No, that is not a cheap plug for the NBC game show hosted by Bob Saget, where the producers pick a person who could never make it on to Jeopardy and that person tries to answer questions better than an angry mob. I prefer The Biggest Loser, if only because it makes me feel like a decathlete.
The headline refers to the 100 day mark of 2008, and the measurement of oil prices during that period. Today we saw new all-time record highs for benchmark crude (whether it be the U.S. WTI grade or the North Sea Brent blend). We also saw all-time record highs for jet fuel, diesel, and heating oil. Wholesale price advances in those products don’t have the same marquee status as gasoline, but their impact on inflation may be more insidious. By the way, some, but not all wholesale gasoline markets saw record highs today - - if not for August 31, 2005 (the wild session after Katrina’s landfall), we would be at record levels for all petroleum products, and perhaps for Oil of Olay as well.
I’ll make some comments on this historic day, but first, let me present the numbers. With the exception of the first two lines, which reflect retail prices, all of the values in this hastily assembled table are exclusive of taxes, freight and other costs associated with fuel sales.
Location/Product Jan 1, 2008 April 9, 2008 % Change
--------------------- --------------- ---------------- ------------
Nationwide Retail Unl $3.043 gal $3.343 gal +10.0%
Nationwide Retail Diesel $3.421 gal $4.031 gal +17.8%
Crude Futures (WTI) $96.00 bbl $110.87 bbl +15.5%
Gasoline Futures(RBOB) $2.4597 gal $2.7742 gal +12.8%
Heating Oil Futures $2.6370 gal $3.2345 gal +36.7%
NY Unl Gasoline $2.4645 gal $2.6600 gal + 7.9%
NY Diesel $2.6670 gal $3.4100 gal +34.6%
NY Jet Fuel $2.7070 gal $3.7000 gal +36.7%
Gulf Coast Gasoline $2.4155 gal $2.6900 gal +11.4%
Gulf Coast Diesel $2.6090 gal $3.4100 gal +30.1%
Gulf Coast Jet $2.6715 gal $3.4400 gal +28.8%
Midwest Gasoline $2.4100 gal $2.6800 gal +11.2%
Midwest Diesel $2.6140 gal $3.4100 gal +30.5%
Midwest Jet $2.7440 gal $3.4400 gal +25.4%
California Gasoline $2.5825 gal $3.0500 gal +18.1%
California Diesel $2.6500 gal $3.4200 gal +29.1%
California Jet $2.7000 gal $3.4400 gal +27.4%
Some observations:
- Crude oil hit $112.21 bbl on an intraday basis today, but settled at $110.87 bbl. In late January 2007, it was valued for as little as $49.90 bbl. It began this year at $96 bbl.
- This year’s gasoline price surge is unlike other similar spikes in the 21st century. By this time of the year, it’s gasoline that usually tugs crude oil prices higher. This year, crude oil prices have outpaced gasoline’s escalation by a substantial percentage. There is no hint of any forthcoming supply problem for gasoline.
- The products the public pays the least attention to - - - diesel, heating oil, and jet fuel - - have seen the most spectacular increases. Some states will see average retail diesel prices above $4.25 gal this week. The nationwide average will almost assuredly reach $4.05-$4.10 gal by Sunday.
- Oil producers as well as investors in oil are the beneficiaries of this year’s price spike. Refiners have joined consumers and commercial end-users in the victim category. Gasoline today is selling for only a few dollars above the price of sweet crude. Only on the West Coast has there been any recovery in gasoline margins for refiners - - the rest of the country has produced a subpar performance. Of course, many refiners have exploration and production, so one might argue that one pocket has a fistful of dollars while the other has just a few pennies.
- The increases cannot - -I repeat, they cannot - - be attributed to higher U.S. demand. The Department of Energy today suggested that gasoline demand was up 0.3 percent from last year (on a four week moving average basis). The DOE reported that distillate demand (mostly diesel, but also representative of heating oil) was flat to 2007. Both of these numbers are almost certainly overstatements. Gasoline sales are lower than last year, and diesel sales have just dropped off the table. The government does not track diesel exports on a week to week basis, and that movement explains why U.S. inventories of diesel and heating oil remain tight.
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Conclusions: We’re nearing the top for crude oil, as well as for diesel, and I suspect we’ll see a first half 2008 top on gasoline within the next 40 days. You’ll know we are near the top when you hear more talk about $5.00 gal gasoline or $200 bbl crude.