenty of it in storage so much so several ship that hold millions of barrels of crude are parked out at sea. Oil refiners to help keep the price higher so they can make a profit have been trying to make less gas and diesel. Short term solution to their problem, as crude continues to build because you just can’t turn off the barrels being reduced, we will see gas and diesel make a reverse to a downward trend like we had during the last several weeks of 2008. Diesel the world’s most popular product will continue to see at a premium to gas but we believe that we should see $1.75 to $2.00 a gallon. This is a far cry from the $5.00 diesel customer were paying just 7 months ago.
That leaves me to being over confident. How can anyone that over the last year has seen economies make dramatic turns, oil prices go from record highs to loosing over $110 a barrel fee so sure about what the future long term is going to be. No, I never liked the number 17 much (even growing up as a child, old enough to drive but not old enough to vote) and I certainly would not bet that a barrel of oil will get to $17. Everyone can guess and you can be sure the crazier the guess the more attention the press will give someone.
For all you fuel management and fuel consulting help, reach out to the Sokolis Group. www.sokolisgroup.com.
Tuesday, January 13, 2009
Economy & Supply Keep Fuel Prices Falling
The market is over flooded with crude oil as traders are buying crude and putting into storage in hopes that it will be worth more at a later date. Oil tankers are being leased at sea. Storage space for crude became very hard to find at a key delivery point when the January contract expired a few weeks ago as unwanted oil flooded the market. It’s a simple supply and demand issue. Still plenty of supply and not enough demand.
Oil prices tumbled Monday to close at $37.59 a barrel on the New York Mercantile Exchange.
As the U.S. enters a corporate earnings season expected to be fraught with bad news, what could happen this week is a look at peak maybe at $29 a barrel? Sokolis Group actually believes that will happen next week. The scenario is Obama gets sworn into office and the fighting stops in Gaza. Earning reports come out, which we all expect to be bad but they are slightly worse. Warmer weather moves into the Northeast and Europe which today is one of the only bullish things happening in the fuel market. Next thing you know we are looking at $29 a barrel. Do you believe? Still plenty of money to be saved in your fuel purchasing when prices are low. Low prices lead to high margins for suppliers. Sokolis Group has the fueling solutions for you.
Oil prices tumbled Monday to close at $37.59 a barrel on the New York Mercantile Exchange.
As the U.S. enters a corporate earnings season expected to be fraught with bad news, what could happen this week is a look at peak maybe at $29 a barrel? Sokolis Group actually believes that will happen next week. The scenario is Obama gets sworn into office and the fighting stops in Gaza. Earning reports come out, which we all expect to be bad but they are slightly worse. Warmer weather moves into the Northeast and Europe which today is one of the only bullish things happening in the fuel market. Next thing you know we are looking at $29 a barrel. Do you believe? Still plenty of money to be saved in your fuel purchasing when prices are low. Low prices lead to high margins for suppliers. Sokolis Group has the fueling solutions for you.
Monday, January 12, 2009
It's the Economy Stupid
New week, new action, what are fuel prices going to do this week. The Sokolis Group still believes that there is room for prices to move lower, of course if we were as smart about the fuel market as we are about fuel management the company would be worth tens of millions of dollars. Here is why we believe prices will fall lower. This week oil prices fell as data showing a big rise in U.S. unemployment deepened the gloomy outlook for the world's biggest oil consumer. U.S. employers slashed payrolls by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years, a government report showed, suggesting the year-long recession was deepening.
As we all pretty much know that much is not going to turn the economy around until at least January 20, 2009. Even then, we need to give our new President and Congress several months to get their agendas together and put in place.
Yes, top exporter Saudi Arabia plans to cut oil output by up to 300,000 barrels per day below its agreed OPEC target, a proactive step to prop up a collapsing market, industry sources said on Sunday. "We've been told Saudi Arabia will cut to about 7.7 million in February," said a senior oil executive. "They want to prevent a huge stock build up and a further decline in the oil price."
As the headline says, it’s the economy stupid. The jobless rate rose to 7.2 percent, the highest since January 1993. Analysts polled by Reuters had predicted a reduction of 550,000 jobs in December. The rest of the world’s economy is no better than ours because for the most part what we make or buy the world takes or sells. So until our economy starts to move a little, the whole world’s economy will be in this slide.
Now, what happens when all of these billions of dollars of proposed plans and tax cuts kick into place, not only here but across the world? Supercharged economy will be a term people will be using for awhile. Fuel prices will spring back to the $80-$100 a barrel mark, putting gas at $2.75 and diesel around $3.25 but with growth at the rate these packages should generator, we should all be fine. If your thinking about hedging (price insurance) now is not a bad time to buy. Fuel will go a little lower but don’t try to time the market. Just but some caps, kick back and enjoy your fuel budget being under for 2009 and possibly 2010.
As we all pretty much know that much is not going to turn the economy around until at least January 20, 2009. Even then, we need to give our new President and Congress several months to get their agendas together and put in place.
Yes, top exporter Saudi Arabia plans to cut oil output by up to 300,000 barrels per day below its agreed OPEC target, a proactive step to prop up a collapsing market, industry sources said on Sunday. "We've been told Saudi Arabia will cut to about 7.7 million in February," said a senior oil executive. "They want to prevent a huge stock build up and a further decline in the oil price."
As the headline says, it’s the economy stupid. The jobless rate rose to 7.2 percent, the highest since January 1993. Analysts polled by Reuters had predicted a reduction of 550,000 jobs in December. The rest of the world’s economy is no better than ours because for the most part what we make or buy the world takes or sells. So until our economy starts to move a little, the whole world’s economy will be in this slide.
Now, what happens when all of these billions of dollars of proposed plans and tax cuts kick into place, not only here but across the world? Supercharged economy will be a term people will be using for awhile. Fuel prices will spring back to the $80-$100 a barrel mark, putting gas at $2.75 and diesel around $3.25 but with growth at the rate these packages should generator, we should all be fine. If your thinking about hedging (price insurance) now is not a bad time to buy. Fuel will go a little lower but don’t try to time the market. Just but some caps, kick back and enjoy your fuel budget being under for 2009 and possibly 2010.
Wednesday, January 7, 2009
Fuel Management
Just when everyone was starting to worry the fuel prices were headed higher we find out that we have a lot of inventory. Fuel prices plunged across the board Wednesday, giving up a week of gains with unexpectedly large U.S. crude reserves suggesting demand for energy has eroded even further.
Sweet crude for February delivery tumbled 12 percent, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange after the report was released.
Crude oil stocks rose by 6.7 million barrels, the U.S. Energy Information Administration said, more than the 900,000-barrel increase analysts had expected.
"We had pretty large builds in all categories. I think it's a confirmation of the weak demand environment. Any time the market sees physical confirmation of that in inventory building, it's just another reason to move lower, and that's what we're seeing right now,'' said Amanda Kurzendoerfer, commodities analyst at Summit Energy in Louisville, Kentucky.
Oil demand in the United States, as well as Europe and Asia, has been eroded by the global economic slowdown.
The bearish data overshadowed the conflict in Gaza, both of which had supported oil prices early in the week.While the Gaza conflict did not directly threaten any oil supplies, unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.
Let's see what tomorrow brings!
Sweet crude for February delivery tumbled 12 percent, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange after the report was released.
Crude oil stocks rose by 6.7 million barrels, the U.S. Energy Information Administration said, more than the 900,000-barrel increase analysts had expected.
"We had pretty large builds in all categories. I think it's a confirmation of the weak demand environment. Any time the market sees physical confirmation of that in inventory building, it's just another reason to move lower, and that's what we're seeing right now,'' said Amanda Kurzendoerfer, commodities analyst at Summit Energy in Louisville, Kentucky.
Oil demand in the United States, as well as Europe and Asia, has been eroded by the global economic slowdown.
The bearish data overshadowed the conflict in Gaza, both of which had supported oil prices early in the week.While the Gaza conflict did not directly threaten any oil supplies, unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.
Let's see what tomorrow brings!
Fuel Analyze Can't Decide
The slide in gas and diesel fuel has slowed down and has actualy started to climb back up recent days amid indicators that the national average could jump to $2 a gallon or higher this spring.
A shift in the psychology in the fuel market seems to be under way. Fuel prices are up more than 40 percent since they bottomed out just below $33 a barrel on Dec. 19. The reversal, after months of declines, suggests that production cuts by the OPEC cartel may be having an effect, along with growing tensions in the Middle East and the sentiment by traders that drops in prices went too far.
The 11-day Israeli air and ground offensive, which has killed about 600 people, has probably added about $10 to the price of oil, said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne.
"The recent gains have been due to a one-off issue in the Middle East," Pervan said. "Once that calms down, the market could be in for a correction back toward $40."
Oil prices are up about 25 percent in the last week alone, in part because of the escalating conflict between Israel and Hamas in Gaza. Rising oil prices have helped push the wholesale price of gasoline up by 40 percent since Dec. 24, leading to predictions by energy experts that retail gasoline prices will spike by as much as 25 percent in coming weeks.
"A lot of people are talking about dollar-a-gallon gasoline, when the wholesale market seems to be pointing to $2 a gallon," said Tom Kloza, chief oil analyst at the Oil Price Information Service. As of Monday, regular gasoline was selling for $1.67 a gallon, on average, up from a recent low of $1.62 on Dec. 30.
The decline in gasoline prices has offered badly needed relief to consumers. A driver buying 50 gallons of gasoline a month has been saving $2 a day compared to a year ago, and $4 a day compared to the price peak in July. For the national economy as a whole, the savings came to around $1 billion a day, according to the Oil Price Information Service.
Analysts say the decline in gasoline use may have bottomed out, barring a further big downturn in the economy."There will be a real spike in gasoline prices coming in the next four to six weeks," predicted Chris Ruppel, an energy analyst at Execution, a brokerage and research firm. "We are witnessing a sea change in energy market sentiment as Americans appear to be returning to some of their old driving habits just as geopolitical risk is once again a factor in crude prices."
Oil prices jumped more than 5 percent on Monday alone to close at $48.81 in New York trading, as fighting continued in the Gaza Strip and Iran's OPEC representative said the cartel would hold a special meeting in February. The cartel decided last month to cut output by 2.2 million barrels, on top of earlier cutbacks.
The AAA auto club reported that the average price for a gallon of unleaded gasoline on Monday was $1.67, up nearly a penny and a half from the day before. That still compares favorably to the national average of $3.10 a gallon a year ago and the record high national average price of $4.11 last July 17.
In contrast to gasoline, diesel prices have not yet bottomed out. A gallon cost $2.40 on Monday, down a fraction of a penny from the day before.
"In comparison with between roughly a 40 percent drop in the stock market and a 20 percent drop in home values, the drop in gasoline prices is just a drop in the bucket," said Adam J. Robinson, director of commodities at Armored Wolf L.L.C., a hedge fund.
Mr. Robinson said he was unconvinced that oil and gasoline prices would go back up for long. "I think it is too soon to call a bottom in oil or gasoline because demand is falling faster than OPEC is cutting," he said.
"Consistent negative economic data over the coming weeks from the U.S. and elsewhere will likely be enough to water down this positive mood in the market right now," said Pervan, who expects oil to average about $40 a barrel this year.
With several different sides weighing in, its difficult to know where fuel is really going to go. Only time will tell.
A shift in the psychology in the fuel market seems to be under way. Fuel prices are up more than 40 percent since they bottomed out just below $33 a barrel on Dec. 19. The reversal, after months of declines, suggests that production cuts by the OPEC cartel may be having an effect, along with growing tensions in the Middle East and the sentiment by traders that drops in prices went too far.
The 11-day Israeli air and ground offensive, which has killed about 600 people, has probably added about $10 to the price of oil, said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne.
"The recent gains have been due to a one-off issue in the Middle East," Pervan said. "Once that calms down, the market could be in for a correction back toward $40."
Oil prices are up about 25 percent in the last week alone, in part because of the escalating conflict between Israel and Hamas in Gaza. Rising oil prices have helped push the wholesale price of gasoline up by 40 percent since Dec. 24, leading to predictions by energy experts that retail gasoline prices will spike by as much as 25 percent in coming weeks.
"A lot of people are talking about dollar-a-gallon gasoline, when the wholesale market seems to be pointing to $2 a gallon," said Tom Kloza, chief oil analyst at the Oil Price Information Service. As of Monday, regular gasoline was selling for $1.67 a gallon, on average, up from a recent low of $1.62 on Dec. 30.
The decline in gasoline prices has offered badly needed relief to consumers. A driver buying 50 gallons of gasoline a month has been saving $2 a day compared to a year ago, and $4 a day compared to the price peak in July. For the national economy as a whole, the savings came to around $1 billion a day, according to the Oil Price Information Service.
Analysts say the decline in gasoline use may have bottomed out, barring a further big downturn in the economy."There will be a real spike in gasoline prices coming in the next four to six weeks," predicted Chris Ruppel, an energy analyst at Execution, a brokerage and research firm. "We are witnessing a sea change in energy market sentiment as Americans appear to be returning to some of their old driving habits just as geopolitical risk is once again a factor in crude prices."
Oil prices jumped more than 5 percent on Monday alone to close at $48.81 in New York trading, as fighting continued in the Gaza Strip and Iran's OPEC representative said the cartel would hold a special meeting in February. The cartel decided last month to cut output by 2.2 million barrels, on top of earlier cutbacks.
The AAA auto club reported that the average price for a gallon of unleaded gasoline on Monday was $1.67, up nearly a penny and a half from the day before. That still compares favorably to the national average of $3.10 a gallon a year ago and the record high national average price of $4.11 last July 17.
In contrast to gasoline, diesel prices have not yet bottomed out. A gallon cost $2.40 on Monday, down a fraction of a penny from the day before.
"In comparison with between roughly a 40 percent drop in the stock market and a 20 percent drop in home values, the drop in gasoline prices is just a drop in the bucket," said Adam J. Robinson, director of commodities at Armored Wolf L.L.C., a hedge fund.
Mr. Robinson said he was unconvinced that oil and gasoline prices would go back up for long. "I think it is too soon to call a bottom in oil or gasoline because demand is falling faster than OPEC is cutting," he said.
"Consistent negative economic data over the coming weeks from the U.S. and elsewhere will likely be enough to water down this positive mood in the market right now," said Pervan, who expects oil to average about $40 a barrel this year.
With several different sides weighing in, its difficult to know where fuel is really going to go. Only time will tell.
Monday, January 5, 2009
Fuel Rises On First Real Trading Day of 2009
There is no peace in the Middle East. Conflict between Israeli and Gaza continued for its 7th day. Meanwhile Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine warned that European customers could see serious natural gas disruptions in about two weeks.
A strong performance in U.S. equity markets also boosted bullish sentiment across the complex. The DJIA broke through the 9000 mark for the first time in 3 weeks. Israel's ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices above $48 a barrel Monday, but some analysts say there's more than just unrest in the Middle East behind the rally. The belief is that the gloom and doom of the economy is leaving the market. I don’t think I would be telling the auto industry that since GM, Ford, Honda and Toyota all reported 30% or better decline in sales for December.
Adding support, the Department of Energy said it would resume filling the nation's Strategic Petroleum Reserve, following the expiration Wednesday of a suspension. The Department plans to fill the reserve this year to its 727 million bbl capacity, which would provide about 70 days of net import protection.
For those of you who just got done reading our monthly newsletter, Oil prices have risen from around $35 a barrel since Israel launched its Gaza offensive Dec. 27, heightening fears for crude supplies from the Middle East. Our article was written before January 1st. We still believe if and it’s a big IF, things can calm down over there we are looking at $40 a barrel crude or less until the next OPEC production cuts or an economy that comes back from the dead and races to 11,000 points quickly.
As we have always said, we do an excellent job managing how our clients buy fuel, negotiating prices, auditing invoices, consolidating back office paper flow, etc. If we knew what the market was going to do from day to day we would have been able to retire a long time ago. Now is not the worst time to think about capping your fuel cost with fuel insurance. You might not be buying it at rock bottom but who knows where the bottom is or if we hit it already.
A strong performance in U.S. equity markets also boosted bullish sentiment across the complex. The DJIA broke through the 9000 mark for the first time in 3 weeks. Israel's ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices above $48 a barrel Monday, but some analysts say there's more than just unrest in the Middle East behind the rally. The belief is that the gloom and doom of the economy is leaving the market. I don’t think I would be telling the auto industry that since GM, Ford, Honda and Toyota all reported 30% or better decline in sales for December.
Adding support, the Department of Energy said it would resume filling the nation's Strategic Petroleum Reserve, following the expiration Wednesday of a suspension. The Department plans to fill the reserve this year to its 727 million bbl capacity, which would provide about 70 days of net import protection.
For those of you who just got done reading our monthly newsletter, Oil prices have risen from around $35 a barrel since Israel launched its Gaza offensive Dec. 27, heightening fears for crude supplies from the Middle East. Our article was written before January 1st. We still believe if and it’s a big IF, things can calm down over there we are looking at $40 a barrel crude or less until the next OPEC production cuts or an economy that comes back from the dead and races to 11,000 points quickly.
As we have always said, we do an excellent job managing how our clients buy fuel, negotiating prices, auditing invoices, consolidating back office paper flow, etc. If we knew what the market was going to do from day to day we would have been able to retire a long time ago. Now is not the worst time to think about capping your fuel cost with fuel insurance. You might not be buying it at rock bottom but who knows where the bottom is or if we hit it already.
Sunday, January 4, 2009
Fuel Costs to Increase as Taxes will Raise
A Federal Commission created by Congress to find ways to help build and repair highways and bridges is recommending a 50% increase in gas & diesel fuel taxes. Is this the right thing to do as the economy is in a recession? Can we really afford this as a country? Yes and Yes. I know for some of you that sounds crazy. Let me explain why....
Gas and Diesel Fuel costs are down around $2.50 per gallon from their record highs earlier this year. A 50% increase in gas and diesel amounts to a 10 to 12 cent a gallon increase respectively. Yes, gas and diesel costs will go back up again over time but there has not been an increase to these taxes in well over a decade. We have bridges collapsing, roads under dire repair and we need to build a better infrastructure for the future.
Our belief is that over the next couple of years that tax should increase by 30-40 cents a gallon or more. With the extra money, we can take that money and start to build and widen more roads along with bridges. This puts people to work. Working people help reduce unemployment as well as spend more money on items. This helps stimulate the economy. It also does something else, it keeps people from driving as much. Public transportation, car pooling, scheduling their trips to the same areas to reduce fuel usage. Additionally, if we tax alternative fuels less, it will help make alternative fuel vehicles more favorable for consumers to buy.
Ok, so today instead of going out and buying gas for your car for $1.75 your going to pay $2.05. For diesel fuel users which is how most of our goods are moved in this country your paying $2.80. What do you get for your money? Better roads, less traffic congestion, improved infrastructure. Not bad!
Let us know your views. More to come on the topic on saving on greenhouse gases, wasted fuel and dependence on foreign oil.
Gas and Diesel Fuel costs are down around $2.50 per gallon from their record highs earlier this year. A 50% increase in gas and diesel amounts to a 10 to 12 cent a gallon increase respectively. Yes, gas and diesel costs will go back up again over time but there has not been an increase to these taxes in well over a decade. We have bridges collapsing, roads under dire repair and we need to build a better infrastructure for the future.
Our belief is that over the next couple of years that tax should increase by 30-40 cents a gallon or more. With the extra money, we can take that money and start to build and widen more roads along with bridges. This puts people to work. Working people help reduce unemployment as well as spend more money on items. This helps stimulate the economy. It also does something else, it keeps people from driving as much. Public transportation, car pooling, scheduling their trips to the same areas to reduce fuel usage. Additionally, if we tax alternative fuels less, it will help make alternative fuel vehicles more favorable for consumers to buy.
Ok, so today instead of going out and buying gas for your car for $1.75 your going to pay $2.05. For diesel fuel users which is how most of our goods are moved in this country your paying $2.80. What do you get for your money? Better roads, less traffic congestion, improved infrastructure. Not bad!
Let us know your views. More to come on the topic on saving on greenhouse gases, wasted fuel and dependence on foreign oil.
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