Between now and Thanksgiving Week, you can expect to see lower prices at the pump for gasoline, but stiff price increases for diesel.  But the numbers will still be higher than they’ve ever been for when home football games are hosted by the Detroit and Dallas NFL franchises. More about the numbers in a moment.

   We are still on a course that will deliver the most expensive year ever for fueling the country’s automobile fleet. And I believe that the trajectory implies that next spring may well deliver the most expensive month, days, and weeks on record. But in the meantime, we just might see plenty of $3.00 gal (or less) placards in at least half of the country.  

   At OPIS, we have to be careful when we put these statistics in perspective. One wiseass reporter, with a hoity-toity name that smacks of an aristocratic and over-privileged Thurston Howell III upbringing, referred to some recent OPIS data observations as “pointless statistical voodoo”. We noted that the “average” American had to work about 8.7 minutes to pay for a gallon of gasoline in October.  A second statistical release mentioned that Americans currently must spend about 8 percent of their household income these days to pay for gasoline.

   I reject the notion that such factoids represent pointless statistical voodoo. A pointless statistical voodoo snippet might point out that the Washington Post reporter who used the term might have to work 44 minutes to purchase his Greatest Hits of Kenny G CD, or the Michael Bolton poster that adorns his cubicle.

    On a personal level, there were some years where I worked several hours per month to pay for the 18 inch American Girl dolls that portrayed a wide array of ethnicities, but more importantly, brought fathers of every faith and culture to their financially arthritic knees. The payments for those dolls (and the expensive line of accessories!) represent voodoo in the most painful Caribbean sense, faithful to the origin of the practice.

 Before I digress further, here is today’s statistical scorecard.

November 15, 2011 Nationwide Gasoline Price        $3.411 gal

November 15, 2010 Nationwide Gasoline Price        $2.892 gal

November 15, 2011 WTI Crude Price                        $97.93 bbl

November 15, 2010 WTI Crude Price                        $84.85 bbl

November 15, 2011 Brent Crude Price                      $112.15bbl

November 15, 2010 Brent Crude Price                       $86.90 bbl

November 15, 2011 Nationwide Diesel Price             $3.970 gal

November 15, 2010 Nationwide Diesel Price             $3.191 gal

   Some non-pointless observations about the numbers and the mid-November backdrop:

-          WTI crude oil futures are not representative of what most U.S., and indeed all global refiners are paying for their crude oil. WTI futures settled at $98.14 bbl yesterday. The price of Brent crude was just under $112 bbl, and that represented the value of crude on the North Sea platforms - - transportation adds another few dollars. The price of Light Louisiana Sweet crude (LLS) is about $114 bbl, and even Alaska North Slope (ANS) crude fetches a value of $116 bbl.

-          Measured against crude oil prices, the value of gasoline is much too low.  The price of a December RBOB futures contract is just $2.535 gal as I write this, or about $106.50 bbl. The cost of turning crude oil into gasoline is about $5 bbl. Hence, the break-even price for wholesale gasoline should be the crude oil number plus about $5 bbl, or something in the neighborhood of $120 bbl, or $2.86 gal. U.S. bulk markets for gasoline range from the $2.465 gal price that Chicago refiners can get, to the $2.575 gal numbers in New York and Los Angeles. Refiners dependent on gasoline are hemorrhaging red ink.

-          Diesel is the hot product in the U.S. and internationally. Emerging countries in South America and Asia have increasing appetites for diesel. Demand growth for diesel far outpaces demand spurts for gasoline across the globe. For U.S. refiners, that means they can get anywhere from $3.15-$3.37 gal for diesel fuel, or $132-$142 bbl for this cut of the barrel. It’s as if oil products are valued on talent, and diesel is Simon, while gasoline is Garfunkel.

-          Not since Roger Miller’s King of the Road have railroads been in the spotlight of the country. Entrepeneurial companies are finding light sweet oil is North American shale formations, but there is little existing infrastructure to gather the crude and send it to refineries in the midcontinent, or the further distance to Gulf or East Coast refineries. Rail cars are crisscrossing the country, carrying crude from North Dakota or central Texas to refiners who would prefer paying domestic prices in the $90’s, rather than offshore prices in the $110-$120 bbl range. Investment bank research suggests that sufficient rail capacity will come on line in the second half of 2012, and that might get rid of some of the huge differences between landlocked domestic crude and on-the-water crude.

-          U.S. petroleum inventories are a bit frightening. If the summer sale of Strategic Petroleum Reserve barrels is taken into consideration, the country has 96.7-million barrels less crude and products in storage than it had one year ago. When the SPR sale is excluded, the difference is still a notable 66.1-million barrels.

   All of these factors make for an interesting two part forecast. Months are too short to bracket real trends in the oil business, but we might borrow a unit of measurement that perfectly fits the next two chapters for the country. I propose we break the year up into “Kardashians” - - a period of approximately 72 days.

   The next Kardashian takes us from now through say, January 26. This period will almost certainly see mostly downward pressure on gasoline, with stability or upward pressure on diesel and heating oil. It’s quite possible that hundreds of towns across the country could see gasoline prices soon approach the numbers we saw in December 2010 – something just above $3.00 gal.

   But that Kardashian will in all likelihood be followed by a typically manic late winter/early spring rally. A future blog will provide some color for the bounce, but I’ll leave you with a teaser for this spring Kardashian.

   The low water mark for gasoline each year generally occurs in the fourth calendar quarter, or occasionally in January. Last year, gasoline futures hit an offseason bottom (low tide level) of $2.03 gal in the first week of October. The high water mark occurred on the last day of April, at $3.4789 gal. Measured against the neap tide, the high tide was about 71% higher. The longer term average between low and high tide for gasoline is about 50%.

   Right now, the offseason low is the $2.4673 gal gasoline futures quote recorded on October 4, 2011. If we see a typical 50% rise from that number, next spring’s high water mark for gasoline futures would be about $3.70 gal. Such a number would pretty much negate the possibility of any retail prices below $4 gal, and result in a national average level of about $4.25 gal or more. Such a backdrop will provide interesting theater during the 2012 presidential campaign.

   Perhaps, I’m engaging in meaningless voodoo forecasting. A recession in Europe or the U.S. would stick a pin in any bullish rag doll, I’ll agree. 

   Last winter brought $5 gal to $6 gal gasoline predictions from authors in search of an audience for their books.

I have no book to peddle (yet) and nothing to be gained from frightening the public.

   But I’m reminded of what one movie critic said when they reviewed the latest Adam Sandler film: You have been warned.

   If only Kim Kardashian’s estranged husband Kris Humphries could make that statement.