Friday, February 10, 2012

Former Shell CEO: $5.00 Gasoline Is Very Possible Before End of Year


February 14, 2012: Lehigh Valley says the same thing --
American motorists have seen the national average for a gallon of regular gasoline rise above $3.50 a gallon on just three occasions, but it has never happened this early in the year. Analysts say it's likely a sign that pain at the pump will rise to some of the highest levels ever seen later this year.

In 2008, average gasoline prices had hit inflation-adjusted records nationally by the summer, but they didn't climb above $3.50 a gallon across the U.S. that year until April 21, according to the AAA Fuel Gauge Report. It happened again last year, but not until March 6.

But $3.50 a gallon gasoline is already here in 2012, weeks before refineries typically shut down for springtime maintenance, and weeks before the states switch from their less expensive winter blends of gasoline to more complicated and pricier summer blends.
February 10, 2012: is India's demand for oil insatiable, as the former Gulf CEO says? Read this NY Times article; the answer is obvious. In case the link breaks, this story is about India, touting US as a reliable ally, continues to buy oil from Iran despite US/EU sanctions.

February 10, 2012: in central Massachusetts, there are some (only a few) service stations now selling premium gasoline for $4.10/gallon. In real terms, that's not all that far from $5.00. In fact, a couple years ago, making a  prediction that gasoline would hit $5.00 was a bit fantastic for some to believe. But now that premium is at $4.10, it is not all that bold to predict $5.00 gasoline. If premium is $4.10 in central, rural Massachusetts, I can only imagine what some stations are selling premium gasoline for in Los Angeles, NYC, or Washington, DC.

Some suggest that gasoline will easily rise another 60 cents this spring (refinery issues, for the most part),

For some, $4.00 gasoline might as well be $5.00 gasoline. Just saying. And that explains the current data showing significant demand destruction.

Original Post

This former Shell CEO has seldom been wrong. He is very direct.

He made a very, very good point about headlines that IEA is cutting its forecast for oil demand. The forecast is NOT FOR LESS demand, the forecast is for a SLOWING IN THE INCREASING RATE OF DEMAND.

Demand will continue to increase, just not as fast as originally forecast.

The former Shell CEO points out that the insatiable Chinese and Indian demand is being overlooked.

By the way, here's a reminder of what happened when oil spiked to $140; shortly thereafter, with the recession, back into the $40's.


  1. Listening to TOTAL 2011 conference call. Heavily accented English. Sort of fun.

    They say Utica is a 400,000 BODE capacity. (page 40 of presentation.) Gas/condensate. Maybe 100% or maybe for their 25%, I am not sure. They pronounce it Ooh ti ka.

    CHK has 75%, plus a million or so Ooh ti ka acres outside the JV, and still buying. Others have acreage.

    Ooh ti ka might be a big deal. Big enough to ooh and ahh.

    anon 1

    1. I am thrilled; I hope they develop this as quickly as possible. Something tells me Mr Obama won't be shutting down fracking in an election year. He needs Ohio and Pennsylvania. Shutting down the oil and gas industry in Ohio and Pennsylvania will probably end his chances in those two states. Even minor rule changes that would slow down development would cost him those budget-constrained states.

    2. Having lots of domestic oil does not cause motor fuel prices to go down domestically, as we've seen. The crude gets refined and refined products get exported.

      Wasn't it reported recently that our top export right now is refined petroleum?

      Shale oil won't stop $5 gas, unfortunately. We'll export our endowment.


    3. Yes, it is my understanding that refined products is our number one export.

      It is interesting that this doesn't get more press in the mainstream media. Something tells me the New York Times knows how embarrassing this would be to Obama, selling our natural resources to Europe.

  2. Toward the end of Q and A very interesting:

    Utica cost to Total - $3/BOE - or is it BO?
    A good deal.
    So CHK made money, we don't care. Only a Marxist would care.
    We don't buy farms. We buy companies or projects (Most world minerals are owned by the governments.) (Clearly out of their element re: leases.)
    Carry - so CHK has to do thus and so or they don't get paid, so what is the problem? None.
    Make money on oil now, more when gas goes up, hopefully.
    Total is #2 or #3 in world LNG. I think they expect the world price to be the US price some day.

    Oil will be high priced, and higher.

    It is humorously somewhat like a CHK conference call. Qs about cash, where will it come from, skepticism. Management thinks some questioners are clueless.


    TOT paid $2.02B, cash and carry. That means almost 700,000,000 BOE. CHK has 3x. About 2.02 Bil BOE.

    This is underestimated by the market.

    anon 1

  3. Hofmeister's forecast for 2011 was way off.

    (see link for his dec 2010 5$ per gal prediction)

    Recent hofmeister prediction looks like a repeat of his 2010 misfire.

    Sorry, this guy has very little credibility. But a broken clock is right twice a day.

    1. I don't know what gasoline costs in Los Angeles, NYC, or Washington, DC., but in central Massachusetts we're starting to see premium gasoline for $4.10. It's not a huge jump from $4.10 to $5.00. For some, for all practical purposes, $4.10/gallon might as well be $5.00/gallon.

      But you are correct. Most likely demand destruction will prevent premium from getting to $5.10.

      But as we get close to $4.25 (as noted, premium is now $4.10 in central Massachusetts), there is a real risk of economy being significantly adversely affected.

      Actually, now that I'm rambling, his prediction of $5.00 gasoline is no longer very bold. As noted, for many, $4.10/gallon might as well be $5.00/gallon. The number $5.00 has just become a political threshold.

  4. Folks need to get a grip. The refined oil products are going mostly to canada and
    Mexico. Us imports crude and exports some refined product back to the cow tries we import crude from in the first place.
    Us refiners are basically renting refinery capacity that is above what is needed for domestic consumption.

    But of course this is all "a 'problem' either caused or made worse or both (take your choice) by Obama"
    Fortunately, uninformed nut jobs are still a minority of those over 18 years of age.

    1. Yes, don't get me wrong. As a market capitalist, it doesn't bother me that US citizens have jobs (in refineries). I'm just surprised that the mainstream media doesn't talk about this more often -- except that it would be embarrassing to the president. This cannot be explained in a 30-second soundbite.

    2. Someone questions whether this headline would hurt/help Obama:

      Gasoline hits $5.00 in US. Meanwhile, US exports oil/gasoline to Europe.

      Perhaps a good poll? No?

  5. Needles California regular $4.60

  6. $3.30 to $3.35 in the Twin Cites, MN. This has the refineries with the greatest current Bakken and oil sand gluts.

  7. $3.70 at Cosco near Pasadena, CA.

    Just a reminder, for the Baaken economics to work, have read that tight oil needs to be above $60 a barrel. The days of domestic production dominating as our primary or sole source of oil are not over, but the days of cheap oil probably is.

    Moving this country to a point of exporting oil and natural gas (we already do this with coal) can help reverse a horrible balance of trade and put Americans to work in the Heartland and at transfer points on either coast.

    Being a baby boomer, I still subscribe to a Johnny Quest optimism that says this country will always be the first to squeeze the most energy out of every barrel or therm while raising (not lowering) our standard of living. The green movement appears to only subscribe to requiring us to lower our expectations on standard of living to one that is common to all. Thanks, but I'll pass, and close with a quote (along with apologies to Chuck Heston - God bless him) relative to my 19mpg, Ford Sport Trac's steering wheel, "From my dead, cold hand."

    CW2 Boise

    1. Yes, that is what bothers me most about the faux-environmentalists and the Al Gore liberals: "The green movement appears to only subscribe to requiring us to lower our expectations on standard of living to one that is common to all."

      Al Gore asks us to live in smaller homes and drive smaller vehicles while his family lives in multiple McMansions, and drives any number of large vehicles, not to mention the private jetting.