This year’s version of the midwinter gasoline sell-off is particularly violent, and on Tuesday morning, OPIS finds 28 states with at least some merchants peddling unleaded regular on the street for less than $2.00 gal. We project that perhaps another 6 or so states will breach that level within the remainder of January, and a few states – South Carolina, Ohio, and Illinois come to mind - - might even see $1.75 gal or so.

  Note: for details, including a state-by-state listing, visit www.fuelgaugereport.com

   Because of the breathtaking pace of the recent wholesale decreases, it’s not unusual to find some counties where 30-40cts gal separates the low and high offerings. Most of the prices should approach the lows in the next 30 days.

   The West Coast should continue to be a notable exception to this new cheaper mid-decade break for fuel. Yesterday saw a fire at a large Chevron refinery in the San Francisco area, and that incident reminds us that western states are dependent on a relative handful of large major-operated refineries, with little access to global imports. We don’t know yet how serious the fire was, but any incident at a coastal California refinery is serious, given the tight supply in that region.

   The nationwide pump price average is very misleading. It stands at $2.229 gal this morning, about 8cts gal below the January 16, 2006 number. But many many people are paying substantially less than this “average” which is clearly inflated by western stations.

WHEN THE SAUDIS TALK, OIL TRADERS LISTEN

   The new week begins with comments from Saudi Oil Minister Ali Naimi, who in interviews in New Delhi this morning, implied that global supply and demand is in relative balance.

   These comments won’t curtail the ongoing 2007 selling spree. I believe that within a few months, we will see relatively balanced crude, but oil traders are an impatient lot. They expect more from Saudi Arabia, and they will almost certainly test the nineteen month low water marks established for crude oil and gasoline last Wednesday and Thursday. Watch for a very tumultuous day and week of crude trading.

SOME PERSPECTIVES ON WHAT YOU’LL SAVE

    There is enough momentum to take gasoline prices down to between $2.05-$2.10 gal by February 1. I can already hear the Wall Street cheerleaders who will no doubt suggest that Americans will have much more disposable income this Winter because of the cheaper fuel prices.

  Well, let’s put this in perspective. In February, 2006, Americans spent about $866 million per day on gasoline, by far the highest amount ever for that month.  If prices slipped to say $2.10 gal, I would project that Americans would spend just over $800-million per day in Feb. 2007. That is a considerable difference, if you can find a good place to spend the $1.8-billion which comes from saving $66-million per day for 28 days.

  My projection takes into account likely 2007 gasoline demand growth of about one percent. Last year, gasoline demand was 9-million b/d, and this year it might hit 9.09-million b/d.

  But the interesting perspective comes when one views the last six year. A bill of $800-million/day may appear cheap compared to last February, and considerably below the $1-billion plus we paid on many driving season days last Summer, but it is far higher than the numbers paid just a few years ago.

   For example, in February 2005, we paid about $711-million each day and in February 2004, the bill was about $602-million.

   There are really drastic differences when one looks at the first few years of the decade. Much of the difference is rooted in price, but a large share is also attributable to demand growth. We’ll use about 37-million gal more gasoline per day in February 2007, when compared with February 2000.

   Some other recent daily gasoline bills for February: In 2003, we paid about $570-million; in 2002, it was $396-million; in February 2001, it was $506.7-million; and in February 2000 it was $475-million. February 2002 was the low water mark (we were still feeling the very powerful post 9-11 effects). 

   So before those Wall Street cheerleaders predict economic largesse, they should consider this fact:  Even if we drop to $2.10 gal this February, we’ll pay about $22.46-billion for that fuel, versus just $14.18-billion some five years ago.