A Horrible EIA Oil Inventory Report

[autofixer]

😱 The weekly EIA report is just out and it is very bad. Distillate inventories were down an unexpected 2.8 million barrels...ouch. Gasoline inventories were down double the expected rate. Look for jet fuel to sky rocket. Gasoline will continue to rise at its moderate pace...double dog ouch! The situation is not, thus far, an oil shortage, it is a production shortage (refineries). Were are now actually importing a great deal of distillates and gasoline from overseas. How vulnerable are these refineries to stops in production?

On the crude front, Rebels in Nigeria have called off their truce with the government today and have demanded all oil producers leave "while they can". We are nearing action in Iran as we have "war games" planned in the area very soon. If crude production in Nigeria and Iran is stopped, it will get very bad. 🙁

Here is some related reading:
http://www.breitbart.com/news/2006/04/19/D8H34M400.html

India is one of the World's top consumers of oil and they are competing with the US for crude on the open market, ie, bidding up the price to get the oil. Here is some interesting India information which will have future implications for the US:
http://www.bloomberg.com/apps/news?pid=100...Oeqk&refer=asia

I look forward to Jim's weekly petrol update.

 

[PITbull]

This is really really bad news.

Folks need to curb their usage and start to car pool. I am permited to work 3 days out of my home per week. I've set up an office down in my family room.
This is earnings reporting month and the oil companies will come in big. I truly believe this is price gouging and they are holding back refinement to make some damn excuse to up prices while they can.

No one in transportation will be showing any profits this coming quarter or next or perhaps the entire year. Unless LUV still has hedges, they won't be either.

 

[autofixer]

It may be gouging or it may not be. Oil is not truely a competitive market as there is no competion...with the oil. We need an alternative to oil so the market can be competitive and not manipulated by people or events or nations. It is past time for ethanol, for instance.

 

[SoftLanding]

This is really really bad news.

Folks need to curb their usage and start to car pool. I am permited to work 3 days out of my home per week. I've set up an office down in my family room.
This is earnings reporting month and the oil companies will come in big. I truly believe this is price gouging and they are holding back refinement to make some damn excuse to up prices while they can.

No one in transportation will be showing any profits this coming quarter or next or perhaps the entire year. Unless LUV still has hedges, they won't be either.

Not so sure it's price gouging, most likely it's a lack of being able to refine products, as there is plenty of oil.

Transportation companies should do fairly good. FedEx and UPS uses fuel charges, as do most of the truckers.

The airlines will most likely show upside surprises, due to several ticket price increases.

AMR reports later today, and that'll be telling. Look for upside surprise from US Airways. Possible negative from JetBlue, though that might be priced into the stock already. Southwest is still hedged, in the 35-36 dollar range.

The avarage consumer is the one hurting at fuel at around 3 dollar/gallon. Working from home/car-pooling would help, but very little. Public transportation would be the way to go to really save, but that is another dabate, alltogether.


SoftLanding

 

[PITbull]

And just how long will an alternative be in place? Who is producing this? I am sure the oil companies know and are hiking prices because they can and because it will take some time to produce a substitute.

Its still price gouging!

 

[jimntx]

And just how long will an alternative be in place? Who is producing this? I am sure the oil companies know and are hiking prices because they can and because it will take some time to produce a substitute.

Its still price gouging!

Bingo! We have a winner. The prices of gasoline is about to go over $3/gal, if not already there in your neighborhood. Here in Dallas, regular unleaded is only $2.89/gal.

The oil companies have cut refinery production to create an artificial shortage of refined product. This allows them to jack up the price to a point that will hurt people. Now when they drop the price back to only $2.50/gal, you will think that's a reasonable price. But, think about what you were paying for regular unleaded a year ago.

Trust me. I worked for Texaco for 16 years. It's the way the game is played. The price of gasoline at the pump is based on not much other than what the oil companies think we are willing to pay.

 

[Prince of PAWOBs]

And just how long will an alternative be in place? Who is producing this? I am sure the oil companies know and are hiking prices because they can and because it will take some time to produce a substitute.

Its still price gouging!

I'm in agreement with PITbull here. There is no shortage of distilled fuel here in the US. Anyone seen any closed gas stations on the way to work due to a shortage?

Didn't think so.

 

[SoftLanding]

Bingo! We have a winner. The prices of gasoline is about to go over $3/gal, if not already there in your neighborhood. Here in Dallas, regular unleaded is only $2.89/gal.

The oil companies have cut refinery production to create an artificial shortage of refined product. This allows them to jack up the price to a point that will hurt people. Now when they drop the price back to only $2.50/gal, you will think that's a reasonable price. But, think about what you were paying for regular unleaded a year ago.

Trust me. I worked for Texaco for 16 years. It's the way the game is played. The price of gasoline at the pump is based on not much other than what the oil companies think we are willing to pay.

I paid over 3/gallon yestarday for premium, grrr...;(

That being said, refinery cutbacks, wasn't that because nobody wanted them in their backyard???

I also believe what you said about Texaco and all the other oil companies. Or any company for that matter.

The big oils have bought up the politicians, that's why there is a lack of refinery capacity, and it takes a long time to get a new refinery online.

Softlanding

 

[robbedagain]

according to the morning call website, mcall.com, the fuelk prices could be at around 3.50 a gallon by summer. not good at all.

 

[PHL]

Oddly, they were all predicting $4+/gal fuel last year in the weeks after Katrina.

 

[FWAAA]

I'm in agreement with PITbull here. There is no shortage of distilled fuel here in the US. Anyone seen any closed gas stations on the way to work due to a shortage?

Didn't think so.

Of course not, since the high price helps prevent shortages.

Which would you rather have? Artificially low prices (like price controls) and corresponding gas lines and shortages? Like in 1973?

Or would you rather pay a little more and be assured that the gas station has plenty of gas for sale?

I vote for the latter. And I hope gas goes higher. Much higher.

Price gouging? A classic complaint of whiners who don't like the fact that market prices fluctuate.

 

[jimntx]

That being said, refinery cutbacks, wasn't that because nobody wanted them in their backyard???

The big oils have bought up the politicians, that's why there is a lack of refinery capacity, and it takes a long time to get a new refinery online.

Softlanding

For the big picture, you are correct. However, the unexpected drop in distillate inventories was based upon current production capacity. The lack of refineries is not the issue here.

The analysts expected a 1.6 million bbl drop in inventory due to partial shutdown of various refineries for maintenance (we used to call it "Spring cleaning"). The actual drop was substantially higher which suggests a deliberate cutback in refinery production.

 

[HPearlyretiree]

It would be nice if we could have built refineries all these years, but the NIMBY's and environmentalists have ensured that we are in the situation we are in right now.

 

[jimntx]

It would be nice if we could have built refineries all these years, but the NIMBY's and environmentalists have ensured that we are in the situation we are in right now.

Maybe, maybe not. The NIMBY's and environmentalists had nothing to do with the closing and dismantling of many refineries that existed up until the 1980's. The oil companies closed those refineries on their own. Some new technology came along about that time that allowed them to increase capacity in the larger refineries without major capital expenditures.

They viewed their smaller refineries as excess capacity and saw closing them as a way to shed a large group of unionized employees.

Oh, and before you denigrate the NIMBYs and the environmentalists, be sure you are willing to raise your hand to have that new refinery built in YOUR backyard. Just FYI, Port Arthur, Texas which has the highest concentration of petrochemical plants in the world also has the highest per capita cancer rate in the U.S. Coincidence? I doubt it. Crude oil and its refined products are just chock full of known carcinogens. Are you willing to subject yourself, your children, and your grandchildren to that risk just to get cheaper gasoline?

 

[FWAAA]

Oh, and before you denigrate the NIMBYs and the environmentalists, be sure you are willing to raise your hand to have that new refinery built in YOUR backyard. Just FYI, Port Arthur, Texas which has the highest concentration of petrochemical plants in the world also has the highest per capita cancer rate in the U.S. Coincidence? I doubt it. Crude oil and its refined products are just chock full of known carcinogens. Are you willing to subject yourself, your children, and your grandchildren to that risk?

Of course not. Let's build the refineries in those godforsaken Arab deserts or other 3rd world countries far away and then tanker the refined product across the ocean instead of crude oil. We don't need no stinkin' refineries - we just want the product.