Prices and consumption
Oil prices hovered around $130 per barrel during the early part of the week. In Nigeria, the MEND blew up another flow station thereby shutting in an additional 130,000 b/d and bringing the total production loss from recent attacks to 305,000 b/d.
A new report from the US Federal Highway Administration says driving in the US fell to 246 billion miles in March from 257 billion last year. This 11 billion mile drop (4.2 percent) is said to be the sharpest since tabulation of such numbers began in 1942. While MasterCard is reporting that gasoline sales last week were down by 5.5 percent over last year, the EIA is reporting that US gasoline consumption dropped by only 0.4 percent during the last four weeks over 2007. At any rate, retail gasoline and diesel prices continue to set new records with national average now at $3.95 for gasoline and $4.78 for diesel.
Today’s stocks report came as a big surprise with the EIA reporting that US crude inventories dropped by 8.8 million barrels last week and gasoline by 3.2 million. Distillate inventories climbed by 1.6 million barrels as is normal for this time of year. The EIA attributed at least part of the largest weekly decline since September 2003 in crude and gasoline stockpiles to difficulties in unloading tankers at Gulf ports.
Of longer term significance, however, is that crude imports over the last four weeks averaged 579,000 b/d less than last year. The EIA also reported that during March 2008 US crude imports fell by 7 percent or 730,000 b/d over 2007. After the stocks report was released, oil prices jumped to above $133 a barrel, but then surprisingly settled back to close below $127 as the prospects for falling demand seemed to outweigh the prospects for shortages.
A wave of strikes and protests against high fuel prices took place in France, the UK, and Spain this week. Even in Russia demonstrations against substandard fuel took place in 50 cities. French fishermen blocked harbors while hundreds of British truckers shut down a key road into London. Diesel in the UK is now $9.65 a gallon which is mostly taxes. To deal with the French protests, President Sarkozy proposed suspending the 19.6 percent value added tax on fuel in the EC. British Prime Minister Brown urged the oil industry to produce more. We have not heard the last of the EC policies of heavily taxing fuel as prices, which are approximately double those in the US, are now approaching the point where many say they can no longer make a living.
Pressures are building in response to the government’s policy of maintaining price caps on retail prices while forcing the oil companies to swallow the losses on the costs of imported oil. The press reports that several oil companies are facing bankruptcy and scattered shortages are being reported across the country. A decision to raise retail prices is expected in the next few days.