US Gasoline prices going down... for now... why?

deconstructionist

Read this on my blog, with links to sources.

In the days before hurricaines Katrina and Rita crippled US oil production and refining capacity, a gallon of regular unleaded was $2.55 at my local gas station. That soared as high as $3.29 before beginning a slow and somewhat steady decline to its current level--$2.19. Pretty good, pretty cheap, all things considered.

I would assume that few people have stopped and thought about exactly why gas and crude oil prices are on the decline. They probably assume that with all of the whining about price gouging--gasoline retailers and oil companies got the message. Or they might not even care to think about it at all, since the hundreds of miles they drive per week just got a whole lot cheaper. Well, here's something you may or may not have known: On September 2nd, the IEA (International Energy Agency) decided to release 2 million barrels per day of crude oil and "refined product" from Europe's strategic reserve to the American market.

These are wholesale prices--so taxes and such are not included. See the huge drop in prices towards the beginning of September and the mostly steady decline since then? The small upward curve represents the effects of hurricane Rita. But otherwise prices are going down, down, and down since September 2 when this 2 mbpd was released from the European reserve. What do you think is going to happen when the 2 mbpd stops?

Well, we're going to find out. The IEA has not posted the announcement on their Web site yet, but they recently declared that the 2 million barrels per day from Europe will indeed stop. "Not because they are hateful meanies, but because, after all, it is Europe's strategic reserve and they can't sell it all to us because, well, some strategic emergency might come up for them, too." (quote from linked source). There will be a 1-2 week period where shipments that were in transit or supplies that were already earmarked for shipment get delivered and such... But after that, we will most likely face supply shortages--just in time for the winter heating season. Yes, we can take 2 mbpd out of our own strategic reserves for a while--but aside from a reletively tiny 2 million barrel Northeast Home Heating Oil reserve, US reserves do not include refined products. So that doesn't really help us where refinery capacities are an issue.

I'm sure that there are good people thinking about this problem and devising a way around it... While I'm sure the rest of the world would like us to stop using 25% of the world's oil resrouces while we only produce 5%, nobody in the American government wants Americans to have to deal with shortages and rising prices. So there is no doubt some movement to mitigate the effects of this recent announcement by the IEA. Interesting though that information about all of this is very difficult to come by. You really have to be a news-hound or you have to be searching for it.

In any case, don't be surprised if by December we see gasoline, crude oil, and heating fuel costs begin to rise again as the 2 million barrels per day from the European reserve are removed from circulation. Fill your tanks now... And please don't blame oil companies or the government--blame the culture of comfort and consumption that we are slaves to...
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UNLESS

BabyPeanut

SIGH,

Please my most recent rendition of my "it's the imports"

http://www.livejournal.com/community/peak_oil/230307.html

It's loaded with charts linked to their TWIP pages. Putting the charts in the right order is very telling.

BabyPeanut · Last edited by BabyPeanut on Fri Nov 11, 2005 4:25 pm; edited 1 time in total

Atlantean_Relic

Gas is $2.02 here in Louisiana

aahala · Intermediate Crude Joined: Feb 03, 2005 Posts: 954

How do we know the transfer rate was 2mbd, when it
actually started, or if it might not have ended two weeks ago?

The 9/2 EIA press release said they would make available
2mbd for 30 days.

The 10/20 announcement said they voted to complete the
remaining 60 million commitment. It was silient on the rate that
had actually occurred, how much had been used or how much
remained.

It's odd too unless the 2mpb transfer didn't start until at least 18
days after the first announcement. The second announcement would
have been unneccessary as the 60 would have been completed otherwise.

BabyPeanut

Does the US still need IEA imported stockpile loans?

(clickable)

BabyPeanut

Well, maybe it does for diesel/heating oil (distallates)

(clickable)

deconstructionist

AlCzervik

This article is subscription only right now, but Ruppert is on the same page as Kunstler about the IEA discontinuing the imports. Again, there is no substantiation on that issue.

DantesPeak

I think all someone has to do is to review the incremental imports over the last few months and subtract them from the 40 m barrels coming from outside the US, then the remainder is what's left to ship. The IEA is only allowing a 90 day, window too, which means the end will come by the end of November in any case.

My rough calculation is that we are very close to the end of the extra imports already. So I don't think Kunstler is too far out of line.

HonestPessimist · Heavy Crude Joined: Feb 25, 2005 Posts: 414

I expect the oil price would quadruple to $100 per barrel by the end of this year or early 2006. Goldman Sachs warned last summer of "$105 per barrel" toward the end of 2005.

The plan's still on. The "warmer weather" prediction in 2006 is a temporary distraction to alleviate oil market concerns for the past few weeks, forcing the oil producers to go slow with the outputs this time.

Soon, it would be a big mistake. Just wait.

No-Oil · Heavy Crude Joined: Dec 31, 2004 Posts: 243 Location: UK

The oil price & thus gas has fallen, because both the European & US SPR's are being consumed, thus knocking approx 4mbpd off world demand. At the same time, neither the European SPR (which was full) or the US SPR are being bought for, thus knocking an unspecified amount off the teh world demand.

Most of the Gulf oil & gas supply damage is still locked in, thus it will be a while before this can contribute to world production again. Meanwhile, when the taps are turned off on the US & European SPR's, the price will rise rapdily & this will be further fueled by the increased demand for oil to refill the SPR's!

The US has said it intends to increase its SPR from 750Mb, to 1Billion Barrels, the UK & some other EU countries are looking at increasing their SPR due to North Sea production declines. China is about to embark on filling their SPR in 2006, so expect a major price hike during 2006 ! Unless demand destruction kicks in big time, the price will soar & the worlds economies will plummet !
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The roller coaster is still climbing, but it's near the top now !
Where there's a WAR there's a WAY Sad

TITAN

No-Oil · Heavy Crude Joined: Dec 31, 2004 Posts: 243 Location: UK

Thanks for the update Titan. That means there is less to come back online in the future, which means that the price hike will likely be more severe than I anticipated ! Bummer Sad

_________________
The roller coaster is still climbing, but it's near the top now !
Where there's a WAR there's a WAY Sad

grabby · Light Sweet Crude Joined: Nov 08, 2005 Posts: 1328

There were no sudden finds or increases in reserves.
But there were congresional hearings.