Gas prices – May 25

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Petrol to hit £1 a litre within weeks as oil supply strains show
Larry Elliott, The Guardian
Petrol prices were on course last night to break the pound-a-litre barrier after the cost of crude oil on global markets rose to its highest level this year.

With the US navy putting on a show of strength off the Iranian coast and oil workers in Nigeria launching an indefinite strike, a barrel of Brent crude was trading for almost $72 last night – up more than a dollar on the day and within six dollars of last summer’s record $78.40.

Industry experts in the UK said motorists – already paying an average 97p a litre on forecourts – could expect to be paying £1 or more within six weeks.

Ray Holloway, of the Petrol Retailers Association, said petrol prices had been edging higher throughout spring against a backdrop of US stockpiling of crude. But he said the latest increase meant the upward pressure would continue for the next two months.
(25 May 2007)
That’s $7.49 per U.S. gallon.

Poll: Gas costs hurt, but many adjust
Alan Fram, Associated Press via Newsweek
Nearly half the country thinks near-record gasoline prices will cause serious hardship, prompting ever more people to consider trading their gas guzzlers for more fuel-efficient cars, an AP-Ipsos poll says.

Yet there are signs that more people also are clinging to their driving and vacation habits while grudgingly accepting the higher price tag. The government said this week that prices for a gallon of regular gasoline had hit a nationwide average of $3.22, nearly 50 percent higher than in January and pennies shy of the all-time mark.

Forty-six percent said spiking gasoline prices are causing them severe financial problems, said the poll, released Friday at the Memorial Day weekend’s unofficial start of the summer driving season.
(25 May 2007)
Contributor Aaron Wissner writes:
This is a good poll to compare against the one earlier this week by the Washington Post. [I think Aaron is referring to: A Poll Finds Prices Must Go Way Higher to Alter Driving.]

I just published a gas price/peak oil story on the same topic.
valuesystem.livejournal.com/17035.html

TOD readers on oil companies and high gas prices
Various, The Oil Drum
If one has the time to go through the long discussions at The Oil Drum, one can usually pick up some gems. Here are some good posts from readers at today’s DrumBeat. -BA

xurb wrote

Who’s to blame?

Scapegoating and ignorance go hand in hand, but they are supplemented by circumstance.

Directed anger levels will rise reflecting how pressured the individual is by locked in consumption and inability economically to afford change. Higher price, higher pressure, higher blame, higher anger…. bad juju.

Folks can be ‘locked in’ to their opinions by either finances and/or a conspicuous consumption lifesyle, ie. WT’s FWOs (formerly well offs). Either way they are more likley to scapegoat and be difficult to make PO aware.

When this long emergency becomes ongoing it is going to become more important to see what could motivate people to anger and violence and what steps can be taken to redirect that energy. And it’s literally a race to save ourselves from a belief in entitlement and limitless resources.

Our best antidote is peak oil awareness. Blaming government and oil companies is symptomatic not conclusive. (and yes it’s high time they better BOTH come clean)

MUDLOGGER wrote:

If the pronouncements by XOM, CERA et all suggest to the general public that PO is decades away, then They are hoisted by their own petard:

General public hears Peak is decades away and is reassured in to continuing the current way of life.

Gas ramps in price. But if PO is decades away then Oil Cos MUST be gouging.

Up steps Uncle Sam and taxes and / or breaks up the large oil companies.

So XOM etc would have been better off telling the truth in the first place…

Is this what is meant by blow back?

oilmanbob wrote:

I don’t want to seem like an apologist for Big Oil. IMHO they have the most brain dead public relations of any major industry the world, with the possible exception of nuclear power. Their executives don’t tell everything they know and totally bend the truth.

Nobody can tell you the exact world reserves of oil, because they depend on two variables – how much will be produced at an economically affordable price and how much can we afford to pay. And those are in a calculus that no one can figure, because we are entering into a brave new world that changes so quickly it’s impossible to predict with any accuracy. We can’t even agree on the definition of oil-is it all liquids or crude plus condensate?

Exxon-Mobil claims in its Annual Report that there is 3 trillion barrels of oil left, but it includes the tar sands and shale oil, both of marginal or negative costs. I know you’ve read the various keyposts and comments that cover the issue. It includes oil in areas that are technicially unfeasable and many that are politicially impossible for the big oil companies to produce. And it doesn’t include environmental costs – in the US alone Big Oil can’t explore for oil in about 3/4ths of the ocean and much of the land.

A more realistic answer is that there is about 250 billion – 500 billion barrels left at a reasonable cost. But, if Exxon-Mobil tells us the truth, then their reserves have become a liquidating asset and the stockprice will change to reflect only their economicially produceable reserves. And the upper management stock options and bonuses will be worth much less. So, they fund CERA and other cornucopians. And if we produce all the bitumen and kerogen and upgrade it the climate will be destroyed.

I want you to notice their exploration and production in North America, because watching where they spend their money is the most reliable barometer of their thought. XOM isn’t investing in North American oil, or bitumen (oil sands), or kerogen (shale oil), but instead in natural gas, the key ingredient in producing the “alternative” liquids. It is also less likely to be hit with punitive taxation.

So, is this a f**khead policy? I think so as a citizen, but as a stockholder I see their logic. Its truly a public relations nightmare, and they are walking through a minefield.

(25 May 2007)

Wis. gas station shuts pumps over prices
Dinesh Ramde, Associated Press
Motorists pulled in to Harvey Pollack’s gas station Thursday, honked and gave him a thumbs-up – because he wasn’t selling any fuel.

The owner of Towne Market Mobil in this suburb north of Milwaukee shut down his pumps for 24 hours, hoping to start a movement aimed at persuading oil companies to lower their prices.

“Somebody out there is making money at these prices, but not me,” said Pollack, 57. “So I just thought: What can I do to help the consumer?”

Yellow caution tape surrounded Pollack’s six idle pumps for his protest, which drew dozens of drivers. One in a green minivan rolled down her window and shouted “Thank you!”

Maria McClory, 38, drove 10 miles out of her way to buy a diet soda from Pollack’s station after seeing local television coverage of the protest.
(24 May 2007)
Contributor Rick Dworsky writes:
The realization that most kids growing up today in developed nations won’t be able to afford gasoline to drive is seeping into global mainstream consciousness. I think we can expect some very bizarre reactions.

House Passes Gasoline Pice Profiteering Bill and Misses the Target by a Mile
Raymond J. Learsy, Huffington Post
Part bluster, all theater, our oil-addled Congress took a swipe at the oil gougers and in Buster Keaton fashion fell flat on its face. Therapeutic play acting perhaps, but comedy shouldn’t be the order of the day for the rest of us while the real gougers laugh all the way to the bank.

The bill focuses on the those gorilla’s of the oil patch, the gasoline stations, and is meant to prevent gasoline stations from running up prices in the face of stressed conditions. Please understand that your local gas station is not well represented among Washington’s “K” Street lobbyists, when compared to his the suppliers, the oil companies. He/She have become a useful diversion, focusing our attention and that of Congress away from the real gougers, the oil companies themselves. But, hey, the gas stations are little guys and don’t bounce around in their jets, plush corner offices and $500 million paydays.

More importantly, for the integrated oil companies, whether it be their own or independent distributors what happens at the gas pump is completely secondary. You see what counts is how much they make on the crude oil they produce, and anything that can take our attention away from that very fundamental issue is a boon to them. To put it all in perspective Exxon/Mobil produces as much crude oil per day as Iran (over 4 million barrels of crude daily and over 6 million barrels in crude oil equivalents). So what possible incentive would they have to force down the price of crude oil. Crude oil makes up some 60 percent of the price of gasoline, and the higher they can keep the price of crude the higher their profits. And while the gas station has a reasonable margin in dimes and quarters, our integrated oil companies profit’s are egregious, exceeding tens of dollars per barrel at current price levels.

…House hearings on “Breaking up the Oil Companies” is certainly a timely exercise. Here the focus should also be on how we got these vertiginously high oil prices. What incentive do integrated oil companies have to militate for lower oil prices? As seen from the above, none and even less then none in that their refining operations are being used to maximize the price of crude with resulting high gas prices and with the added benefit of giving them a vehicle to divert our attention from the real source of gouging.

The House hearings might also touch upon such related issues as : an in depth look into role of OPEC, what has been the role of the oil lobby, who really, are and who funds the peak oil theorists, what is the degree of oil and Middle East funding and influence on the Beltway think tanks, how disinterested are the scare mongers who forever frighten us into higher crude prices
(25 May 2007)
It looks as if Learsy is putting peak oilers on his list of “who is to blame”:

House hearings might [investigate] who really, are and who funds the peak oil theorists

Please Mr. Learsy (and anyone else who has sees conspiracy in the peak oil movement), spend a little time doing research on the Web, contact us, or attend a conference. Your credibility will be much improved! -BA

Oil executive responds to outcry
He calls on Americans to cut demand
Brett Clanton, Houston Chronicle
With gasoline prices topping $3 nationwide, many U.S. drivers and some lawmakers are accusing oil companies of intentionally keeping pump prices high to increase profits.

But Rob Routs, Royal Dutch Shell’s top executive over global refining operations, said the situation the U.S. finds itself in today has been years in the making and has to do more with the country’s shortage of refining capacity than any profiteering on the part of oil companies.

Americans, too, must “back off” on their gasoline consumption or energy costs will only keep rising, said Routs, a Dutch native who lives in The Hague and was in The Woodlands on Thursday for a conference. Routs, who also serves on Shell’s board, spoke with Chronicle reporter Brett Clanton during a break.
(25 May 2007)

Don’t blame oil companies
Editorial, LA Times
This summer, it’s time to lay blame for high gas prices on … us.
—–
MEMORIAL DAY weekend is nearly here, marking the official opening of the summer driving season. In Congress, that means it’s silly season for oil-company bashers, as lawmakers pandering to motorists scramble to look like they’re doing something about high gas prices. Yet despite the overheated political rhetoric and the frustration of consumers, the real culprit for skyrocketing prices at the pump isn’t the oil giants. It’s us.

Gasoline prices have risen to record levels recently and are climbing more sharply than oil prices, raising the usual suspicions that refiners are gouging consumers. The ritual response in Congress to such spikes is to call for investigations (despite the fact that dozens of probes over the last 20 years have turned up no clear evidence of market manipulation by oil companies) and to propose laws imposing price caps or other ways to discourage profiteering. A case in point is a vague bill passed by the House on Wednesday giving federal regulators the power to prosecute, during presidential declarations of an energy emergency, anyone selling gas at a price that is “unconscionably excessive” and “taking unfair advantage” of consumers – whatever that means.

American consumers are plenty mad about high gas prices, but apparently not mad enough to change their behavior.
(25 May 2007)

Gasoline’s making consumers fume
But don’t just blame Big Oil — there’s more to it
Myra P. Saefong, MarketWatch
…Government studies have yet to find that any of the price spikes have come from illegal activity on the part of oil companies.

In 2006, the Federal Trade Commission found examples of price gouging following Hurricane Katrina — where gasoline was sold above average regional price levels even when the higher prices weren’t justified by production, delivery or transportation costs. But it failed to find any instances of illegal market manipulation — instead blaming the price run up on simple supply-and-demand economics. See archived story.

Investigations are a given, but what is “equally certain is that Congress will attempt to ignore many of the factors which have contributed to lower refinery output so far this year,” said James Williams, an economist at WTRG Economics.

Among those factors are “lingering effects of the 2005 hurricanes, last year’s requirement that refiners drop the use of MTBE in gasoline, the requirement for ultra-low sulfur diesel fuel for over-the-road trucking … higher levels of consumption, [and] difficulties in permitting new refineries, he said. New refineries often face the usual “NIMBY,” or not-in-my-back-yard, problems.

…”The bottom line is that we are growing population, both in the U.S. and the world, our demand for a limited resource is increasing beyond our supply, and price is going up,” said Yiorgo Aretos, founder of TheTMPGroup.

U.S. demand for gas is at its highest level in history, oil companies are having difficulty keeping up with supply to meet that demand and new drivers are hitting the roads and staying on them longer — so “demand is growing incrementally,” he said.

Given all that, he calls for the possibility of $5-per-gallon gasoline by the end of the year — arguably a doomsday scenario.

…Added to that, longer-term down the road, crude supplies will tighten with violence in Nigeria an ongoing problem, and supplies from Iraq, Iran, Venezuela and Mexico are questionable, said Kevin Kerr, editor of Global Resources Trader, a newsletter of MarketWatch, the publisher of this report.

He doesn’t expect the nation’s driving habits to change until gasoline is around $8 a gallon. That’s the level he expects people to be forced to consider options and lifestyle changes.

“It’s coming. It’s just a matter of how soon,” Kerr said.
(24 May 2007)