Don’t get too excited by that headline. Average retail gasoline prices increased by exactly 0.08cts gal this morning, and that is not going to inspire a rush to the auto malls to grab discounted Civics and Geos.  But today’s increase to $2.1455 gal does represent the first move higher since January 5. There is more to come, but not quite yet.  Most of the changes in February will represent a slow drift - -with a mixture of increases and decreases.

   The retail increase follows a $5 bbl bounce in crude oil - - prices have recovered from their cup of coffee at $49.90 bbl and are hovering around $55 bbl. The surge (a politically charged word these days) also follows a larger bounce of about 15-30cts gal in the wholesale gasoline prices that distributors must pay. The largest of the increases have occurred in the Midwest, which was the region that saw the most severe drop when oil crashed earlier this month.

OPIS SCORECARD:  American’s are using about 378-million gal of motor fuel each day at the moment, so that calculates to a daily gas bill of about $811-million. That compares with $872-million on this day in 2006; $689-million in 2005; and $578-million in 2004.

   We crossed the $1-billion per day threshold last year on April 3 and paid more than that amount each day until September 14.

   Based on current demand trends, we’d have to see retail prices cross above $2.60 gal to see $1-billion/day levels this April. 

   I feel comfortable in a couple of assumptions. We’ll cross that billion dollar bridge later in 2007 than in 2006; and we won’t spend nearly as much time in such lofty heights.

The Ecstasy & The Agony

    Just a week or two ago, gasoline retailers were targets of consumer and media wrath that is normally (and should appropriately) be reserved for people like Geraldo Rivera.  When wholesale prices plunge, retail numbers inevitably lag, and this can result in the occasional “sweet spot” where gasoline dealers and distributors actually make a nice piece of change.

   But oil markets don’t have a memory, and they take no prisoners. The rebound in wholesale gasoline in the last ten days has sent station costs up by 15-30cts gal, and retail kept moving lower. Accordingly, there has been a margin squeeze, and the station that was making a gross profit of 22cts gal on January 15, may now be seeing “break even” gasoline sales.

   OPIS just put together a 100+ page report on the state of gasoline retailing for all of 2006. It shows that the best place to be a gasoline retailer might be in the nation’s capital, with New England a second choice. The worst place?  Probably, the Illinois side of the St. Louis metro market.

   For an executive summary of this report, contact OPIS Retail Director Fred Rozell at frozell@opisnet.com    Tell him that Pump Daddy sent you.

Some More Thoughts on The State of the Union Message

  I’ve had a bit more time to think about some of the items mentioned in President Bush’ state of the union message.  On Superbowl Sunday, I’m speaking at a renewable energy forum in San Antonio, hosted by the National Biodiesel Board.  My focus will be on traditional fuels and their likely price performance, since I am incapable of distinguishing between switchgrass and fescue.

   Here are some apolitical thoughts.

      Ethanol will have broad support from both sides of the political aisle, but the targets that the president laid out represent a “pipe dream”.   It costs about 15cts gal to move ethanol from Midwestern states to the East Coast, and rail is the preferred mode of transport. In comparison, it costs about 3cts gal to move gasoline from Houston Texas to beautiful downtown Linden, New Jersey.   If someone can find the breakthrough that allows ethanol, or ethanol-blended gasoline to move via oil pipelines, there will be a heck of a lot more alcohol demand in states far removed from the corn belt, or the switchgrass belt, for that matter.

   Shallow Nation. Energy Secretary Bodman wants to double the size of the Strategic Petroleum Reserve and hopes to store some of the oil on the East or West Coast.   For the last fifteen years, I’ve made presentations (always entertaining and well received) that talk about the shallow nature of U.S. storage for crude oil and refined products. In some parts of the country, we have about half as much gasoline in storage per driver than we had during the Big Hair decade of the 80’s.

   So, we need more storage. Just-in-time inventory policies work wonderfully for Dell       Computer or Home Depot, but this strategy can prove to be just intolerable for oil.

   But where in blazes does Secretary Bodman believe we can store oil on either coast?

   There are no large underground caverns and no empty tanks to speak of.  Drain Walden Pond perhaps and refill it with crude?   The goal of doubling the SPR would require about as much storage as exists currently above ground in the U.S.  

   So, doubling strategic storage is a wonderful target and a laudable goal. But it requires discovery of some underground salt domes in strategic coastal areas, or hundreds of times more steel than one can see in an aerial view of New York Harbor.