Price changes for Thursday, August 27th, 2020

Hi to all,

 

Here’s what I have for this week’s price changes:

 

*Heating and stove oils show a drop of 6/10ths of a cent per litre.

*Diesel shows a drop of 5/10ths, and...

*Gasoline shows an increase of 2.4 cents a litre.

 

Market highlights

 

Hurricane Laura drives prices

While prices are not moving by a large amount this week, at least for gasoline, the number is more significant than it has been in some time with prices up sharply over the last two days.

     The reason is showing up in the Gulf of Mexico with at least 1.2 million barrels of oil production shut in in the Gulf, and hurricane warnings now posted for an area of the Texas/Louisiana border known for its refining capacity, offloading and pipeline transport of refined products to eastern and northeastern markets.

     In 2005, Hurricanes Rita and Katrina brought disaster to the industry and consumers with elevated prices due to the disruptions in supplies that the storms brought, with a situation where particularly gasoline prices ran out of control in some areas of the country.

     If memory serves, almost 4.8 million barrels a day of refining capacity was put offline for about two weeks, causing skyrocketing gasoline pricing.

     108 oil producing facilities and platforms were destroyed by Rita and Katrina outside of refining infrastructure, whereas no destruction of facilities offshore has occurred as of yet, although 1.2 million barrels of oil production is offline.

     Prices in Canada hit $2.20 a litre in Ontario and a then record $1.53 a litre in the immediate St. John’s area before moderating somewhat two weeks later, but only after some oil infrastructure came back online.

    Some differences between then and now worth noting however, as Rita and Katrina were both category 5 storms and Laura is category 3 as it hits the coast on the Texas/Louisiana border sometime Wednesday.

 

     **Numbers heading into next week are already showing 3 + cents up a litre at release time, that could affect next week’s pricing. However, positive news on oil infrastructure damage after the storm passes may negate this and show dropping prices.

 

Libya peace agreement?

Factions in Libya have reached a peace agreement that could add up to 1.5 million barrels a day to the world oil markets if it holds.

     Also an OPEC country, the agreement may force OPEC to take a second look at overall production at its next meeting as Libya was not included in the initial agreement on cuts made several months ago.

     Libyan exports mainly are exported to European destinations, but some does come into North American markets from time to time.

 

That’s it for this week!

 

Regards,

 George Murphy

Twitter @GeorgeMurphyOil 

Update #2

Isaac is still in play…

Consumers will pay more this week

Media release

Conception Bay South, NL, August 28, 2012-Hurricane Isaac has played a rough coarse on gasoline numbers to consumers this week, but it hasn’t hit land yet. The real news to consumers may come after damage assessments start in the Gulf of Mexico tomorrow. That news from George Murphy, group researcher and member of the Consumer Group for Fair Gas Prices.

Isaac takes a swipe

“Numbers are very volatile for the last two days of the regulation period. That was all due to the final track of Hurricane Isaac when the storm’s course became clear that it would result in supply and refining shutdowns,” Murphy said. “It’s clear that the storm has had an effect on prices, but the story may not be over yet for the play by the wolves in the marketplace. Things will be a little volatile in the markets for a bit until any storm damage becomes evident.”

The numbers

“Numbers show just a minute rise in distillate fuels with heating and stove oils forecast to increase by just 61/100ths of a cent and diesel to rise by just 8/10ths of a cent. Gasoline prices are predicted to increase by 2.7 cents a litre, but that number may be off somewhat because of volatility in the markets for both Monday and Tuesday. I am cautious about the gasoline numbers!”

Storm damage may cost consumers next week

“It’s ‘wait and see’ for next week. Depending on how long it takes for refineries to come back to working order will determine just what damage it will do to consumers pocketbooks. With this storm being agonizingly slow to move across the Gulf of Mexico, it is promising to be a heavy rain event with much flooding being predicted. It’s rain that takes most refineries off-line, and not necessarily the winds. Most of these facilities can stand a certain amount of that, but rain and refining are not a good mix. Depending on how much refining will be disrupted depends on how much prices will be impacted. Right now, there’s approximately 900K barrels of production off-line and not available to consumers. Rain means flooding, and that means electricity has to be turned off, and it takes time for refineries to re-boot again after a shutdown.”

“I expect to be some kind of market play, although not as much as the Katrina and Rita events of 2005, but again, that depends on the damage. Isaac is coming ashore as a category one, whereas, Katrina came ashore as a category three. Consumers and government alike in the US won’t stand for Big Oil to make the market play like that again. Back then, consumers in Newfoundland and Labrador saw the St. John’s and area hit $1.48.1 at the pumps, while other regions of the country briefly hitting $2.25 a litre in the Newmarket, Ontario markets, and $1.89 a litre briefly in the immediate Halifax, Nova Scotia markets. I don’t think they’ll see that repeat again either, but they will be subject to an increase elsewhere as well.”

-30-

For more information, contact;

George Murphy

Group researcher/member

Consumer Group for Fair Gas Prices

Twitter: @GeorgeMurphyNDP

Update #1:

U.S and mainland Canada consumers will take a hit tonight.

If you're in a mainland Canada unregulated market tonight, you might want to get to the pumps as the first round effects from tropical storm Isaac and the market wolves out there, take a bite out of your pocketbook.

Gasoline spot prices have shot up by close on 18 cents a US gallon late today on news that Isaac has succeeded in shutting in almost 75% of Gulf of Mexico oil production.

US consumers can also be expected to take a hit from today's trading, all in spite of oil's slight retreat. refined commodity prices have increased in anticipation of the drop in production as well as almost 900K barrels of refining per day has come to a halt along the storms path.

More later...

George

Tropical Storm Isaac at play in the markets

Just a quick note...

I’ve been watching “Hurricane Syndrome” season play itself out in the markets this past week. Numbers are reflecting the possibility that consumers will see something of an increase to come this Thursday, but the real news of any price spiking may come after the storm comes ashore somewhere along the Louisiana and Alabama coast.

Any landing of the storm itself will probably be enough to shut in any production and possibly disrupt refining of product. That’s the bigger worry to gasoline trading on the New York Mercantile Exchange (NYMEX). It’s the water and not the winds necessarily that will be more disruptive to consumer prices.

So far, while numbers are up slightly to consumers this week, it’s the aftereffects of the storm that might hit us harder. Mind you, the similarities between Katrina just seven years ago, and the track of this storm, are both eerily similar, and the consequences of the strength of the storm in the next day or so, will be well worth something to watch out for.

Numbers so far show an increase of just 7/10ths of a cent to heating and stove oils, an added one cent to diesel prices and gasoline shows just 1.6 cents a litre upwards. Nothing of concern here yet…

This morning shows gasoline trading upwards by 11 cents a US gallon which, if it holds through today and again tomorrow, may boost these numbers upwards by another penny or so to all fuels, but again, nothing substantial until we hear of the damage the storm has caused. Right now, the wolves are in the marketplace and they’re looking for any excuses.

Regards for now and I’ll be in touch if anything happens out there!

George Murphy

Group researcher/member

Consumer Group for Fair Gas Prices

Twitter: @GeorgeMurphyNDP

Highway robbery

Well...

In areas of the country that got hit with upwards of a 13 cent a litre increase, there are a lot of people thinking that this is a case of highway robbery...

They'd probably be right in this case...

Hurricane Ike may be blowing ashore and having it's effects on New York harbour pricing that we're seeing hit us right now, but, are the traders right in pushing pricing up?

Doubtful, and here's why...

Back at the time of the Katrina and Rita hurricanes during the Labor day week of 2005, consumers saw gasoline pricing increase while still in the demand season for gasoline and while, at a time when refiner capacity was measured well above todays 78 per cent...

Memory is failing me but I do believe that capacity was measured somewhere around 92 per cent. That number alone tells you that there is more than enough extra capacity to take over where any disruption might be occuring, or will occur after this weekend when the damage assessments are done.

Here's the big second notion; Consumer demand is lower now than what it was back then. We're presently down 5 per cent from the same time last year. While inventories may be down from last year they're not described as "critical".

What gives Big Oil?

I think it's high time we in Canada start to look after ourselves and trade based on a Canadian condition and not where Uncle Sam thinks pricing should be...

Thoughts?...

In the meantime, a caller to a local Open Line radio show here told the host that while he was at a local gas station here, the station owner told him his cost for purchase had already shot up close to 11 cents a litre. That's before taxes...

Number I have here is 10.2 cents plus...

Be warned!...It's coming!...

Regards,

George

Enter Ike...Stage center

...and here we go again...

Latest word tonight is coming compliments of a note I received from the Toronto area that is warning of an imminent 13 cent a litre increase at the pumps.

Yes...I said 13 cents a litre.

According to Bloomberg's news service, they say that Gulf Coast gasoline that comes mainly from the Louisiana and Texas border area, increased in price today to close on the markets at close on $4.74 a US gallon. That was a 50 per cent increase and, as they say in the article, the largest increase in the cost of gasoline since 1973 and the Arab oil embargo.

Unbelievable as it is, your energy and the use of our natural resources, is not on anyone's election agenda as of yet. Fifty bucks says that, if Toronto consumers get hit with an added 13 cents a litre tomorrow, it will be on Harper's agenda by Friday...

If you're in Newfoundland and Labrador (and I'll be cautious about this one) I'd fill up the vehicle by the morning and try to let it ride for a few extra days just to see if the New York Mercantile Exchange decides to play the Ike factor tomorrow.

So far, Ike has shut down upwards of 2.2 million barrels a day of refining capacity available in the United States Gulf coast. That's about 14 per cent of overall US refining capacity. Most refining capacity that has been shut down is centered right where Ike is forecast to come ashore, in the Houston area. Refineries lay dormant for now until after the storm rolls through and any damage can be assessed.

Again, we'll keep everyone posted right here on what's happening(if anything) and keep an ear to the local media as I usually pound out a press release to them now and then. If this thing does indeed play itself out in Toronto tonight, you can bet your bottom dollar that it will play out in other areas of the country.

It's all getting so tiresome, this Katrina and Rita play the traders keep using. I just want to know why all these things are not on the election radar for any party...

Regards,

George

Here comes Gustav!

I'm back from a short vacation and first off I have to apologise to some out there who use the blog as a source for my releases on the iminent movement in pricing here in Newfoundland and Labrador. It's been ten years now since I started my predictions on the movement at the pumps or at the heating oil truck, but only the first time I took a vavcation that affected any release I normally would have done.

I will be back with new numbers in the coming weeks so keep an eye. I have not simply just "gone away".

But, then again, pricing issues never will either and, hence the topic for this entry. I've told you about "Hurricane Syndrome" and we have our first test case on the block...

If I were a smart consumer and betting on the markets, I think I would be filing my tank just about now-and again by Sunday.

The reason?...

Hurricane Gustav has been projected to hit the U.S Gulf Coast as early as this weekend and that means that, in the area there is another possibility that there will be refining disruptions as well as potential damage to other oil infrastructure in the Gulf of Mexico.

Ironic as it is, it was on the Labor Day weekend that also saw the advent of two other hurricanes that disrupted almost 20 per cent of overall US refining capacity. At that time here in Newfoundland and Labrador, consumers saw a spike of $1.48.1 a litre at the pumps...

If Gustaf hits the main concentration of oil infrastructure on the weekend it may very well pale in comparison the potential record we could see at the pumps. It may very well be that, if there is major disruption in production or supply, we could see an added 30 cents a litre at the pumps. The only condition that may help us avoid the hit is "what category hurricane will we be dealing with?"

Why do I say 30 cents?

In the week leading up to the Katrina hurricane hit, spot pricing averaged 60 cents a litre. A corresponding increase of 38 cents a litre was realised on the markets but the full impact of any increase back then was absorbed by the Public Utilities Board at the time. It was simply a case of "wait and see' as the news came out. If it was bad on one day, an "allowable" increase in pricing was granted. That scenario can be expected to be repeated again this time around as it did save the consumer some grief-if I can call it that. It saved us from some of the $2.25 a litre prices as they had in some areas of Ontario and $1.89 a litre in Halifax. Our "maximum allowable" turned into the "record" at the time of $1.48.1 a litre that has since fallen. The unknown variable in all this is wind spped. While the NHC currently has a 30% chance of windspeeds over 74 miles per hour, what will the actual category be by the time this one hits Louisiana again?

So, consumer be warned here!

I fully expect the traders to start bargaining in bad faith on the "promise" of a supply disruption-again, and I also expect the panicked analysts on CNN to again help the trader "justify" his numbers as they push for the potential of $6.00 US a gallon gasoline-again. Back at the time of Katrina, a CNN reporter talked about the potential of $5.00 a gallon and helped institute a panic in the central US.

Let's see if they go for a repeat.

Remember where you read it first IF Gustav hits the processing areas as is the promise from the National Hurricane Center and, if it exceeds a category 3 storm, we can expect to see a run in the markets as the sharks have been let loose...

Keep the gas tank full and conserve throughout this one when it hits.

Regards,

George

Update #1: Gustav will now hit shore just west of New Orleans. That puts it a little closer to the Louisiana-Texas border where there is a heavy concentration of oil refining facilities. It wasn't so much the winds of the Katrina storm that shut down refineries as much as it was water and flooding. Gustav is forcast to dump as much as 50 centimeters of rain while it is in the area.

Electronic trading on the New York Mercnatile Exchange will begin at 4p.m Newfoundland time, 2:30EST, to allow traders to "cover their short positions" and to allow for same-time trading with traders in Asia. Gasoline retail pricing along the path of the storm has already increased by several cents a US gallon.

The next twenty four hours will tell the tale on where pricing will be headed. I'd rather err on the side of caution on this one.

Update #2: Gustav has come ashore just slighly west of New Orleans as a category 3 storm. That probably means a little good news on the oil markets as hurricane damage may be minimised. All hinges on the re-start of refineries in the area directly after the storm now as some of those same refineries were closed up due to water damage from flooding rather than wind damage. Some 13 refineries and other distribution and import facilities have been affected so far. We'll keep you all updated here but, we just might all dodge a bullet yet. Question now is, if refineries are closed can other refineries around the US pick up production to meet current demand? Back in Katrina's time, refiners operated at 97 per cent capacity while, as of late last week US refiners operated at close to 86 per cent. Can they pick up the load and prevent a spike?

Update #3: According to Bloomberg, approximately 1.5 million barrels of production has been affected but damage to any refineries has been minimised as a result of the storm being downgraded in intensity. Gustav was originally forecast to hit land with a category 4 or 5 punch but weakend to a category 3 before hitting just west of New Orleans. Some sources are now saying that refining and production will be "back to normal within days". Still waiting on some word of any damage. Flooding could still be a problem as Gustav moves overland and close to other refining facilities close to the Texas border.

In the meantime, oil is trading down as a result of the news. If we hear of no damage in the next day or so, we can assume that there will be no need for any increase in pricing! This was a close one!