Weekly Petroleum Report - 8/31/05

[WorldTraveler]

No one has been willing to do it yet but the situation would be helped if all airlines would pull down 10-20% of their capacity for the month of September. Sept. is one of the lowest load factor months so it makes little sense to fly so many empty seats when fuel costs as much as it does. Since airlines can't coordinate schedules w/o blessing from the gov't, it seems someone like the Air Transport Association should ask the DOJ for an emergency waiver for airlines to discuss how to reduce capacity w/o cutting too much from any one place.

 

[ClueByFour]

No other industry that I know of (except maybe the auto industry) do companies price their product below what it costs to produce.

[post="295659"][/post]​

Some of the airlines do this. Some (notably the legacies) don't.

 

[767jetz]

But Worldtraveler, that idea would only help airlines like Delta, who currently must maintain capacity to keep market share, even at a huge loss (greater than others who have already reduced costs). Surely you're not suggesting that other airlines do their part to help DL in their dark hour, are you??

Actually, I think most airlines pull their schedules down after Labor Day. Northwest actually did it early to help offset the stike effects.

 

[whlinder]

FlyI needs to be shut down before Dulles runs out of fuel.

Can someone explain what this means?

For the airline industry, the soaring cost of oil will have immediate consequences, warned James C. May, president of the Air Transport Association, the industry's trade lobby. The premium that refiners charge to turn oil into jet fuel has shot from $3 a barrel at the beginning of the year to $25, pushing the effective price of a barrel of oil to around $95 for the already ailing airlines.

From http://www.washingtonpost.com/wp-dyn/conte...5090102411.html

Is he just saying that oil is $70, and since airplanes don't use oil, they use airplane fuel, and it costs $25 a barrel to turn oil into airplane fuel, that the real cost is $95 a barrel? Has this price shot to $25 recently or did it gradually climb to this point this year?

 

[BoeingBoy]

What I say that he said was "Of major concern is the increasing gap between the price of crude oil and the price of jet fuel, known as the “crack spread.â€￾ The crack spread for jet fuel has increased in each of the last four years, surpassing $25 per barrel on August 30, versus $3.63 in 2002."

So the period it took to go from $3+ to $25 is longer. That said, however, I think it means the difference between the cost of a barrel of crude and a barrel of jet fuel. In other words, the premium paid to cover the cost of turning the crude into jet fuel plus profit.

The Washington post twisted that a little - if oil were at $95/bbl, the cost of jet fuel would be about $120/bbl or nearly $3 per gallon given the crack spread. What they really should have said is that oil at $70/bbl equals jet fuel at $95/bbl.

Jim

[Edit - addition]

I'm not sure about what time period the $25 crack spread applies to. I looked at that a few months ago - comparing the cost of a barrel of oil to a barrel of jet fuel - and seems like it was more like a $15 difference. He may have been referring to this week when fuel prices spiked up because of Katrina damage. Jim

 

[BoeingBoy]

Aviation Daily Article

"The DAILY's sister company Platts reports that the price of jet fuel in New York spiked 33 cents to 226.45 cents per gallon and the price in Chicago grew 35 cents to 228.65 cents per gallon. If the 35-cent increase in jet fuel prices were spread over the 19 billion gallons consumed annually by carriers, the industry would be hit with an additional $6.8 billion in extra expenses."

Note that those prices equal $95-$96 per barrel for jet fuel. With crude prices running $68-$69 per barrel, that's a $26-$28 crack spread. However, gasoline and heating oil prices are coming down as pipeline capacity comes back on line and some refineries are restarting, according to CNBC & Bloomberg. So the crack spread should continue coming down toward pre-Katrina levels.

Jim

 

[BoeingBoy]

From the DOE morning update on Katrina recovery:

* A report from MMS will be in the next Situation Report. www.mms.gov

* The LOOP is operational from St. James terminal. Entergy reports that they will restore electricity to Clovelly in 7-9 days.

* [Same as last update]The Strategic Petroleum Reserve at New Orleans Elmwood office complex remains shut down. Bayou Choctaw, Bryan Mound, Big Hill and West Hackberry storage sites, however, are operational and will be able to provide crude oil in the loan program noted above.

* Capline, a crude oil pipeline serving the Midwest, was restarted yesterday at a rate of 720,000 barrels a day and can operate at reduced rates until the LOOP is fully operational.

* The Seaway Interstate Pipeline to Cushing, OK, is operating at full capacity (350,000 barrels a day). From Cushing, the Enbridge (Ozark) pipeline to Wood River and the BP pipeline to Chicago are operating at full capacity.

* Entergy reports that it has restored electricity to all but three of the refineries in the New Orleans area it supplies with power. According to Entergy, the refineries still without power are the ConocoPhillips 250,000 b/d Alliance refinery in Belle Chasse, the ExxonMobil/PDVSA 187,000 b/d Chalmette refinery and the Murphy Oil 125,000 b/d refinery in Meraux.

* Plantation pipeline restored power to Collins last night and expects to significantly increase capacity soon.

* Inaccessibility as well as extensive damage from flooding and saltwater are major issues impacting electricity restoration. Well over 10,000 outside crews have arrived to provide assistance; however, availability of line crews remains an issue. As Florida utilities finish their restoration work their crews have begun to move to other states. Entergy reports that its single biggest problem to restoring power in the Greater New Orleans area is the lack of food, water and shelter for its repair crews who are literally sleeping in their trucks. The Department is coordinating with FEMA and AMTRAK to provide sleeper cars for emergency response crews in New Orleans.

* The Department of Energy has entered into three separate agreements to loan oil from the Strategic Petroleum Reserve. The first agreement, between the Department of Energy and ExxonMobil Corp. is for a loan of 3 million barrels of “sweetâ€￾ crude and 3 million barrels of “sourâ€￾ crude oil, and is larger than the 5.4 million barrels loaned during Hurricane Ivan. The second, an agreement between the Department of Energy and Placid Refining is for one million barrels of sweet crude oil. The third is for 1.5 million barrels of sweet crude to Valero. The crude oil will be loaned from the SPR under short-term contractual agreements and returned to the Reserve once supply conditions return to normal. The Department of Energy is working to finalize other loan agreements to loan oil from the SPR.

* Colonial Pipeline is now operating at 40% of normal operating capacity. Once additional generators are activated at inactive pump stations, production will increase to 1.2 to 1.3 million barrels per day. Both gasoline and distillates are currently being transported and delivered. The line was full when it went down, so deliveries were possible within hours – not days – of restart. The company anticipates that it may be able to achieve approximately 74% of normal operating capacity by Sunday and 75% to 86% by early or mid-next week if additional electricity can be supplied to critical pump stations. Further increases cannot be made until normal power is restored. The capacity of Colonial is about 2.4 million barrels per day. Solutions for power restoration are underway.

* As before, status of individual refineries in the affected area in on page 3 of this pdf file:

DOE 11AM Update

Jim

 

[BoeingBoy]

The International Energy Agency (IEA) Director General made an official statement that the member countries will release a total of 2 million bbls/day of crude/product from their emergency reserves....

Statement

Jim

 

[BoeingBoy]

I probably should have done it sooner, what with all the talk about pipelines, but here's links to the major pipeline maps.

Jim

Colonial Pipeline Map

Plantation Pipeline Map

Centennial Pipeline Map

 

[smfav8r]

The whole Atlanta gas mess started because of the media and the rumor mill.

On Tuesday's 11pm's local news, there were reports of possible gas shortages in Metro Atlanta. This morphed over-night. On Wednesday, rumor's spread like wild-fire that the city would run out of gas and all the gas stations would close by 400pm to conserve.

This sent the city into a tizzy for fuel and everyone went to the pumps before 400pm. More gas was sold in 3 hours on Wednesday afternoon then is normally sold in 3 days in Metro Atlanta.

Simple supply and demand, because of the whole influx in folks buying gas, a couple of stations here and there ran their tanks dry. Many of the stations upped their prices to $5 and $6+ per gallon. The killer is, people actually paid it!

The governer then proceeded to put a freeze on fuel prices at the pumps and is looking into punishing those who may gouged prices!

I live in Metro Atlanta and have watched this unfold....it's rather amusing (and sad) to still see people 30 cars deep lined up for gas at an average of $3.50 a gallon for regular unleaded.

 

[BoeingBoy]

The MMS (Mineral Management Service) has released their daily update and the recovery continues.....

328 of 819 oil platforms remain evacuated (40% vs 52% yesterday)

53 of 137 oil rigs remain evacuated (40% vs 48% yesterday)

1,327,953 bbls/day of crude remains shut-in (vs 1,356,498 bbls/day yesterday - or 89% of production vs 91%)

Total crude shut-in since 8/26 is 8,761,468 bbls, or 1.6% of annual production in the Gulf

Jim

 

[whlinder]

On Tuesday's 11pm's local news, there were reports of possible gas shortages in Metro Atlanta. This morphed over-night. On Wednesday, rumor's spread like wild-fire that the city would run out of gas and all the gas stations would close by 400pm to conserve.

[post="295922"][/post]​

Always a self-fulfilling prophecy. Media says there might be a shortage. People think there might a shortage. They go stock up, causing a shortage.

 

[MarkMyWords]

Some of the airlines do this. Some (notably the legacies) don't.

[post="295714"][/post]​

US cut capacity from July to Oct almost 10%. NW cut capacity 17% in anticipation of the mechanics strike.

I am sure other carriers pull back on their flight schedules from peak summer to the lean fall months.

 

[BoeingBoy]

The 1800 CDT update from DOE:

* Colonial Pipeline is now operating at 66% of normal operating capacity. Both gasoline and distillates are currently being transported and delivered. The line was full when it went down, so deliveries were possible within hours – not days – of restart. The company anticipates that it may be able to achieve approximately 74% of normal operating capacity by Sunday and 75% to 86% by early or mid-next week if additional electricity can be supplied to critical pump stations. Further increases cannot be made until normal power is restored. The capacity of Colonial is about 2.4 million barrels per day. Solutions for power restoration are underway.

* Plantation pipeline restored power to Collins last night. Plantation has announced that they will be 100 percent operational by late this evening. Plantation pipeline moves about 620,000 barrels of gasoline, diesel and jet fuel per day.

* [Same as earlier today] Entergy reports that it has restored electricity to all but three of the refineries in the New Orleans area it supplies with power. According to Entergy, the refineries still without power are the ConocoPhillips 250,000 b/d Alliance refinery in Belle Chasse, the ExxonMobil/PDVSA 187,000 b/d Chalmette refinery and the Murphy Oil 125,000 b/d refinery in Meraux.

* [As noted by others on this forum] The President yesterday temporarily waived restrictions on foreign flagged vessels to ship fuels between US ports. TThe Jones Act, requiring U.S.-flag coastwise qualified vessels, has been waived for crude oil and refined petroleum products from September 1 through 19 because of Hurricane Katrina.

* The Intracoastal Waterway from Mobile to Carabelle, Fla., is open, and tug and barge traffic has resumed in the Port of Mobile. All other ports and waterways from Mobile to New Orleans remain closed. The Port of Mobile is open to vessels with 12 feet of draft or less.

* Enterprise Product Partners has reported that the majority of the firm’s five major gas processing plants in Louisiana were waiting for the return of power knocked out by Katrina, a process that local electric utility Entergy has said could take from seven to 10 days.

* The LOOP reports operational capability at 60% via St. James terminal. Facilities at Clovelly continue to operate on auxiliary power.

* The Strategic Petroleum Reserve at New Orleans Elmwood office complex remains shut down.

* [Adds full capacity figure to earlier report] Capline, a crude oil pipeline serving the Midwest, was restarted yesterday at a rate of 720,000 barrels a day and will operate at reduced rates until the LOOP is fully operational. Capline runs roughly 1.2 millions barrels a day of crude oil to the Midwest.

* The Seaway Interstate Pipeline to Cushing, OK, is operating at full capacity (350,000 barrels a day). From Cushing, the Enbridge (Ozark) pipeline to Wood River and the BP pipeline to Chicago are operating at full capacity.

The table of specific refinery status is on page 4 of this updates pdf file:

DOE 1800 CDT Update

Jim

 

[whlinder]

Jim,

FlyI came out with this today:

DECISION MADE TO DISCONTINUE SERVICE TO LAX

East Coast Airbus Flying Proves More Efficient

Due to ever-increasing fuel prices and the expense incurred by flying into Los Angeles, we have decided to discontinue service to LAX as of September 30th. Although our service there was verypopular, and our loads were generally quite high, the cost of flying to that destination is much higher per seat than making multiple flights with the Airbus to destinations East of the Mississippi. You may recall that a similar decision was made about San Jose and San Diego.
“It’s all about fuel. Flying to LA burns a lot of fuel, and we’re not seeing average fares that cover that. We burn about 3500 gallons on a trip to the West Coast, and since fuel is up by a dollar in
recent months, that’s another $3500 per trip we need to recoup,†explained Jeff Pollack (Senior Director, Market Planning). “The current fares people are willing to pay to the West Coast just aren’t able to cover the expense of flying there.†Jeff went on to say, “We are pleased with the performance of our A319s on the East Coast.
Financially, we are getting good returns with our East Coast Airbus flights, even at load factors that are less than what we’ve been seeing in our Western markets.â€
Remember, LAX is not staffed by FLYi employees, so Customer Service staffing will not be affected by this decision."

About what are they paying per gallon of fuel, and when was it a dollar less?