Some relief coming at the pumps
Nigeria and Venezuela situation stymies price drops

News release

St. John’s, NL, February 12, 2008- Consumers can expect to see some modest drops in pricing for some fuel products but they aren’t as great as what would have happened if the situation in South America didn’t have to blow in.

“Consumers in Newfoundland and Labrador can expect to see close to 2.0 cents a litre down on gasoline and a rough 1.3 cents a litre down on heating and stove oils this coming Thursday, that’s with twelve days data out of a possible fourteen days available at press time,” said George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

“We were initially looking at something greater than 2.5 cents a litre down on gas with a larger than expected decrease up to Thursday of last week but the ongoing war of words between Hugo Chavez and the United States and an ensuing court case between Venezuela and Big Oil caused a huge increase in oil prices. That, in turn, drove up the related prices for their refined commodities.

“The Venezuelan president, Hugo Chavez, nationalized some major oil fields belonging to Exxon Mobil some time ago. Exxon Mobil has since moved to place a freeze on the assets of Venezuela’s state-owned oil company Petroleos de Venezuela’s overseas assets and Chavez has promised an economic war if the courts agree with the move. Chavez has promised to disrupt exports of crude to the United States, the fourth largest importer of Venezuelan oil products.

“It’s a unique problem that the markets face here. Most of the oil refineries that can refine Venezuelan products are situated in the United States. Chavez may just be trying to raise his own popularity at home but it’s a funny way of doing things. If he fails to export products and raise revenue for his country, he will have to curtail spending. Funny thing here also is that Venezuelan exports amounted to almost 1.75 million barrels per day of crude to the United States so he’s potentially forcing the United States to look elsewhere for more stable supplies of crude oil. There may be opportunities here for other major oil producers to capitalize on his actions. Either way, it’s a “Catch-22” and consumers will end up paying for his folly or his own people will.

“In the meantime, Nigerian exports continue to suffer in the face of an ongoing “civil war” in the area that has led to a disruption of almost 500,000 barrels of exports of crude oil to the west. The latest actions involved rebels attacking a Nigerian naval vessel that was performing escort for an oil company staff vessel. One sailor died in that attack.

“A full blow-up of violence in the major oil production region will have an adverse cost to consumers and to oil pricing. Oil prices have increased almost four dollars U.S a barrel since Thursday afternoon’s market close while spot prices for gasoline and heating/stove oils have increased along with it.

“We are still well above the numbers for last year for the same timeframe. Gasoline is now 11 cents above while heating/stove oils are 16 cents above year-ago levels. The implications of those numbers should be obvious.”

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For more information, contact;

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices
gasprices@hotmail.com