Suitably Flip

A Deeply Cynical and Heroically Bold Prediction

We'll see a Strategic Petroleum Reserve release before November 6.

Gasoline Prices Set to Rise Through Election Day

Retail gasoline prices, already at the highest levels on average since July 2008, are likely to continue to climb this month as refinery and pipeline problems overshadow weakness in U.S. consumer demand.

On Wednesday night, a fire broke out at Exxon's Baytown, Texas refinery, a 584,000 barrel per day facility that is the largest operating refinery in the U.S.

Exxon said there may be "some impacts to production" from the fire, but the plant will resume normal operations. A partial shutdown of the Colonial Pipeline, the nation's largest oil product pipeline, also contributed to supplies fears, as it impacted the portion of the line carrying gasoline from Atlanta to Nashville.

"It will only take another refinery issue and a bit more of geopolitical noise to have the first U.S. election at a US average gasoline price of $4 a gallon," says energy analyst Olivier Jakob of Petromatrix.

Probably not for another 1-2 weeks though, assuming they've learned the lesson from last year's non-emergency release.

On June 23 [2011], the day the U.S. unveiled plans to release 30 million barrels from the Strategic Petroleum Reserve, crude plummeted $4.39 a barrel, or 4.60% -- the biggest one-day selloff since mid-May. The tumble left crude, which had already been losing serious ground, at its lowest level since February 18.

That wasnt a change in sentiment, said Schork. This was a state-sponsored margin squeeze.

Indeed, crude took just five days to bounce back from that selloff and continued to head northward. On Tuesday, crude jumped another $2.28, or 2.4%, to $97.43 -- leaving it $2.02 above the SPR release level.

Likewise, the national average price of gasoline tumbled from $3.6258 a gallon on June 22  the day before the SPR release  to as low as $3.5412 on June 30, according to the Oil Price Information Service. However, gas prices quickly bounced back, increasing 11 of the 12 days so far in July and climbing to $3.6361 a gallon on Tuesday.
...
This is purely a politically-motivated move and the market is seeing right through it, said Schork. This is why prices have bounced back so ferociously in such a short amount time.

Crude prices were roaring back inside of a week.  Prices at the pump had returned to pre-release levels (even higher) within three weeks.  So tapping the SPR in the modern oil market - particularly when the market perceives electoral impetus - does little more than paper over the problem for a few weeks.

On the plus side, it papers over the problem for a few weeks!

Let's watch that reserve get raided, ooh, say between October 11-18.

Comments

A Deeply Cynical and Heroically Bold Prediction

We'll see a Strategic Petroleum Reserve release before November 6.

Gasoline Prices Set to Rise Through Election Day

Retail gasoline prices, already at the highest levels on average since July 2008, are likely to continue to climb this month as refinery and pipeline problems overshadow weakness in U.S. consumer demand.

On Wednesday night, a fire broke out at Exxon's Baytown, Texas refinery, a 584,000 barrel per day facility that is the largest operating refinery in the U.S.

Exxon said there may be "some impacts to production" from the fire, but the plant will resume normal operations. A partial shutdown of the Colonial Pipeline, the nation's largest oil product pipeline, also contributed to supplies fears, as it impacted the portion of the line carrying gasoline from Atlanta to Nashville.

"It will only take another refinery issue and a bit more of geopolitical noise to have the first U.S. election at a US average gasoline price of $4 a gallon," says energy analyst Olivier Jakob of Petromatrix.

Probably not for another 1-2 weeks though, assuming they've learned the lesson from last year's non-emergency release.

On June 23 [2011], the day the U.S. unveiled plans to release 30 million barrels from the Strategic Petroleum Reserve, crude plummeted $4.39 a barrel, or 4.60% -- the biggest one-day selloff since mid-May. The tumble left crude, which had already been losing serious ground, at its lowest level since February 18.

That wasnt a change in sentiment, said Schork. This was a state-sponsored margin squeeze.

Indeed, crude took just five days to bounce back from that selloff and continued to head northward. On Tuesday, crude jumped another $2.28, or 2.4%, to $97.43 -- leaving it $2.02 above the SPR release level.

Likewise, the national average price of gasoline tumbled from $3.6258 a gallon on June 22  the day before the SPR release  to as low as $3.5412 on June 30, according to the Oil Price Information Service. However, gas prices quickly bounced back, increasing 11 of the 12 days so far in July and climbing to $3.6361 a gallon on Tuesday.
...
This is purely a politically-motivated move and the market is seeing right through it, said Schork. This is why prices have bounced back so ferociously in such a short amount time.

Crude prices were roaring back inside of a week.  Prices at the pump had returned to pre-release levels (even higher) within three weeks.  So tapping the SPR in the modern oil market - particularly when the market perceives electoral impetus - does little more than paper over the problem for a few weeks.

On the plus side, it papers over the problem for a few weeks!

Let's watch that reserve get raided, ooh, say between October 11-18.