"The Perfect Storm scenario"

Why prices might even crash...

I know...

Seven days showed a 3.9 cent a litre increase and still a decrease for stove and heating oils. Guess they were close...

It made me sick too, just to look at the pump as I drove by. I didn't need any as I topped it all off the night before...

It's my way of putting the screws to Big Oil before they get to do it to me later in the week when I'm back on "w" for "walk".

But, if the storm in the markets has anything to do with it, we just might see a drop at the pumps before the summer driving season hits and we hit the "expected' spike in prices for the summer.

You shouldn't take for granted everything these professional oil analysts are thinking. You might "get use" to what they say and then you'll have to pay the piper.

And that's the reason for this particular post; because I don't take what they're shoving at me for the truth. Matter of fact, I think there's something that the "investor" is not telling you...

If the refining industry is having such a tough time with their refiner margins and oil is becoming hard to acquire because of price, then it must be obvious to the consumer that they are "purposely" keeping capacity down in order to support the retail price to the consumer, right?

If that is true, and prices have climbed to the point that overall demand is being broken and people start to conserve, then that creates a build in inventories right?

Then the following must be true...

Less demand means less need for refined product which in turn means less refining. That would also mean a drop in demand for the raw crude oil product. We have to note here that crude inventories climbed last week possibly because of part of what we're saying here; that crude simply costs too much to buy by the refiner and inventories were allowed to build in the hope that prices may be impacted...

That means there's evidence of an attempt to support gasoline and heating oil prices by the refiner and Big Oil; a "supported" price...

While the price may indeed be supported, there's not a heck of a lot of return for the investment...

What the markets need to see now, or should I say, the consumer needs to see, is the proof that inventory is building and that demand is being impacted. That may bring down the house of cards that OPEC helped create.

We have already reached a point where Big Oil has hit the Law of Diminishing Returns because of rampant investment in commodities like gasoline and heating oils. consumers here in Newfoundland and Labrador have been hard hit this winter with "above normal" heating oil prices. The elderly and those on fixed incomes as well as pensioners, are at the point where they are buying no more.

They now choose food over heat.

I think they like to call it "energy starvation"...

I think that we're going to start to see investors in distillates lose a lot of money...

One can always live in hope...

Regards,

George

Six days now reporting...

Little change expected in predictions

Six days are now in and the data has only changed slightly. Numbers are still showing a decrease for stove oils and an increase to gasoline pricing Wednesday night in Newfoundland and Labrador.

Heating oils and diesels may go the same way as stove oils but the last couple of adjustments showed heating oils increasing moreso than stove oils. That could translate into little change in the heating oil or diesel price.

Stove oils now show an expected decline of 1.46 cents a litre from yesterdays 1.55. Gasoline is showing a steady 3.7 up on a litre for Wednesday...

As an afterthought, I do an awful lot of thinking while I'm at this...

If 1) it's possible for heating and stove oil product to become so expensive that Big Oil just may ruin its own market for the commodity, and

2) We find that people can't keep themselves warm as a result of heating oils being unaffordable and people want to make the switch to electricity, then

3) Obviously we're going to presure our own sources of energy like electricity as the most beneficial next to wood some might say, then we have another problem developing for the short-term future, and here it is...

To me there may be trouble down the line for our supply of electricity, particularly on the island portion of the province. The question has to be asked about the supply-demand balance of electricity if we find a lot of people are going to switch from oil-based products to electricity.

With those thoughts in mind, here's a few questions for you all to ponder...

1)Do we have the capacity on the island portion to handle the increased demand in electricity if people/consumers switch?

2) Why haven't we heard of Labrador residents being covered in the provincial energy plan, particularly on the coast in areas that face electricity generated by diesel generation?

3) Natural gas is being eyed closely as an alternate source of energy again in the United States as heating oil pricing has skyrocketed. Does our government still have plans to ship out our natural gas to places far away rather than supply our own people with it first?

4) If more people are going to fall back on wood, what is the government going to do as regards to placing some constraints on wood harvesting for "personal consumption"?

5) How about forest replantation/silviculture programs for the long term?

I could go on but, I'll leave it at that for now...

regards,

george

Oil keeps climbing, so does gasoline
Consumers to get dinged at the pumps again this week

News release

Conception Bay South, NL, April 22, 2008- Consumers in Newfoundland and Labrador haven’t seen the end of price increases this regulation period as prices for gasoline are expected to take another hit, that’s from George Murphy of the Consumer Group for Fair Gas Prices.

Gasoline to increase
“Consumers of gasoline will most likely see another 3.7 cents a litre at the gas pumps this coming Thursday unless there’s something that I don’t know. Five days out of a possible seven show that consumers are going to take it on the chin as they have been doing in other regions of the country as gasoline sets almost daily records in trading,” said Murphy.

Heating and stove oils to decline
“Stove oils show a small decline of 1.5 cents a litre which may be indicating stagnation in the rise of distillates. It may have hit its peak with the end of winter and the continuing bad economic news. Inventories of distillates increased only slightly in last week’s inventory report. Distillate demand along with demand for jet fuels which are used in winter heating oils, are both showing a drop in demand so, these may be the signs that we’ve been waiting for; that prices will soon start to drop for heating commodities. They had better because they’ve become unaffordable to most people now and we’re looking at a record peak for heating and stove oils! Look for prices in heating oils to stall if not decrease.

Reasons for price changes
“Last week saw early interruption in pricing. Supply disruptions, including an attack on a Japanese tanker off the coast of Yemen, lower refiner capacity and draw-downs on both oil and gasoline inventory, continue to impact the price we’re seeing at the pumps again this week. I almost wonder if Big Oil is deliberately trying to cut back on production of refined product in order to control the price. Even though there remains good demand in some aspects of heating oils this past winter for example, refiner capacity remained at a low. That’s also reason that we never saw good builds in gasoline inventory this past winter.

Consumers of heating oil face tough questions
Heating oil consumers have hit a roadblock in pricing. Not only have record prices hit for heating and stove oils, it has also become almost unaffordable for some companies to deliver and some are saying that they can’t deliver anything less than $200 worth of product.
Consumers can not be expected to be held to account for buying contracts if the terms of their contracts have been changed by their company. Some buying arrangements and service/warranty agreements require that consumers have to buy heating and stove oils off that particular company. Consumers are advised to shop around if their company of choice can no longer deliver fuel for less than the stated amount that has been changed by that company.
Government also needs to pursue new retrofit programs that also include assistance in petroleum users switching from petroleum products to electricity or other forms of heating if they so wish. Government has to look at this as a viable alternative as it also is in keeping with helping to lower carbon emissions from houses and other heating/stove oil users.

Budget Day coming
Consumers of petroleum products should pressure their government now in order to pursue tax breaks from petroleum products. Whether it is the pursuit of the removal of taxes off all forms of heat or a break in gasoline taxes, all petroleum products have reached a point where we deserve cuts to taxes applied to petroleum products. Government on both the federal and provincial level has made a huge amount of royalties off oil and we deserve the break.

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For more information, contact;

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices

Not gonna do it...

Numbers tomorrow on more increases to come at the pumps...

Keep an eye to "Gasandoil" tomorrow as I'll have new numbers on where prices will be going.

So far, with only two days out of a possible seven, as prices interrupted last week, I have about three cents a litre on gasoline.

It's a little different for stove oils and that may be painting the way for heating oils and diesels. A slight drop in stove oil numbers of a rough 1.5 cents on a litre.

Short shrift I know, considering it's still a little chilly during the night.Oh well...Big Oil doesn't have to worry about our seniors not being able to afford the heating oils. I guess that's up to the Avalon Mall as "wandering gangs" of seniors are in competition with our younger folk for the spot at the best vido game.

Shame!

See you all in the A.M...

Rate increase coming from Hydro
Government should absorb any further electricity charges to consumers

Media release

Conception Bay South, NL, April 17, 2008- Consumers in this province should not have to face the heavy financial burden being placed on them with the prospects of higher electricity bills in the coming weeks.

“Consumers in Newfoundland and Labrador are facing a double whammy in higher electricity charges at the same time as getting hit with higher heating and stove oil pricing. To be hit with these costs and get hit with higher electricity costs as a result of higher crude oil pricing seems to be a little asinine in the least, knowing that the province is making huge royalties from offshore oil,” said George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

“Government should take immediate steps to allow Hydro to absorb the higher crude acquisition costs and insulate the Newfoundland and Labrador consumer from these costs. With close to a billion dollars in the treasury from oil royalties this year, it is entirely within the realm of government to do this. The Newfoundland and Labrador consumer owns Newfoundland and Labrador Hydro and should be able to get government to call the shot on this latest increase on their behalf. This time, the government can say ‘no’.

“Labrador residents particularly will be hard hit knowing that the Labrador winter is longer and colder. Electricity users along coastal Labrador, where electricity is generated by diesel, will be particularly hard hit. Government should do the right thing and prevent consumers from paying more as a result of something they have the power to help us avoid. The government should also be taking the concrete steps in getting coastal regions of Labrador wired into the provincial energy plan thusly removing them from wild swings in pricing caused by oil-generation of electricity.”

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For more information, contact;

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

Update: Numbers still show interruption possible

Conception Bay South, NL, April 16, 2008- Numbers here still show for interruption on all major fuels tonight. Numbers are still showing that interruption is possible for gasoline as well as stove oils, a major fuel in the distillate group which also includes diesel and heating oils. I would expect those fuels to follow the way of the stove oil numbers if all holds true.

Gasoline still shows an additional 5.2 cents a litre now, while stove oils are now showing 6.4 cents a litre to come into effect tonight. Heating oils and diesels should also closely follow those numbers.

All numbers are now with six days of data instead of yesterdays five days.

Hope all this helps!

regards,

George

Numbers show fuel price interruption is possible
Considerable hikes to all petroleum products on the way for Thursday

Media release

Conception Bay South, NL, April 15, 2008- Consumers in the province of Newfoundland and Labrador can expect to be hit with a huge increase to all petroleum products this coming Thursday morning if George Murphy’s numbers are right. The numbers are substantial and could start to prove a bone of contention in this country if they remain high.

How much to expect
“So far this regulation period, we’re looking at five days data that are all showing at least at least a 6.7 cent a litre increase to stove oils and a 5.1 cent a litre increase coming for gasoline. Monday’s market numbers are also up for crude oil which has only enforced those figures. I believe there is a very strong possibility that other commodities like heating oil and diesel will also get to take this hit as they are so closely related to stove oils, being part of the same distillate group of fuels. This morning, crude oil hit a new record of $112.48 a U.S barrel as the U.S dollar continues a slide against other world currencies and that is only enforcing my belief that interruption will happen this coming Thursday morning,” said Murphy.

Consumers could face tough choices
“I don’t think we can predict where this will end now. We have a case where people will start to become energy-starved and will face a bigger problem of affording energy over food. That goes especially for people who are on fixed incomes. What we are witnessing on the markets is an investor’s complete fixation with the money to be made off the petroleum markets and consumers are being faced with some pretty tough choices as a result. If we don’t see a substantial drop-off in spot pricing for heating and stove oils in the next couple of weeks, we will face some serious problems keeping warm next winter and that goes for everyone in the province as some electricity is generated via the burning of petroleum products. This is the time of year when we should be witness to falling heating and stove oil pricing, not increases. It has to break. Prices as high as they are now are not sustainable on anyone’s part! If this trend keeps up we’re looking at the possibility that any heating rebate program just isn’t going to cut it and we’ll have to see government assist people into breaking their dependency on oil-related products.

Reasons for the possible increases
“Oil is up for several reasons. Last week saw considerable draws against U.S inventories, as well as supply disruptions in places such as Nigeria, Mexico and the Middle East. Demand for crude in China is also expected to grow as economic growth is expected to hit 10 per cent for the first quarter of the year.

Canada may to face the tough questions
“I believe that this country is going to have to face the tough question about how we are going to afford to keep ourselves warm if we continue to face high prices for oil-related commodities. If people are no longer going to be able to afford heating oil over food, and farmers begin to invest heavily into energy industry related crops, them we may also face the problem of ever-increasing food pricing. We already are facing mass increases in wheat, corn and other crops on mere speculation. When you start to hit food pricing as other world nations have seen, then we have a serious problem. What is this country prepared to do in the event that we face a continuance of the situation we are witnessing in the world markets now?

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For more information, contact;

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

Hate to be the bearer of bad news but...

Newfoundland and Labrador consumers will most likely take the hit from the latest round of increases in oil last week but we'll probably not know for sure until tomorrow.

With the first two days of the regulatory period out of the way, stove oils are showing an allowable of 5.03 upwards. That could be pointing the way for heating oils and diesel as well.

Gasoline shows an allowable increase of 3.88 cents and that falls within the 3/10ths of a cent margin for error I use putting the number slightly over the four cents needed for interruption of fuel prices...

I'll know more by Tuesday afternoon so, keep an eye for a posted release and your ears to the media...

Sometimes it just sucks to be on the receiving end of oil doesn't it?

Regards,

George

Latest EIA survey confirms our thinking

Petroleum stocks down on three fronts this week...

The latest report from the Energy Information Administration today seems to confirm our worst fears; that there is a steady decline in inventories of crude and distillate and that we can expect pricing here in Newfoundland and Labrador to remain around the $1.22 to $1.37 range for the better part of the summer.

As a matter of fact, my numbers are also pointing at the figure of $1.30 at summertime peak this coming first week of July before things moderate. That doesn't include outside factors like Hurricane Syndrome.

Numbers in the report are all down again this week while, refiner capacity is at a near historic low of 83 per cent, a level I haven't seen since I started predicting pricing movements.

See the report from the EIA on last weeks oil inventories here:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

Here's the kicker though...

In the report, we also see that gasoline demand is also projected to drop as recession factors and consumer fears kick in. Gasoline demand has been dropping so much so, that it is a mere 3/10ths of a percentage point over last years numbers for the same timeframe.

Distillate demand along with jet fuel usage has also remained flat for the past week compared to last years numbers so, consumers can expect to see prices for heating and stove oils start to drop from here on in.

They better start soon!

If pricing fails to fall now rather than later, there is no doubt that consumers again will be paying new records for heating and stove oils next year possibly making heating oils even more unaffordable than it already is now.

See the highlights report here:

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/pdf/highlite.pdf

In the meantime, don't forget to hit the pumps on the way home tonight. My numbers now show an expected 3.1 cents a litre at the pumps tonight.

You just might want to pass the word along...

Still no relief on the heating front
Heavy commodity investment still forcing prices upwards

News release

Conception Bay South, NL, April 08, 2008- Market conditions are still putting upwards pressure on petroleum commodities and that means ‘prices up’ for gasoline along with stove oils this week, that’s according to George Murphy of the Consumer Group for Fair Gas Prices.

“Continued heavy investment into commodities like heating, stove oils and gasoline is putting upwards pressure on those petroleum products as a hedge against the U.S dollar. We’re also dealing with a huge drop in refiner capacity as refiners turn their attentions towards gasoline as we get out of the winter heating season. All this means that consumers here in the province of Newfoundland and Labrador will likely see increases to all petroleum pricing again this week.

What consumers can expect
“All numbers are based on twelve days data out of a possible fourteen that is used to set pricing. It appears that gasoline will see the bigger increase. Numbers there show a possible 2.8 cent a litre hike at the pumps while stove oils will only see a 3/10ths of a cent hike in price. The stove oil number may be a sign that we’re near the peak in pricing for heating oils as well as investors and refiners turn their attention to gasoline for the run-up to the summer driving season. The actual that may occur with heating and stove oils could be higher with the other days of data unavailable yet, although I don’t think those numbers will be significant to radically change things at this point.

Warning for next winter
While pricing for heating and stove oils are both expected to back off from records in short order, those same numbers have to begin to show a substantive drop between now and the fall if we are to avoid any problems with consumers keeping themselves warm next winter. Right now, heating and stove oil pricing is a record 28 cents a litre higher than last year while gasoline is roughly 7 cents a litre higher for the same timeframe. I would advise government now rather than later, to get rebate and retrofit programs ready to catch those who will need it, and that could be everybody next year if pricing does not fall back to more affordable levels between now and the fall. A rebate of $300 to consumers just will not cut it next time if pricing does not decline.

Time for pressure on the federal government
While the provincial government came through with a rebate program this year, the federal government got off scott-free in aid to consumers of heating products. Why? It is now time for both governments to get together and remove all the taxation components on all forms of heat in this country. Both levels of government are making astronomical amounts of revenue on oil royalties and that should be returned to the Canadian consumer. The pressures put on all related heating commodities is complicated that much more by a tax on a necessity in this country and so far, that pricing outlook may be a bleak one for heating, stove oils and natural gas users next winter. The simple removal of all forms of taxation on all forms of heat would go a long way to providing some relief to consumers.

Early summer gasoline outlook
Market investors and refiners have turned their attention to gasoline as the heating oil season comes to an end. Continued investment in commodities ahead of a dropping U.S dollar, may be enough to keep the pressure up on pricing but our models are still showing a “market reluctance” to drive up pricing to consumers. Recession fears are absorbing some of the upwards pressures right now and, I don’t believe that consumers are getting hit with as big of increases as they could possibly be because of that. Bad economic news has resulted in a fear in the markets that energy could be hit sooner than other commodities like foodstuffs. Bearing that thought in mind, it appears that while we may experience some increases heading into the summer, they will not be as great as the $1.50 a litre predicted by some industry analysts out there. Our model still shows a minimum to maximum possible price of $1.22 to $1.37 at the summer peak in July and, even those numbers show the volatility of the markets. Just the difference between last year and this years spot petroleum numbers shows a $1.30 a litre at the pumps is “attainable” at this point.

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For more information, contact;

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