Answer: One should never be surprised by its capacity for excess.
Today saw a continuation of the trend that has been in full control of global markets for most of the last 60 days. A weaker Dollar and spin about various geopolitical possibilities (not probabilities) drove WTI crude oil prices above $97 bbl for the first time ever, and the price settled at an all time high close of $96.70 bbl. It is now $46.80 bbl higher than its January nadir, and it has spiked by nearly $30 bbl since late August. We are now about $20 bbl above the level that oil bulls would have thought reasonable for the fourth quarter as Summer ended.
Tomorrow is the day when the Department of Energy releases its weekly statistical bulletin, and we’ll get some inventory, production, and demand numbers. Today saw the relatively new MasterCard SpendingPulse report data, and that data (still regarded with skepticism by many veteran oil execs) suggests that gasoline demand is down about 3% from last year.
The October/November price spike has been mostly about crude. The U.S. is not, of course, the world, and the states have been more encumbered by rising oil prices, since refiners and traders purchase their crude oil in U.S. dollars. Thanks to the U.S. Dollar’s Autumn swoon, the increases in crude oil and other products haven’t been as noticeable in countries that use Yuans, or Euros, or Loonies, et al.
Some Quick Number Crunching
Average retail unleaded regular gas prices nationwide stood at $3.024 gal today, and they will probably hit $3.05 gal by Thursday. Some quick arithmetic using today’s numbers finds Americans paying about $1.18-billion for their daily gasoline fix. That compares to $859-million on this day in 2006; $915-million in 2005; $777-million in 2004; $576-million in 2003; $538-million in 2002; and $455-million in 2001. These are estimates – be glad that I am not in the vinyl siding business.
(If you are reading this after November 6, just visit www.fuelgaugereport.com and get the more recent numbers.)
The average retail diesel price today is $3.346 gal (a new record) and we’ll probably threaten $3.40 gal by the weekend. The price is 85cts gal above where it was last year and more than twice what was paid on this day in many of the years of this decade.
Wholesale gasoline prices closed today anywhere between $2.44 gal at the Gulf Coast to as much as $2.68 gal in California. My rule of thumb is to add about 60cts gal to the wholesale price in order to come up with a reasonable retail target. Hence, we are looking at $3.04 gal to $3.28 gal for these various markets, based on a snapshot of wholesale numbers at presstime.
Postscript: We are still a long way from any case to be made for $4.00 gal gasoline. My core belief is that $100 bbl crude may be touched but not sustained, and it would take crude costs in the $125-$140 bbl range in Autumn/Winter months to create a viable climate for $4.00 gal average gas prices.
One doesn’t need such high crude oil prices in the Spring to support a gasoline spike, however. Some markets last Spring saw wholesale gasoline trade briefly at $50 bbl over crude. If one looks at oil futures prices for the Spring, one finds crude oil pegged at about $92 bbl and gasoline in New York assessed at $2.60 gal. If this were the NASDAQ, one might say that another 25% move would be necessary to get to the $4.00 gal apocalypse.
Of course, the NASDAQ didn’t stop at 4,000 when the tech bubble was in full inflation mode. It got to 5,000 and beyond. Whatever happened to that 5,000 mark?