I received almost a dozen phone calls and emails yesterday asking about the possibility of $4.00 gal gasoline prices this Summer.  Never mind that the U.S. national average is more than 10cts gal shy of $3.00 gasoline - - that number isn’t sexy enough for some editors.  All this occurred on the anniversary of William Shakespeare’s death, proving perhaps that dread - - and not hope - - springs eternal nearly five centuries after the Bard’s demise.. 

    Let me make this clear: There will be $4.00 and $5.00 and $6.00 gal prices across the country this summer, but they’ll be primarily in two small segments: the rental car return counter (if you return a vehicle less than full and didn’t get the full paid tank option) and, perhaps in tony little areas like Greenwich, Connecticut and Beverly Hills, California.

   The pace of retail gasoline price increases has actually stalled of late. And most U.S. states now have average pump prices that are below the numbers witnessed one year ago. That’s hard to believe, but it’s particularly true in areas east of the Rockies. Today finds the nationwide number at $2.856 gal, up 0.4cts gal after a few days of very modest decreases. Today’s price is 28cts gal above where it stood a month ago, but it is 5.2cts gal below last year’s average on this day.

Let’s look at the numbers in the OPIS OilManac for today:

                          Retail Avg. Nationwide              Daily Nationwide Expense

Current                      $2.856 gal                               $1,109.2 million

2006                          $2.908 gal                               $1,111.4 million

2005                          $2.218 gal                               $   866.7 million

2004                          $1.809 gal                               $   703.1 million

2003                          $1.564 gal                               $   549.1 million

2002                          $1.412 gal                               $   516.0 million

2001                          $1.624 gal                               $   573.4 million

   What peeves me isn’t the procession of inquiries about the next fuel apocalypse - - when people stop asking about energy prices and supply, I’ll be out of a job. I’m more annoyed about the nonsense excuses that are purveyed as reasons for the surge.

Nigeria Leads the Nonsense Flow

   Nigeria appears to have modeled its elections on Florida 2000 and then worked backward from there (if you hang a left in western Chad, you’ll enter the country) It is certainly an unpleasant and destitute country despite its oil riches, and corruption there has been endemic for more than a decade. It does contribute some of the sweetest, high priced grades of crude oil in the world, and those are the highly prized barrels among many unsophisticated global refineries.

    But it is nonsense to attribute the most recent strength in crude oil and refined products to “worries about Nigeria.”   There will be worries about Nigeria for the rest of the decade. One wire service report today mentioned that the flawed elections brought new threats of instability to the region. Please inform me of the last time that Nigeria was a stable country and help me determine when interruptions of oil output from this region did not represent a daily threat.

   Equally ridiculous was the talk about the possibilities of a Belgian refinery strike and the impact that such worries had on worldwide gasoline and diesel prices. It is quite rare for the Belgians or any other European industrial powers will actually see a refinery work stoppage. If they waffle on the negotiations, ExxonMobil could simply buy Belgium, I suppose.

   And the final excuse du jour for recent market strength is the notion of U.S. gasoline demand rising even as prices ascend.  The gasoline demand data has been flawed, and it will continue to be flawed as long as investment banks, trading companies, and other “merchant” concerns provide flawed data on inventories to the data gatherers. Gasoline demand is quite possibly up by 1-to-1.5 percent in the nation, and very probably, demonstrating less than that lift in Western markets.

Coming Attractions . . . .

    The procession of oil companies releasing Spring earnings will begin on Wednesday and continue through early May.  This week will see ConocoPhillips and Chevron release their numbers  - -- they are large enough so that their refining largesse can be bundled in to many integrated segments, and I suspect robust earnings, but nothing that puts the microscope on record refinery profits.  That song will be sung later this month when we hear from companies like Valero, Sunoco, and Tesoro, all of whom were beneficiaries of stable first quarter crude prices, and runaway refined products’ values (not just gasoline, but diesel and heating oil as well).

   The retail market is in the peaking process. It may have another 5-10cts gal of upside at worst, but the combination of a small dip in mid-Spring demand and a large impending increase in domestic production should keep the apocalyptic pump prices at bay.

   Several analysts, including one or two who I have considerable respect for, have pointed to the possibility of $4.00 gal gasoline this Summer in recent days. But most caveat the prediction with the introductory clause: “if a major hurricane hits Houston or Corpus Christi this Summer “. 

   If an asteroid hits the Delaware River, we could see $5.00 gal gasoline this Summer. That doesn’t mean that it’s likely.