Eight days ago, crude oil futures touched $100 bbl and a business media circus ensued. Today, we saw gasoline trade at just over $89 bbl in the world market that traditionally demands the highest wholesale price in the world. More on this latest wild swing, in a moment. 

  I wonder. Reporters covered the climax --  hence, the reference to another 70’s rock band of my college years - - but will they cover the denouement?

 (I make take an oath and promise that you will not see French words in this space again. I prefer Spanish thanks to six years of lessons and countless hours viewing Telemundo and Univision, two of the only networks that have not had me on air. Está escuchándome?)

Retail gasoline prices hit $3.10 gal in the last 24 hours, and that may be about it for January upside and perhaps even for February.  Nearly every nook and cranny of the country will see lower retail prices in the next few weeks as is typical for mid-January when people drive less. The addition of the Wall Street discussion about “recession” will add to the wind shear.

 Remember that when you view retail prices in any given market, it is akin to watching a sporting event on tape delay.  You are observing what happened in the wholesale sector about one week prior. The hastily assembled table below will provide you with a quick comparison of what has happened in eight tumultuous days in January.

Wholesale Market           Jan. 2 Price     Jan. 10 Price          Change

NYMEX Crude                 $99.62bbl         $93.92bbl       Down $5.70 bbl

L.A. Gasoline*                  $2.655 gal         $2.15 gal         Down 50cts gal

Gulf Coast Gasoline         $2.510 gal         $2.295gal        Down 21.5cts gal

Midwestern Gasoline        $2.500 gal         $2.310gal        Down 19.0cts gal

New York Gasoline          $2.540 gal         $2.330gal         Down 21.0cts gal

*Note: Prices mentioned are for spot California blendstock, or CARBOB.

 We also saw trades on Thursday for just $2.10 gal, which works out to just $88.20 bbl.

  These much lower wholesale spot prices aren’t immediately passed along downstream, and a single day can commonly witness a wholesale price rebound of 5cts gal or more. But right now, the story of 2008 is not so much the $100 bbl trophy number on January 2 - - it’s the wholesale plunge that has occurred in record time thereafter.

  You’ll note that California gasoline has plunged by 50cts gal. Along with the other Pacific Coast states, there is evidence that people are indeed driving less. Most of the evidence is anecdotal, but the last time the California tax people published month-to-month data (for September 2007) it showed a decline in sales of more than 2 percent. It’s too soon to say whether this represents a longer term trend, or just some temporary behavior, perhaps due to miserable weather.

   For those of us who view markets the way film critics look at the cinema, we have seen this movie before.  The middle of the Winter can deliver very poor demand for motor fuel under the best of circumstances. There is a tradition of false start rallies that give way to nearly emetic givebacks.

   I might also add that the U.S. West Coast has long been a harbinger for trends that may come to the rest of the country. It is often the canary in the coal mine, and right now that bird is singing the blues.

   California’s performance many times augurs fuel price trends that will move east, just as it is the birthplace of many pop culture trends. And when one looks at the bulk storage for the region, it is as shallow as many of the starlets.

   There are probably fewer barrels per 1,000 drivers in the Golden State than most other parts of the U.S. This week’s wholesale slide reminds the trading community that shallow inventories are quick-to-empty, but also quick-to-fill. It’s not good to be shallow.

   That brings up a final movie reference. This weekend I will trek to the multiplex and see There Will Be Blood, a flick that the trailer implies is about the oil industry.

   Unfortunately for U.S. refiners, it is a headline that suits the present dilemma they face for their business.  Crude oil prices are still frothy, thanks mostly to the sense that crude oil futures are a safe haven in these uncertain times.  Refined products prices are very weak relative to crude - - West Coast refiners are processing a raw product that costs $5 bbl or so more than the manufactured gasoline that comes out after all that hard work.

    But refiners will have their day.  Later this month, and especially in February and March, we’ll see extensive refinery maintenance.  That maintenance could coincide with the switch to Summer blends (less volatile, and more expensive-to-manufacture gasoline) and deliver some more manic moments after this seasonal affected disorderly market.  The price of wholesale or spot gasoline for January delivery (the $2.15 gal number cited above) gives way to prices about 40cts gal higher for late February when Summer gasoline begins shipment on West Coast pipelines.  That represents a shift of nearly $17 bbl.  I still believe that the entire country could see a Spring peak of $3.50 gal or higher.

   But in the meantime, sit back and watch as the relationship between gasoline and crude has all the stability of a Hollywood marriage