ICYMI -- Price Of Gasoline, US -- 2005 -- 2023 — And It Is Going To Get A Lot Cheaper — March 14, 2023

Updates

Later, 2:28 p.m. CT: WTI settled at $71.33, down 5% today. Some say energy is a huge determinant of inflation. If so, the failure of the Silicon Valley Bank just made JPow’s job a lot easier. Headline earlier today: inflation y/y and m/m has moderated. WTI should bring inflation down further. Biggest beneficiaries: those who drive Deere equipment. Investing thoughts, anyone?

Later, 12:32 p.m. CT: by the way, upwards of 50% of US office workers are still working from home, saving even more in transportation costs.

Original Post

Gasoline, US, 2005 - 2023: no inflation. Thank you Mr Biden. Link here.

President of the United States, 2001 - 2009: George W. Bush.

In 2005, "mpg" average for light vehicle in the US: 13 mpg. Link here.

Most fuel efficient cars, 2023, link here. Honda Civic clocking in at 31/39/35. CAFE standards mandated by US Congress, first enacted in 1975. US president inn 1975: Gerald Ford, His start in politics: just a few miles westsouthwest of Detroit.

For the archives -- me personally:

• driving a third or less as many miles now as I did in 2005;
• in 2005, we lived on the northeast side of San Antonio, TX (Henderson Pass area), and commuted daily to Lackland AFB, TX, on the far southwest side of San Antonio (google maps: 60 miles daily, round trip)
• I now drive about 60 miles every two weeks
• and, oh, by the way, my rent today is the same as my rent in 2005
• and no children in college
  
• getting 3x better mileage: from 12 mpg (2005) to 36 mpg (2023)
  
• paying about the same amount for gasoline.

Notes From All Over -- December 31, 2021

Updates

Later, 8:30 p.m. CT: wow, talk about a mismatched semifinal game, Alabama vs Cincinnati -- one could see where this game was headed before the first drive by Alabama was even completed. As for the second game, it appears one team failed to show up. The good news: most fans were able to spend more time with their families on New Year's Eve knowing the outcome of both games before the end of the first quarter.

Later, 6:52 p.m. CT: in the original note I mentioned that the largest Buc-ee's in the world was outside New Braunfels, TX. I mentioned that to my granddaughter. She replied, "not for long." World's largest Buc-ee's is under construction in Tennessee:

• construction began earlier this autumn (2021); to be completed in 2023;
• in Sevier County; exit 407, I-40, "gateway" for Great Smoky Mountains National Park; Kodak, TN
• 120 fueling positions (compared with 60 at the New Braunfels, TX, site
• 250-foot long car wash:
• 74,000-square-foot development;
• the first Buc-ee's in Tennessee was recently announced, located in Crossville, TN

What I find most interesting about this: the close relationship between Tennessee and Texas that began more than a hundred years ago continues today.

Original Note

Betty White: reportedly dies at 99. 

Vanguard: if you're having problems with accessing Vanguard, you are not the only one.  Bogle's website has been down off and on (mostly off) for the past six days.

XOM: it's going to be one of the bigger investing stories in 2022.

• whisper numbers here; let me know if one can find a company whose expected quarterly earnings will grow more than XOM's with their next report (year/year); for XOM: 5,733%.
• SEC filings suggest earnings will be better than Wall Street thinks; Barron's.
• reaps windfall with energy rally; Bloomberg;
• higher gasoline prices to boost profts by as much as $1.1 billion; MarketWatch.
• quarterly earnings per share, 2006 - 2021,  XOM; macrotrends. This could be one of XOM's best quarters in recent history;
• XOM to post fourth consecutive quarterly (increase) in profit; HartEnergy;
  

UNP: closed at a 52-week high, after raising dividend twice in one year. Closed just above $252.

Pelosi: I have no idea why folks are upset with news of her recent equity trading. Has she not provided us her crystal ball? You may not like Pelosi, but you might want to look at her picks. It's not as if she doesn't know what's happening. For the record, she invested in Google, Roblox, and Disney, hardly earth-shattering.

• Roblox: huge
  

Pelosi's home state: it's generally agreed that California could see $6-gasoline next year (2022).

Lutheran Social Services: declares bankruptcy. Won’t follow. 

Richest people in the world: nice video. Speaks volumes about the Bakken, but in a way most folks won't connect.

Buc-ee's New Braunfels, TX: the world's largest gas station.

TSLA: one of my predictions for 2022 -- China will present formidable challenges for Tesla. Today this: China will cut subsidy standard for new energy vehicles by 30% y/y in 2022; CN Wire. So, nine of ten predictions yet to follow.

Flaring: when I heard that AOC had departed NYC for a sunny vacation I assumed she was going to Iraq to check in on flaring; alas she went to maskless Florida. Iraq: flares more natural gas in ONE year than California produces in 3.5 years. California banned flaring in 1939.

• California imported almost 50 million bbls of crude oil from Iraq in 202
• California has increased its dependence on oil from Iraq by almost 70% since 2017 (almost 30 million bbls)

US equities: best sector in 2021? Energy. Up almost 50% in the past year.

Flashback: bringing down the bank in Williston, ND. Ultimate Googie architecture?

• opened, May 22, 1963, next door to my dad's business. 
• the story begins with the classic Patty Melt. The story is behind a paywall, but there appears a way around; will be archived;
• think The Jetsons
  
• demolished July 21, 2008 -- after 45 years
• more of the story, here;
  

DAO: new "buzzword" for 2021. 

First group "financial / economic" indicators:

• 10-Year Treasury: link here. 1.512% -- trending down.
  
• DXY: link here. 95.60 -- trending down.
  
• Silver: link  here. $23.31 -- trending up.
  
• CBOE volatility index: link here. 17.5, up slightly but remains at the lower end.
  

********************************
Back to the Bakken

Active rigs:

$75.46	12/31/2021	12/31/2020	12/31/2019	12/31/2018	12/31/2017
Active Rigs	30	13	55	67	49

No wells coming off the confidential list today.

RBN Energy: the top ten RBN energy prognostications for 2021 -- scorecard. 

Finally! It’s the last day of 2021, which means it’s time for our annual Top 10 Energy Prognostications blog, the long-standing RBN tradition where we look into our crystal ball to see what the upcoming year has in store for energy markets. And unlike many forecasters, we also look into the rear-view mirror to see how we did with last year’s predictions. That’s right! We actually check our work! And that’s what we’ll do in today’s scorecard blog. Then on Monday we’ll lay out what we see as the most important developments of the year ahead. But today it’s time to look back.

$4.00 Gasoline And The Keystone XL -- December 29, 2021

It's pretty much a given that all credible analysts argue that unleaded, regular gasoline could average $4.00 / gallon next spring (2022). 

For those who understand the pricing of gasoline in this country, one can connect the dots back to 2005 when the Keystone XL was first publicly proposed. 

It's a complicated story, not easily explained to the American public.

But at the end of the day, all discussions about $4.00-gasoline circle back to the Keystone XL.

Cost Of Driving By State -- New Link -- June 8, 2021

Unsolicited and completely unexpected I received this in my in-box the other day:

I saw this page on your website: http://themilliondollarway.blogspot.com/2021/03/california-i-am-island-march-7-2021.html

My team put together this resource about automobile energy and gas costs by state. Our energy analysts pulled different data from the Department of Energy, AAA, and other sources to help measure differences. They do a great job at updating the information once new reports come out by those sources. I think it would compliment your page nicely.

Automobile energy costs for each state
https://www.chooseenergy.com/data-center/cost-of-driving-by-state/

The link has been added to the "Data Link" page and the sidebar at the right. 

FWIW: the gasoline cost for my 2011 Honda Civic, link here.

*****************************
CO2: EVs Vs ICEs

A reader asked if I had seen this article: EVs with negligible CO2 advantages of ICEs.

I replied to the reader but got a "failure daemon" note. This was my reply:

Yes, I did see that. I debated whether to post it. Two immediate thoughts: preaching to the choir, and all of us following this story closely know the CO2 story regarding EVs is questionable at best. And it was another story from oilprice which I already use too much. LOL. 

Irony: the link was posted.

Love Him, Hate Him, This Guy Delivers -- March 10, 2020

This was less than two years ago:



Crude oil was almost $70/bbl two years ago. Oil is now half that less than two years later.

President Trump delivers.

Gasoline at our neighborhood service station, Murphy Oil: $1.80 / gallon / regular unleaded.

Gas Buddy Oklahoma City: $1.61.

Notes From All Over, Part 1 -- October 11, 2019

Updates

October 12, 2019: this article over at zerohedge is so good, I'm tempted to post it in its entirety even at risk of copyright inquiry.

October 12, 2019:

October 11, 2019: from the WSJ, an op-ed -- "California's Dark Eyes" -- why the progressive paragon is living like it's 1899 (no typo).

Californians are learning to live like the Amish after investor-owned utility PG&E this week shut off power to two million or so residents to prevent wildfires amid heavy, dry winds. Blame the state’s largest blackout on a perfect storm of bad policies.

Two dozen or so wildfires in the past few years have been linked to PG&E equipment, including one last fall that killed 85 people. PG&E under state law is on the hook for tens of billions of dollars in damages and has filed for bankruptcy. For years the utility skimped on safety upgrades and repairs while pumping billions into green energy and electric-car subsidies to please its overlords in Sacramento. Credit Suisse has estimated that long-term contracts with renewable developers cost the utility $2.2 billion annually more than current market power rates.

A report this week by Next 10 and Beacon Economics warns that the state isn’t on target to meet its climate goals in 2030 because Californians refuse to abandon SUVs for electric cars. Wildfires last year produced more CO2 than the state’s businesses, homes and farms, offsetting state emission reductions in 2017 nine times over.

Environmental regulators responded to the report by claiming that carbon from burned trees is more “natural” than from combusted fossil fuels. Perhaps they’ve inhaled too much of their own smoke.

One comment that pretty much encapsulates readers' thoughts:

This is the same state that dropped $77 billion on a high speed rail project that no one wanted, designed to connect places no one went to, and failed to create a single piece of useful public infrastructure out of it.  But I'll bet a whole lot of homes, cars, planes, vacations, and private cash hordes were built from it.  There are countries in the world that would put people to death over such a travesty of public funds malfeasance.  No one even lost their job over that.  California is utterly and irredeemably corrupt. 

And this:

I was reading the interesting tale of the rechargeable Lithium-ion car battery. A Nobel was just given to three fellows responsible for the chemistry/engineering aspects-one 97. The down side from an environmental side was the relatively enormous 50-60 lbs of cobalt required. Supposedly 500,000 lbs of ore must be mined in one of several far away places in order to achieve that. Compared to clean natural gas and a CO2 extraction system attached to the engine  the environmental impact of the electric car is dubious at best. But that's why Musk needs to get off this rock pile. We need to be messing up other places not here. 

Original Post

California moratorium on oil and gas leases has ended. See below.

Finally; should have been done years ago. Why didn't the US Postal Service do this ten years ago? And it still hasn't. But UPS will. UPS will spend $450 million to add 6,000 vehicles to its natural gas fleet. Link here. Amazon did one better: adding a coal-powered fleet (AKA EVs). Posted earlier.

$5 gasoline in California? Nope, how about $6 gas? I remember all the pushback I got when I "predicted" $5 gasoline for California. The price of gasoline has risen 86.4 cents / gallon since the start of the year. And this is the end of the driving season. Links everyone. This is from Forbes.

While the CNN story focuses on this recent spike, the reality is that the lowest price Californians have experienced during 2019, according to the U.S. Energy Information Administration (EIA), came during the week of January 28, when the price for a gallon of regular averaged $3.206. Texans paid $1.962 during that same week.

Let's see how this goes? US opens up California land for oil, gas leasing. LOL. Over at Rigzone.  Like that will go anywhere.

The U.S. Department of the Interior’s Bureau of Land Management has opened up 722,000 acres of federal land in California’s central coast for oil and gas leasing and development.

The land is located primarily in Fresno, Monterey and San Benito counties. The decision makes 680,000 acres of federal mineral estate available for lease with controlled surface use stipulations and an additional 42,000 acres available for lease with no surface occupancy requirements.

It also marks the end of a five-year moratorium on oil and gas leases in California. The state had not had an oil and gas lease sale since 2013.

The catch:  However, it doesn’t authorize any actual drilling for exploration or development of oil and gas resources, according to a BLM press release.

Geography lesson: quick! Where is the Gulf of Oman? We'll come back to this later.

They're Reading The Blog -- Californians Love Saudi Oil -- October 1, 2019

Updates

Later, 9:21 p.m. CT: I posted the original note earlier today. This evening, while proofreading and correcting typographical errors, I came across this story in LosAngelesCBSNews:



From the linked article:

Gas price hikes were blamed on unplanned maintenance issues at the Chevron and Marathon refineries in Los Angeles County and the absence of imported gasoline, according to the Automobile Club of Southern California.

Absence of imported gasoline? And why was that? Gasoline shipments from Europe to the Middle East surged after the attack on Saudi assets. Re-posting:

But look at this, link here:

From Reuters, the linked article:

Gasoline exports from Europe to the Middle East and Asia are set to surge this week after recent attacks on Saudi Arabia’s oil facilities crippled output at the kingdom’s refineries.

Over 400,000 tonnes of gasoline and gasoline blending components have been booked in the past week for loading between Sept. 21 and Sept 26 out of northwest Europe with Mideast Gulf delivery options, shipping data shows. The flow is the equivalent of around 500,000 barrels per day. [Why didn't they say that to begin with; who in the ... measures gasoline in "tonnes"? I guess you do when loading a sea-going tanker. LOL.]

It is unclear where the cargoes will end up, but traders said that Saudi Arabia’s state-run oil company Aramco is seeking to buy large volumes of refined oil products.

Europe’s exports of gasoline and blending components to Saudi Arabia averaged 60,000 bpd in the first five months of the year, according to data analytics firm Vortexa.

Original Post

They're reading the blog. LOL. I don't know how often I've said this: Californians prefer Saudi oil.

But here it is, in the WSJ over the weekend:

From the linked article:

Following the attacks on Saudi Arabia’s oil facilities last month, many forecasters warned that gas prices would spike. Yet prices have hardly budged—except in California, where they are surging due to policies that have made the state more reliant on foreign oil.

Gas prices in the Golden State have shot up 30 cents a gallon in the last week amid problems at in-state refineries to a statewide average of $4.03 a gallon and may be headed higher. Prices rose a mere 10 cents nationwide in the week after the attacks on Saudi facilities and have since ticked down a few cents.

A big reason gas prices didn’t spike after the Saudi attack is growing U.S. shale oil production, which has doubled since 2012 to about 12.5 million barrels a day and added about six million barrels to global supply. This has more than offset the 5.7 million barrels that were temporarily knocked out of Saudi production.

Yet oil production in California has declined about 18% since 2012 as older wells are exhausted and regulatory costs make it less profitable to drill new ones. California has made up for its declining domestic production by importing more foreign oil by tanker, especially from, you guessed it, Saudi Arabia—which emits more CO2.

Regulatory costs have also forced many refiners in the state to close. The California Energy Commission notes that “the cost of complying with environmental regulations and low product prices will continue to make it difficult to continue operating older, less efficient refineries.” Few refineries outside of the state produce the unique fuel blends required by California.

Thus when California refineries experience problems, retailers must import foreign gasoline at steep prices, a challenge partly exacerbated by the outages in Saudi Arabia. Add California’s 61-cent-a-gallon gas tax—the highest in the country—and this is why its gasoline prices are now nearly $1.40 higher than the U.S. average and $1.70 more than in Texas. 

Much more at the linked article.

As usual, the comments are the best part.

The Price Of Gasoline And The Mix Of Vehicle Sales -- May 20, 2019

The link to this article was sent to me by a reader last week.

It's a difficult article to follow, for two reasons:

• too many ads which interrupt the flow of the article;
• the writer seems to be focused on three things, making it unclear what the writer was primarily interested in

But after re-reading it closely, the writer had three points:

• the mix of privately sold vehicles in the US is overwhelmingly leaning towards trucks (70%) vs sedans (30%)
• the sales lots across the country are filled with trucks and cars
• the price of gasoline has little correlation with the mix of truck/sedan sales

Actually, the writer had really only one point: to sell subscriptions to his pay site but that's a different story.

It should be noted that the definition of trucks is broad:

• anything that is not a sedan
• pickup trucks, SUVs, and minvans (yes, even minvans)

The writer's conclusion:

• little correlation between the price of gasoline and the mix of vehicle sales in the US

The article, by the way, is an advertisement disguised as a news article for the writer's research firm.

His conclusion:

The dramatic shift in sales to the truck segment is the strongest contributor to the bull case but also the biggest threat if the mix of sales shifts back towards cars as it has in the past. So, if not gasoline prices, then what causes the cyclical shifts in sales mix between cars and trucks? If you'd like a comprehensive answer to that last question, please contact us for pricing information.

Pricing information for a subscription to his pay-site.

If you are wondering what the writer is talking about when he says "bull case": he's talking about investing in automobile manufacturers. As long as trucks remain the big seller, automobile manufacturers will do very well; the margins are greater on trucks than on sedans. So, even if overall vehicle sales are down, automobile manufacturers can continue to do well if they sell high-margin "trucks."

By the way, we've talked about this more than once on the blog. The price of gasoline is but one data point in this equation. Two other data points are much, much more important.

First, the total amount spend on gasoline over a year is not all that great in raw numbers regardless of the price of oil when one actually runs the numbers which I've done several times.

Second, the price paid per gallon is a lot less important than how much one actually drives. When prices are high, consumers can easily combine driving trips to save on gasoline. Likewise, they can drive less fast. It's amazing how much gas can be saved driving cross-country at 55 mph compared to 85 mph. Driving not at all on days when one does not go into work would be a huge savings. Etc. Etc.

By the way, here in north Texas, the least expensive grade of gasoline is incredibly affordable, back down to $2.49 or thereabouts. One can actually find gasoline for $2.09/gallon in Ft Worth, Texas, according to gasbuddy.

Here We Go Again -- The Sky Is Falling, The Sky Is Falling -- AAA -- March 11, 2018; Tesla Shut Down Production For One Wekk In Late February -- That's Good News -- Bloomberg

According to the AAA:

• the price of gasoline is going to keep rising
• the price of gasoline is already 25 cents/gallon more than it was last year
• American drivers could reach a "tipping point" on the price of gasoline this summer

So, let's take a look:

• 16,000 miles / year
• 20 miles per gallon 
• 800 gallons of gasoline / year
• x 25 cents / gallon = $200
• / 52 weeks = $3.85 / week more in gasoline
• a single Big Mac costs about $4.00

Get a grip, AAA.

More:

• minimum wage, $15/hour
• $4/$15 =  27% = 16 minutes (per week)

*******************************

Confirmed: Tesla Suspended Production Of Its Model 3 For One Week

That's Good News -- Bloomberg

Reported by Bloomberg:

Tesla Inc. temporarily suspended production of the Model 3 electric sedan at its lone auto plant for a week in late February, a planned breather that ultimately may help increase output of the closely watched vehicle.

Model 3 production was idled from Feb. 20 to Feb. 24 before resuming at the company’s assembly plant in Fremont, California, Tesla confirmed Sunday. The automaker currently makes the Model S sedan, Model X sport utility vehicle and Model 3 at that site, and batteries at a plant known as the Gigafactory east of Reno, Nevada.

“Our Model 3 production plan includes periods of planned downtime in both Fremont and Gigafactory 1,” a Tesla spokesman said in an emailed statement. “These periods are used to improve automation and systematically address bottlenecks in order to increase production rates. This is not unusual and is in fact common in production ramps like this.” 

I assume shares of Tesla will surge on this news tomorrow.

Why US Refiners Like Shipping Gasoline To Mexico -- RINS -- November 8, 2017

Folks wonder why the price of gasoline will melt up when there remains a huge glut of oil in the US. There are many, many reasons. One reason: state taxes. Californians know all about that as new gasoline and diesel taxes go into effect in that state today.

But here's another reason: RINS.

See this article over at Bloomberg, which I posted in an earlier post but for a different reason. But this part of the story was too important to be lost buried in another post, so here it is, as a stand-alone.

US refiners will preferably ship their product to Mexico where they will command better margins because Mexico does not have costly biofuels regulations. Shipping product to Mexico will sop up some of that excess, in turn pushing prices here in the US slightly higher (and, of course, if Mexico can't take it all, Europe certainly will):

The chance to skip out on compliance with costly U.S. biofuels regulations by exporting fuel is a huge incentive for overseas sales. Under the Renewable Fuel Standard, refiners aren’t required to buy blending credits called RINs for barrels that are exported. Mexico has potential to demand 600,000 barrels a day of gasoline imports as its own refineries limp.

America’s southern neighbor has continued to be its best customer as its own fuel factories suffer from inefficiencies and breakdowns -- in September Mexico’s crude processing fell to the lowest since December 1990, or about 33 percent of its total national operating capacity.

I don't have a dog in this fight:

• I don't invest in refineries, as a general rule (only exception: I own shares in some publicly-traded integrated companies)
• the price of gasoline is off-set by the few miles I actually drive any more, and it's getting less every year (I do replace the tires on my bicycle more often these days, however

*****************************

From A Reader

Some time ago, I mentioned to a reader that a family member suggested to me the high price of gasoline in California is due to some sort of "collusion" on the part of Big Oil.

The reader responded with two long notes regarding the gasoline taxes and the price of gasoline in California. I hate "not using" a great note from a reader but I did not know where to use those two notes until now. I'm too tired to do much more than post them as I got them with minimal editing, but it helps me put things in perspective:

The first note from the reader:

Here are current California state fuel taxes (they're going to go up soon)

38.13 cents per gallon of gas

40.01 cents per gallon of diesel

plus

Gasoline subject to 2.25% sales tax. Diesel subject to 9.25% sales tax.

plus the federal government charges 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel

........................ So, the government skims the first 58 cents per gallon of gas or the first 71 cents per gallon of diesel sold in the state of California. I don't know how the "tax on tax" is computed, so those numbers are not warranted correct, but I know it's quite a nice annuity.

......................... The government take is nearly pure profit. They hire a few inspectors and quite a few more accountants, but they have very little overhead. The oil companies have a huge capital expense in exploration and production, not to mention transportation, etc., and their profit per gallon is somewhere around 7 cents per gallon. (Can't find that reference, but it's a number I saw a while back and I was just floored that the risk takers were making only what I considered one tenth as much profit as the government was.)

The second note:

This is an excerpt from an article which ran in Forbes back in 2011. I imagine there are more current figures, but I doubt that the teeter-totter has become more balanced. I'm sure I saw the 7 cents figure within the last couple months, because I would have not remembered it for 6 years. The government figure quoted is an average, and of course, California is at the top of the curve for taxes.

...........................................

Industry profit margins are cyclical too. But on average, between 2006 and 2010, the largest oil companies averaged a profit margin of around 6.5%. This pales in comparison to profit margins in just about every other industry. The pharmaceutical industry, for example, routinely averages a profit margin of about 16%. The soft drink market is even more lucrative.

At the gas tank, integrated oil companies make about 7 cents per gallon. Meanwhile, the government extracts more than 48 cents, on average, per gallon. That’s right: Uncle Sam takes nearly seven times more out of drivers’ wallets via taxation than “Big Oil.”

For working Americans higher gas prices do indeed mean higher costs of daily living. But strong oil industry earnings (and profits beat losses in just about anyone’s book) also lead to very real economic benefits for these exact same families.

Compared with a small fraction of oil stocks (about 1.5%) owned by corporate management, the vast majority of such investments are held by average Americans, primarily via retirement accounts. Independent research shows that 14% of industry shares are in IRAs and a full 30% held in mutual funds.

Another 27% of oil stocks are in public pension funds. And in these accounts, oil shares more than pull their weight. While oil stocks made up less than 4% of major pensions in four key states between 2005 and 2008, they accounted for 8.6% of returns.

As the revenues of oil companies improve, so do their stock prices. In turn, teachers, firefighters, policemen and millions of other public servants see their retirement accounts expand. And as most states are struggling to keep their pension programs solvent, oil stocks can help ease that pressure and stave off fiscal woes.

And the economic ripple effects don’t stop there. Oil and natural gas companies support more than 9.2 million U.S. jobs and have invested nearly $2 trillion in domestic capital projects over the last decade. Higher earnings mean more cash to plow into new projects and jobs.

And remember: freely choosing consumers -- not government mandates – are driving industry margins and growth. Unfortunately the bloated political rhetoric generated by Capitol Hill raises the prospect of bad public policy. Some legislators have threatened to institute a brand new “windfall profit” tax in times of unusually high returns.

Such a move would saddle firms with new costs, which will get recouped with higher prices at the pump. Vulnerable American families would be squeezed. And firms would have less money to invest in new projects, leading to slower job growth and fewer employment opportunities.

Denunciations of America’s oil and natural gas industry ignore the fact that shifts in global supply and demand are behind increased prices of recent months. Resisting punitive politics will ensure that petroleum prices drop as political tensions ease and the dollar strengthens. Such market-based policy will also promote jobs, investment and income for America at a time when they are most needed.

-- Robert L. Bradley Jr. is the CEO and founder of the Institute for Energy Research.

Theme Song, The Adventures of Rin Tin Tin

Gasoline To Increase In Price In Mexico; Then Based On Market -- December 31, 2016

Updates

January 2, 2016: as usual, the MDW blog is foreshadowing what the New York Times will be reporting. The credit goes to the readers who send me the links.

The New York Times is reporting that Mexicans are protesting the increase in the price of gasoline:

Small groups of protesters blockaded some roads and gasoline stations in Mexico on Monday to protest a government price deregulation that sent the price of fuel up by as much as 20 percent over the weekend.

One group blockaded a privately owned gasoline station on Mexico City's main boulevard, shouting: "The people, united, will never be defeated!"

"This will increase the cost of living for all Mexicans. It will make more expensive transportation, basic food stuffs, food, and it will ultimately hit Mexican families," said Rafael Sotocruz, a nurse who was protesting at the station.

On a busy highway leading into the capital from the west, another group blocked traffic and held up a banner reading "Enough already!"

Original Post

 

There have been several stories about gasoline consumption in Mexico in the past few days. Now this:

Mexicans are bracing to kickstart the New Year on a sour note, with protests planned against the government's huge hike in gasoline prices.

President Enrique Pena Nieto has promised that fuel prices will fall thanks to his landmark 2014 energy reform, which ended a seven-decade-old monopoly held by the state-run firm Pemex.

The government plans to end subsidies and let the market dictate prices in March, but Mexicans will feel the pinch at the pump before they start falling.

The finance ministry announced Tuesday that the price of gasoline would increase by as much as 20.1 percent to 0.88 dollars per liter on January 1, while diesel would rise by 16.5 percent to 0.83 dollars.

The price ceiling will be adjusted daily from February 18, before letting supply and demand determine them in March.

• A gallon = 3.78541 gallons. More or less. 
• $0.81 x 3.78541 = $3.33 / gallon.

Really? In Mexico?

We're paying about $2.20/gallon here in the DFW, Texas, area.

Upstream CAPEX Reductions -- March 11, 2016

From Woods Mckenzie:

I think two interesting data points is the extent to which California Resources will quit drilling in California, and the fact that Whiting is not on the list (if it is, I missed it).

************************************

Here We Go Again!

WKOW/Madison is reporting:

The Wisconsin Department of Health Services is reporting four more cases of Elizabethkingia in the Madison-Milwaukee area.

Wisconsin State Hygiene Communicable Disease Deputy Director David Warshauer says 48 cases is worrisome.

"Laboratories may see a case a year, so it is concerning,"  Dr. Warshauer said about the rare blood infection being found in 12 counties.  D.H.S does say they have revised the numbers of deaths from 18 to 15 possibly linked to the bacteria.

Right now, researchers in his lab are isolating Elizabethkingia DNA samples.  Just one of isolation can take up to 48 hours.  His lab has done more than 40 in the last few weeks.

"Everybody has been busy, hoping to find the source for this."

But CDC Spokesman Tom Skinner says there is no smoking gun just yet.

 "We're now including any possible food source here that maybe implemented here, including any soil water or medical products that anyone who may have acquired this infection may have been using," Skinner said.

Hopefully, Chipotle is not part of this story.

Regarding the bacterium:

Elizabethkingia meningoseptica is a gram-negative rod-shaped bacterium widely distributed in nature (e.g. fresh water, salt water, or soil). It may be normally present in fish and frogs but is not normally present in human microflora.

In 1959 American bacteriologist Elizabeth O. King (who isolated Kingella in 1960), was studying unclassified bacteria associated with pediatric meningitis at the CDC in Atlanta, when she isolated an organism that she named Flavobacterium meningosepticum (Flavobacterium means "the yellow bacillus" in Latin; meningosepticum likewise means "associated with meningitis and sepsis"). 

In 2005, a 16S rRNA phylogenetic tree of Chryseobacteria showed that C. meningosepticum along with C. miricola (which was reported to have been isolated from Russian space station Mir in 2001 and placed in the genus Chryseobacterium in 2003 were close to each other but outside the tree of the rest of the Chryseobacteria and were then placed in a new genus Elizabethkingia named after the original discoverer of F. meningosepticum.

Another Top Energy Story Of The Week? Chevron Cuts CAPEX Another 36% -- March 9, 2016

I posted/linked this article earlier but really didn't stop to consider the implications. This is a big story that hardly got a footnote in the business pages today, it seems. From any number of sources, this one from oilprice:

The California-based multinational just announced that it would cut its capex in 2017 and 2018 by another 36 percent, bringing annual spending down to between $17 and $22 billion.

That is down from an October 2015 estimate, when Chevron said that it expected to spend $20 to $24 billion each year in 2017 and 2018. It is also sharply lower than the $26.6 billion Chevron is spending this year, which itself is a 25 percent reduction from last year’s levels.

The severe cuts come as Chevron has had to take on debt in order to afford shareholder dividends, as the company has not generated enough cash flow to cover the payouts with oil prices as low as they are. Dividends cost the company $8 billion in 2015 alone. Chevron would need oil trading at $50 in order to cover the dividend with cash flow.

So, to recap, CVX CAPEX:

• 2015: $35.5 billion
• 2016: $26.6 billion
• 2017: first estimate -- $24 billion (max)
• 2018: first estimate -- $24 billion (max)
• 2017: new estimate -- $22 billion (max)
• 2018: new estimate -- $22 billion (max) 

The cut in CAPEX in percent has a broad range because the estimates Chevron provides are quite broad.

CAPEX in 2017 and 2018 ranges as low as $17 billion to as high as $22 billion.

In a worse case situation, a cut from $35.5 billion (2015) to $17 billion (next year) would represent a 52% cut in two years. My arithmetic could be wrong. If the numbers are right, that's huge. A 50% cut in CAPEX in two years by a major.

I think 2017 will be a most interesting year for US consumers when it comes to the price of oil.

WTI At 7-Year Low; Around $37 -- December 8, 2015

Price of gasoline, 1918 - present:

Truax oil field has been updated. Link here. 

Active rigs:

	12/8/2015	12/08/2014	12/08/2013	12/08/2012	12/08/2011
Active Rigs	64	191	193	181	202

RBN Energy: Part 2 on Corpus Christi, December 8, 2015.

Over the past few years, midstream companies have responded to the boom in crude oil and lease condensate production in the Eagle Ford and the Permian by developing significant new pipeline capacity to, as well as storage and dock facilities in, both Houston and Corpus Christi. Now, with production in the Eagle Ford off its high and growth in the Permian slowing, these same midstreamers (and producers, marketers, refiners, and exporters of condensate and other refined products) are taking stock, and assessing not only what new infrastructure might still be needed in this period of lowered expectation, but whether shifting more of their attention (and liquids) towards Corpus instead of Houston might be warranted. Today, we continue our look at Corpus Christi’s increasing role as a crude/condensate powerhouse.

Even with the declines in drilling and completion activity we’ve been seeing with lower oil prices, a lot of light crude and lease condensate is still being produced in the Eagle Ford and the Permian Basin. According to the U.S. Energy Information Administration (EIA) drilling productivity report (DPR), crude and condensate production in the Permian is estimated to be just over 2 MMb/d in November 2015 (up slightly from a year ago); production in the Eagle Ford (where the active rig count is flirting with 100—off from an average of 250 in the 2012-14 period) has been sliding of late, and is estimated to be 1.3 MMb/d in the same month. Together that’s a huge 3.3 MMb/d of crude and condensate to move to market.

As we said in Episode 1, Corpus Christi is now a competitive alternative to Houston as a market hub for Eagle Ford and Permian crude and condensate headed to the Gulf Coast. Not only is Corpus close to (and well-connected by pipeline with) the Eagle Ford and connected (to a lesser degree) with the Permian, the city and its environs boast considerable crude/condensate storage, oil-refining and growing condensate splitting capacity, as well as one of the nation’s best and busiest ports. Let’s begin this time with an overview of crude/condensate pipelines out of the two plays to Corpus and Houston.

Simply Staggering -- What The Torrance Refinery Outage Means For Californians -- EIA -- October 23, 2015

Updates

May 6, 2016: Torrance refinery to re-start.
 

Original Post

 
This was posted by the EIA on October 15, 2015, a screen shot in case the link is ever broken:

and then the map showing origin of imported gasoline:

I wonder when/if the Los Angeles Times will ever put this on their front page, above the fold. Every gas station in California should post this story, along with photographs of their governor, US senators, congressmen, and local state representatives.

But for all of that, the average premium for Los Angeles spot gasoline is only 31 cents.

From the linked site:

Over a five-month period following an explosion at a California oil refinery in February 2015, imports of gasoline into California increased to more than 10 times their typical level, drawing from sources that include India, the United Kingdom, and Russia.

Imported gasoline has been arriving from all over the world (see graph above) at rates of 28,000–68,000 barrels per day (b/d) for March through July (the latest data available). These levels compare with an average of 5,000 b/d in 2013-14.

California gasoline markets continue to adjust to the February 18 explosion and fire at the ExxonMobil refinery in Torrance, California, located southwest of Los Angeles. The ExxonMobil refinery is the third-largest refinery in Southern California. The refinery unit affected by the explosion, the fluid catalytic cracker (FCC), is essential to making gasoline. Torrance's FCC represents 22% of the region's total FCC capacity, making it a key source of gasoline and distillate fuels that meet California's very stringent fuel specifications. On September 30, ExxonMobil announced the sale of the refinery to PBF Energy, which will be PBF Energy's first refinery on the West Coast once the sale is complete.

Because of its unique product specifications and long distance from international gasoline markets, California specifically, and the West Coast in general, does not typically import much gasoline. As a result, the sudden loss of supply from the Torrance refinery resulted in immediate supply shortfalls and higher wholesale and retail prices. The higher wholesale prices covered the costs of importing more gasoline from distant markets into California to make up for the supply shortfalls.

The U.S. Energy Information Administration's company-level import data show that from March to July, California imports of motor gasoline averaged 52,000 b/d, from 15 different countries. The main supply sources have been refineries in India and the United Kingdom, averaging 13,000 b/d and 11,000 b/d over that time, respectively. California has also imported an average of 5,600 b/d from Russia over that period, along with smaller amounts from refineries across Europe and Asia.

An earlier post regarding the Torrance refinery is at this link.

Compare this graph, around the 34th week, about mid-August, 2015, with the graph above. It took awhile to arrange for imports and then to have the gasoline delivered.

RBN Commentary On Refinery Adjustments -- Thursday, October 1, 2015

Active rigs:

	10/1/2015	10/01/2014	10/01/2013	10/01/2012	10/01/2011
Active Rigs	68	191	187	186	201

RBN Energy: could refinery adjustments to handle more light crude be a bust? This is another very important article for those trying to get a better understanding of the US shale revolution. This is a keeper. The article will be archived at the source.

The deluge of light (and super light) sweet crude from U.S. tight-oil plays like the Permian Basin, Bakken and Eagle Ford has had many effects, including a push by refiners to rework facilities designed for heavy-crude processing to handle an excess of lighter oils. Many of these projects are underway and expected online in the next two years. Today, we consider refinery infrastructure investments that might not pan out in a low crude price world.

Everyone--even those whose interest in the oil industry extends only to how much they pay for gasoline or heating oil—knows that U.S. oil production has risen significantly over the past few years (from 5.6 MMb/d in 2011 to 8.7 MMb/d in 2014, and 9.3 MMb/d as of June 2015). You need to be something of a petro-geek, though, to know that almost all of the increase in domestic production the past few years has come in the form of lighter, sweeter crudes, especially very light oil with American Petroleum Institute (API) gravity of between 40 and 50 degrees. (Crudes with API gravity between 32 and 40 degrees are typically categorized as light, while heavy crudes--say, diluted bitumen from the Alberta oil sands--have gravities below 22 degrees, and medium oils have API gravity of between 22 and 31 degrees.) Refineries are designed and built to operate most efficiently when processing a certain type or mix of crudes, and a lot of refinery upgrades in the years leading up to the Shale Revolution were intended to accommodate a world where lighter crudes were thought to be running out, to be replaced by heavier (lower API gravity) crudes – particularly on the Gulf Coast. There is still plenty of heavy crude out there that comes to the Gulf Coast – from Mexico and Venezuela for example and also Western Canada. But with the U.S. producing a surfeit of light crude and with prices for that light crude being discounted – refiners began to consider investing in functionality to improve their light crude processing capacity.

Production in “light tight” oil plays like the Permian, Bakken and—most pertinent to today’s blog—Eagle Ford (which produces the lightest crude of them all) has grown exponentially since 2011 and is expected to remain high even under a pessimistic oil-price scenario according to the Energy Information Administration.

Commentary On $5 Gasoline In California -- July 29, 2015

I think everyone is aware that California has unique gasoline requirements and that refineries from outside California do not refine oil to meet California's gasoline specifications. Some Asian refineries will bring "California" gasoline to the state when it is cost-effective, which appears to be about $4.50 at today's exchange rate.

I think one could argue that, for the most part, California's gasoline supply comes from in-state refineries.

Hold that thought.

Based on newspaper reports coming out California over the past ten years or so, it appears that Californians are no more inclined to build new refineries or expand capacity any more than the rest of the country (North Dakota is somewhat of an anomaly with its new Dickinson refinery).

At the same time, there was probably no need to think about new refineries in California because the Los Angeles Times has been reporting for the past decade that coal-powered vehicles would become the norm in California, and that the few Californians driving gasoline-powered cars would be downsizing to compact and sub-compact cars. It all made any argument for more California refineries moot.

But a funny thing happened on the way to the forum.

First of all, Californians are driving more than ever.

Second, the rush to EVs seems to have peaked, another passing fad.

Third, gas-guzzling SUVs and big Ford pick-up trucks are back in vogue.

Hold all those thoughts.

Everyone, by now is quite aware that California, especially southern California, is being hit with $5 gasoline and in a news report of July 17, 2015, it did not sound like things were going to turn around very quickly.

With a crude oil glut and oil prices down to $47; with gasoline across the rest of the nation as low as $2.59, folks in California are understandably wondering why their gasoline is priced at $4.59 for regular unleaded (premium will be a lot more expensive due to the alkylate "shortage").

One of the explanations for the "shortage" of gasoline in California is the explosion at the Exxon refinery in Torrance (south Los Angeles), which is operating at 20% capacity and will continue to do for quite some time (based on that July 17, 2015, story).

I was aware of a few other reasons in addition to the Exxon explosion, but it sure sounded like that was the main reason.

I'm not so sure any more. I did not notice this until this morning, in a graph I posted yesterday. I will explain what I'm talking about but see if you see the same thing I'm seeing:

Yes, gasoline stockpiles in California are at 10-year lows this year (red line), and the averages this year have been hugging the 10-year low. However, it was actually worse last year from week 15 through week 28 (or thereabouts). 

Maybe I'm reading too much into this, but if there are no new refineries being built in California, if Californians are driving more than ever, if EVs are a passing fad (at least not growing as fast as anticipated), if Ford is having record quarters with larger SUVs and larger F-150's --

If one looks at the wild swings in the 2014 stockpiles, one gets the feeling that the situation is somewhat chaotic. 

Again, maybe I'm over-reading this, but it certainly appears last year was worse than this year -- until the Exxon refinery explosion.  If that reading is accurate, one would assume that by 2018 the situation could be much, much worse. Certainly the $5-gasoline driving season will start earlier in the spring and last longer into the autumn all things continue to trend the way they are now.

One wonders if the new refineries in Saudi Arabia (about 1 million bbl daily capacity) will be optimized to produce "California-spec" gasoline.

Note: I often misread things. I often misread graphs. I could be completely way off on this. If this information is important to you, go to the source. Do not use this site to make any investment, financial, or transportation decisions.

Wednesday, July 29, 2015 -- Part V; $5 Gasoline In California Could Last Months

Updates

May 6, 2016: Torrance refinery to re-start.  
 
October 22, 2015: XOM sells Torrance, CA, refinery.  

Original Post

 

Tweeting now: US refinery throughput edged down -108,000 b/d last week but is still close to record and +211,000 b/d above prior year; imports down 2.8 million bbls compared to previous week; and, US crude oil stocks fell 4.2 million bbls. Refineries are struggling to keep up with demand.

Tweeting now: propane supplies continue to hit new record; surging. Comment: RBN Energy has covered this in depth. Some operators are paying to have their propane taken away.

Tweeting now: US gasoline consumption averaged 9.5 million b/d over the last four weeks, about +560,000 b/d above last year.

And this is why gasoline is still expensive in California:  West coast refineries continued to raise output but it remains 75,000 b/d below 10-yr average when demand is booming. Comment: one of the largest refineries in California, and perhaps the most important in southern California, the XOM refinery in Torrance remains at 20% capacity (as far as I know) due to recent explosion of its pollution control units. Yes, here it is, at The Los Angeles Times July 17, 2015:

The refinery that has historically produced about a fifth of Southern California's gasoline has been crippled since a February explosion — and may stay that way for months to come.

The trouble at Exxon Mobil's refinery in Torrance is a major factor pushing up regional gas prices, which have risen dramatically this month. Restoring the site to full capacity is among the best hopes for bringing prices back down.

The Torrance refinery currently operates at less than 20% of its capacity.

Exxon Mobil asked the management district for approval to use an old pollution control unit it replaced in 2008 to temporarily restore full operations of the Torrance refinery, but regulators said the equipment does not capture emissions well enough. Emissions from the older unit would violate state regulations and rules.

For those who still don't understand why gasoline in southern California can cost nearly $5 / gallon:

Having said that, did you notice something even more remarkable in the graph above? In fact, the gasoline stockpiles were actually running higher than last year from Week 13 to Week 26. The blast at the XOM refinery occurred on/about February 18, 2015, the 8th week of this year. In other words, the gasoline stockpiles were actually lower last year at this time, and I don't recall any explosion shutting down a major refinery in California at this time last year. In fact, California reached its historic low of gasoline stockpiles last year in Weeks 15, 23, and 26 or thereabouts (hard to tell from the graph).

I truly thought the XOM refinery explosion was the main culprit, but it appears that the explosion simply exacerbated something else already going on in California. Call me naive, but it certainly looks like the refineries in California have not been able to keep up with increased demand for gasoline over the past ten years in California. If this is accurate, $5 gasoline is going to be a recurring nightmare for Californians every summer (and that $5-gasoline driving season will arrive earlier each spring and last longer into each autumn). My hunch is that the Californians will catch on to what is happening sometime in 2018.  

#1 Story In Southern California This Week: $5 Gasoline; EIA Rubs Salt In The Wound -- July 14, 2015

Updates

Later, 9:11 a.m. Pacific time: moments after posting the original post -- that the #1 story in California is $5 gasoline, this EIA "energy cookie" pops up:

The average retail price for motor gasoline this summer (April through September) is expected to be $2.67 per gallon, the lowest price (in real dollars, meaning adjusted for inflation) since 2009, based on projections in EIA's July Short-Term Energy Outlook (http://www.eia.gov/forecasts/steo/) . This decline is mainly the result of the projected 41% year-over-year decline in the average price of North Sea Brent crude oil. --- EIA  

What? "This decline is mainly the result of the projected 41% year-over-year decline in the average price of North Sea Brent crude oil. What? 

Original Post

 

Breitbart probably has the best broad-brush explanation to date of the overall energy picture in California:

GasBuddy noted that an “extraordinary convergence of fuel supply problems this week in California prompted severe spikes in wholesale gasoline prices and experts say there’s no immediate relief in sight.” CEO Jason Toews sent Governor Brown a letter asking him to consult with the EPA and Department of Energy about a California gas regulation standards waiver due to “extreme and unusual fuel supply circumstances.”

Friday’s Gas Buddy call came after U.S. crude oil prices plummeted by -5% last week and the average price of gas in the U.S. slumped to $2.76 per gallon.

The International Energy Agency stated that the world is currently “massively oversupplied” with oil, mostly due to the US fracking boom.  Over the July 4 weekend, the U.S. national average price for gasoline fell to the lowest level since 2010.

But while the rest of the America enjoys almost $1 per gallon in savings, California drivers on Friday in the Bay Area drivers were surprised to see gasoline up-tick to $4 a gallon, and L.A. Basin drivers were stunned as some stations posted $5 a gallon gasoline.

When Governor Brown was leaving office after his first stint in 1983, California was America’s second-largest producer of crude oil at 1.025 million barrels per day (bpd) 32 years later, California has dropped to the third-largest producer of crude oil, as production plummeted to 545,000 bpd.

When Brown signed a bill in 2011 raising the minimum renewable portfolio standards (RPS) for utilities from 20% to 33% by 2020, he promised investments in wind, solar, biomass, and geothermal sources would cut energy prices and create tens of thousands of jobs. The only things stimulated so far have been higher energy prices.

State oil supplies are now at their lowest point in 12-months. Federal energy officials said that California refiners have been forced to run-down 1.1 million barrels held in their reserve storage tanks. Out-of-state crude oil imports had been averaging about  100,000 barrels a day, but no imports arrived last week, according to state records.

Other relevant links at this site:

• California and CBR, April 13, 2014
• Only 1% of California oil arrives by rail, October 1, 2014
• California approves first CBR off-loading terminal after lengthy review, September 10, 2014
• Bakersfield CBR off-loading terminal, November 8, 2013 
• California CBR - huge success story, May 8, 2014

Notice also the earlier tag: California_Spike_2014

Approaching $5 Gasoline In Southern California -- July 10, 2015

In today's Orange County Register (southern California): Orange County wakes up to shock of $4.35 and climbing: Gas prices soar at independent stations.

Orange County motorists blinked Friday and saw gas prices top $4 a gallon at some of their neighborhood gas stations.

At OC Gas on Grand Avenue in Santa Ana, prices shot up to $4.35 from $3.27 on Wednesday. 

So,what's the story? The article continues:

Low inventory across the West Coast, a lack of imported gas for California and rising wholesale prices all have contributed to sporadic price hikes around the county.

“We are in a high-driving, high-consumption time of the year,” said Tupper Hull, the vice president of strategic communications for the Western States Petroleum Association. “I don’t know what occurred this week to change the wholesale prices. I don’t have an answer for that.”

GasBuddy, a website that collects gas price reports from its app users, saw wild price changes all day Friday across Orange County. A Dana Point Chevron took the top spot at $4.61 for a gallon of regular, followed by $4.59 a gallon at a 76 station in Seal Beach. Both stations had reported prices closer to $3.45 in recent days.

Will Governor Brown respond?

GasBuddy on Thursday petitioned Gov. Jerry Brown to temporarily waive California’s fuel requirements because of the shortage. A reprieve would mean the state could import gas from other states with different blends to hold off even higher price hikes.