Guest Blogger Tom Kloza: Why Gas Prices Are Where They Are
Posted By:Sharon Epperson
Topics:Economy (U.S.) Energy Economy (Global)
Sectors:Oil and Gas
Tom Kloza
Chief Oil Analyst, OPIS
We have a guest blogger today. Tom Kloza is Chief Oil Analyst at OPIS (Oil Price Information Service) and has his own blog. Tom has been writing about downstream oil markets since 1975 and was among the founders of OPIS over 25 years ago. We appreciate his posting today.
For fuel prices, this month will almost certainly be the cruelest month, or the “cruellest” month as poet T.S. Eliot preferred to call it in "The Wasteland." The first full week of April begins with Americans paying about $287-million more per day for gasoline than they paid a year ago, and $712-million more than was meted out on this day five years ago.
The average nationwide gasoline price stands at $3.339 gal, up 57.6cts gal from last year, and some $1.70 gal above prices on the same day in 2003. Every single state finds prices up at least 41cts gal from April 7, 2007, and if you are planning to go into the wild in Alaska, you will find prices there 91cts gal higher than they were twelve months ago. Two out of three U.S. states have surpassed the “tipping point” of $3.25 gal, a number which has OPIS has determined has clearly provoked cutbacks by consumers in recent history.
Posted By:Sharon Epperson
Topics:Economy (U.S.) Energy Economy (Global)
Sectors:Oil and Gas
Tom Kloza
Chief Oil Analyst, OPIS
We have a guest blogger today. Tom Kloza is Chief Oil Analyst at OPIS (Oil Price Information Service) and has his own blog. Tom has been writing about downstream oil markets since 1975 and was among the founders of OPIS over 25 years ago. We appreciate his posting today.
For fuel prices, this month will almost certainly be the cruelest month, or the “cruellest” month as poet T.S. Eliot preferred to call it in "The Wasteland." The first full week of April begins with Americans paying about $287-million more per day for gasoline than they paid a year ago, and $712-million more than was meted out on this day five years ago.
The average nationwide gasoline price stands at $3.339 gal, up 57.6cts gal from last year, and some $1.70 gal above prices on the same day in 2003. Every single state finds prices up at least 41cts gal from April 7, 2007, and if you are planning to go into the wild in Alaska, you will find prices there 91cts gal higher than they were twelve months ago. Two out of three U.S. states have surpassed the “tipping point” of $3.25 gal, a number which has OPIS has determined has clearly provoked cutbacks by consumers in recent history.
Why are we here? Where are we going?
Well, we are almost certainly headed higher in the first part of the month, thanks to international money managers who believe that crude oil is one of the safest places to park money as the Dollar struggles; inflation rears its head, and the perception of a voracious appetite for transportation fuels in China and India steadily increases.
Crude oil starts this first full April week about $42 bbl higher than April 7, 2007. Since there are 42 gallons in a barrel, that yields a convenient year-on-year increase in raw costs of $1.00 gal. But gasoline futures are up “only” 63cts gal during the same period, so manufacturing gasoline is nowhere near as profitable as it was during the 2004-2007 refining renaissance.
I’m betting that we’ll see the peak for crude oil futures and gasoline futures in the next six weeks. I suspect that crude oil peak will be in the $112-$120 bbl range, and believe that gasoline futures will top out just under $3.00 gal. That translates into a retail peak (usually about two weeks after the futures’ apex) of some $3.50-$3.80 gal.
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