Gasoline prices going down... for now... why?
In the days before hurricaines Katrina and Rita crippled US oil production and refining capacity, a gallon of regular unleaded was $2.55 at my local gas station. That soared as high as $3.29 before beginning a slow and somewhat steady decline to its current level--$2.19. Pretty good, pretty cheap, all things considered.
I would assume that few people have stopped and thought about exactly why gas and crude oil prices are on the decline. They probably assume that with all of the whining about price gouging--gasoline retailers and oil companies got the message. Or they might not even care to think about it at all, since the hundreds of miles they drive per week just got a whole lot cheaper. Well, here's something you may or may not have known: On September 2nd, the IEA (International Energy Agency) decided to release 2 million barrels per day of crude oil and "refined product" from Europe's strategic reserve to the American market.
These are wholesale prices--so taxes and such are not included. See the huge drop in prices towards the beginning of September and the mostly steady decline since then? The small upward curve represents the effects of hurricane Rita. But otherwise prices are going down, down, and down since September 2 when this 2 mbpd was released from the European reserve. What do you think is going to happen when the 2 mbpd stops?
Well, we're going to find out. The IEA has not posted the announcement on their Web site yet, but they recently declared that the 2 million barrels per day from Europe will indeed stop. "Not because they are hateful meanies, but because, after all, it is Europe's strategic reserve and they can't sell it all to us because, well, some strategic emergency might come up for them, too." (quote from linked source). There will be a 1-2 week period where shipments that were in transit or supplies that were already earmarked for shipment get delivered and such... But after that, we will most likely face supply shortages--just in time for the winter heating season. Yes, we can take 2 mbpd out of our own strategic reserves for a while--but aside from a reletively tiny 2 million barrel Northeast Home Heating Oil reserve, US reserves do not include refined products. So that doesn't really help us where refinery capacities are an issue.
I'm sure that there are good people thinking about this problem and devising a way around it... While I'm sure the rest of the world would like us to stop using 25% of the world's oil resrouces while we only produce 5%, but nobody in the American government wants Americans to have to deal with shortages and rising prices. So there is no doubt some movement to mitigate the effects of this recent announcement by the IEA. Interesting though that information about all of this is very difficult to come by. You really have to be a news-hound or you have to be searching for it.
In any case, don't be surprised if by December we see gasoline, crude oil, and heating fuel costs begin to rise again as the 2 million barrels per day from the European reserve are removed from circulation. Fill your tanks now... And please don't blame oil companies or the government--blame the culture of comfort and consumption that we are slaves to...
I would assume that few people have stopped and thought about exactly why gas and crude oil prices are on the decline. They probably assume that with all of the whining about price gouging--gasoline retailers and oil companies got the message. Or they might not even care to think about it at all, since the hundreds of miles they drive per week just got a whole lot cheaper. Well, here's something you may or may not have known: On September 2nd, the IEA (International Energy Agency) decided to release 2 million barrels per day of crude oil and "refined product" from Europe's strategic reserve to the American market.
These are wholesale prices--so taxes and such are not included. See the huge drop in prices towards the beginning of September and the mostly steady decline since then? The small upward curve represents the effects of hurricane Rita. But otherwise prices are going down, down, and down since September 2 when this 2 mbpd was released from the European reserve. What do you think is going to happen when the 2 mbpd stops?
Well, we're going to find out. The IEA has not posted the announcement on their Web site yet, but they recently declared that the 2 million barrels per day from Europe will indeed stop. "Not because they are hateful meanies, but because, after all, it is Europe's strategic reserve and they can't sell it all to us because, well, some strategic emergency might come up for them, too." (quote from linked source). There will be a 1-2 week period where shipments that were in transit or supplies that were already earmarked for shipment get delivered and such... But after that, we will most likely face supply shortages--just in time for the winter heating season. Yes, we can take 2 mbpd out of our own strategic reserves for a while--but aside from a reletively tiny 2 million barrel Northeast Home Heating Oil reserve, US reserves do not include refined products. So that doesn't really help us where refinery capacities are an issue.
I'm sure that there are good people thinking about this problem and devising a way around it... While I'm sure the rest of the world would like us to stop using 25% of the world's oil resrouces while we only produce 5%, but nobody in the American government wants Americans to have to deal with shortages and rising prices. So there is no doubt some movement to mitigate the effects of this recent announcement by the IEA. Interesting though that information about all of this is very difficult to come by. You really have to be a news-hound or you have to be searching for it.
In any case, don't be surprised if by December we see gasoline, crude oil, and heating fuel costs begin to rise again as the 2 million barrels per day from the European reserve are removed from circulation. Fill your tanks now... And please don't blame oil companies or the government--blame the culture of comfort and consumption that we are slaves to...
posted by and i at 12:11 PM
1 Comments:
The claim that the 2mbpd is going to stop was made by Jim Kunstler. It has not yet been publicized by the IEA. I have asked Mr. Kunstler to substantiate the information, but he has yet to reply. He is somewhat of an insider, but still--we can't be sure that this is actually true or not as the IEA hasn't said it themselves and Kunstler hasn't told me where he found out.
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