Diesel prices

[dsprik]

The gardening struck me this morning when I was on here. Anyone want to bet we are going to see a sharp increase in lawns getting rototilled up??? I don't blame them.

If we could only grow our own diesel - in our own gardens.

[skypilot]

Theft is up in all of the stores -- grocery stores now hiring security (armed) guards because people are stealing food; and as Rich says, there is a storm coming. My dad used to talk about having to stay up at night pulling guard on the family 'row veggies' (I believe that is what he called them). People out of work, out of money and out of food would do late-night shopping in other folks gardens. He was a teen then and we used to tell him that it was not that bad. Well, I'm beginning to wonder if we won't be seeing much the same thing happening again. I sure hope not -- surely not!!!

[richfaa]

I am concerned....I tend to observe things and ask questions. Security guards in stores where we never saw them before. Fuel stations with the card slots taped over and cash only signs posted. City school bus lots now have security guards at night to prevent fuel theft. Local RV storage lot owner has hired a security guard at night due to a increase in break ins. Ford latest cut back will hurt real bad around here. This is Ford country with many Ford plants nearby. I am also concerned because we live in a upper middle class neighborhood, Big House, we have a big expensive truck and 5th wheel in the driveway and drive a shinny new Honda Accord. I note the police zone car driving by more often..when asked ..they have '"increased the frequency" of patrols, less during the day..more after dark. We might be considered "Affluent" and targets to those who are less fortunate. I wonder about the upcoming hot summer nights,can't afford the A/C, out of work.Nothing to do.... Why does that guy have more than me...its not fair..He has more than he needs..I have nothing..There is a storm coming....

[c214dick]

Thank God for Carol & Tammy's postings otherwise I would really be depressed.

[HamRad]

Trying to stay on topic:.... Back in Mt. Shasta today for some groceries and noted the price of diesel was up to $5.099. Yesterday it was only [ONLY] $4.959! I can't do the math on this type of thing.... Things simply change to fast for logic to apply!

I knew I should have filled up at $4.95!

HamRad

[richfaa]

Diesel has not yet hit the 5.00 mark around here.I did see 4.799 this afternoon. I pumped 225.55 in the mid sized bus I was driving. Glad it was not my money. The schools is 20K over the fuel budget thus far and increasing every day. This is a small private school with 4 diesel and 3 small gas busses. I pump about 47 gallons of diesel every 2 1/2 days. The other diesel drivers do about the same. I can't imagine what the large city school bus fleets are suffering. I know that our local city drivers are doing 3 and 4 runs a day in an attempt to conserve. I expect to see 5.00 diesel in the next couple of days..We are home for memorial weekend for the first time in years....but we have a good time planned.

[rvfirefighter]

The Hess Station and Walmart here in Charleston where I have been buying diesel has gotten to $4.39, regular gas is up to 3.75. Sounds like it is still lower here than alot of places.
The price has risen $.40 per gal since the first of the month.

[skypilot]

Local (Topeka) news had a report a couple of nights ago -- the city bus service is reducing its runs, already increased prices some, have reduced maintenance schedules on the busses to use that money for fuel, etc.... One news item is fuel going up - what are you doing to conserve (riding the bus more....) and ridership is up, but then they cut the number of runs and routes. Vicious circle.

Local Phillips dealership - unlead 3.899; diesel 4.799; another had diesel at 4.959 with unleaded at the same 3.899.

[Mrs. CountryGuy]

Gas seen today from $3.84 to $3.99, diesel, was about $4.59.

This year in our county over 700 families will lose their homes to foreclosure, 10 years ago, that number was less than 50. We live in a rural type community, estimated population in 2006 was 102,191, population in 2000 was 98,890; housing units in 2006 were 42,669 (not sure but that probably includes apartments, etc.) Interesting fact, persons per square mile for Lenawee is 131.7, for the entire state of Michigan is 175.

The price of fuel, hurts everyone, everywhere, somehow.

The price of fuel above is just about what I have been seeing here in Lenawee for the last 7 days.

[scattershot]

Gasoline $3.75, diesel $4.59 today in Denver. Maybe it'll go down after the Memorial Day weekend?

[Native Tex]

Well Folks, we have pretty much parked our Monty for a while. In fact, this is the first time we have been on the forum because we miss the RV life. The price of diesel has forced us to stop and I am sure this will soon effect many more of us. I know the covered parking areas where we store our rig is full with many rigs collecting dust. It is a same, but it is a fact of life.

[sgtpp214]

Diesel on Lake Superior has gone from $4.60 to $4.80 in three days. We are driving 380 miles round trip to grandsons' B-Day Party this weekend and I can see spending $140 on diesel. Have three trips on the docket; one with two grandkids(5&7) to Southern WI,another with 13 yo twins to Dayton, OH, and the final one to DW's siblings rally in Central WI. Had planned on making the Fall MOC Rally, but that is now in doubt. We bought two bikes and plan to use them as much as possible. The 2 1/2 mile ride into town isn't bad as it is downhill, but unfortunately it isn't downhill coming home. Will help the health and maybe lengthen our lives, but we won't be able to afford the longer yrs of traveling.

[exav8tr]

The latest from AP:

By JOHN PORRETTO and JOHN WILEN, AP Business Writers
1 hour, 5 minutes ago



Consider the game of chicken that plays out every day across Pennsylvania State Highway 441. In Marietta, where the road hugs the Susquehanna River, a Rutter's Farm Store gas station stands on one side, a Sheetz gas station on the other.

ADVERTISEMENT

Kelly Bosley, who manages Rutter's, doesn't even have to look across the highway to know when Sheetz changes its price for a gallon of gas. When Sheetz raises prices, her own pumps are busy. When Sheetz lowers prices, she has not a car in sight.

She calls Rutter's headquarters to report the competition's new price and wait for instructions.

"I call a lot of times and say, 'They went down, hurry up! Hurry up! Call me! Call me!' Or it could be where theirs goes up, and I'll say, 'Take your time! You know, I like being busy.' But I have no control over that."

You think you feel helpless at the pump?

Bosley makes a living selling gas — and even she has little control over what it costs.

So how exactly are gas prices set? What determines the hair-pulling figure you see displayed in large electronic or plastic numbers? Why is a gallon of gas, say, $4.11 — not $4.10 or $4.12? Why is the price different across the street?

It all starts with oil.

The biggest factor in the skyrocketing price of gasoline is the historic ascent of crude oil, which has surged from $45 per barrel in 2004 to more than $135 this past week, setting new record highs all the while.

In the first quarter of this year, based on a retail price of gas that now seems like a steal — $3.11 a gallon — crude oil accounted for all but about a dollar, or 70 percent, of the cost, according to the federal government.

The rest is a complex mix of factors, from the cost of turning oil into gas to taxes to marketing costs to, sometimes, nothing more than the competitive whims of your local gas station owner.

Not that understanding the breakdown makes it any less cringe-inducing to fill 'er up.

___

First a primer on how gas gets to your tank:

Once oil is pumped from the ground, it can be sold on the spot market, a last-minute trading arena where oil companies and distributors buy and sell to each other, or straight to refiners. After it's brewed into gasoline, the product can again be sold on the spot market, or directly to wholesalers, who in turn can supply their own stations or sell it to other retailers.

Each step of the way, buyers and sellers negotiate a price until, finally, drivers pay the ultimate tab at the pump.

At the starting point of all this is the price of oil — which, like the oil itself, is nothing if not crude.

The knee-jerk villains are the oil companies, fat with multibillion-dollar profits, frequent targets of populist anger. But wait: The oil companies don't set the price of oil or the cost of a gallon of gas.

Prices are a function of the open market, the result of futures contracts being traded on the New York Mercantile Exchange, or Nymex, and other exchanges around the world.

Buying the current July crude oil futures contract means you're buying oil that will be delivered by the end of July. But most investors who trade futures have no intention of ever accepting the underlying oil: Like stock investors who frequently buy and sell their holdings, they're simply betting that prices will rise or fall.

Of late, on the Nymex, oil futures have been rising.

Why? Blame the falling dollar. Oil is priced in U.S. dollars, and the weaker the dollar gets, the more attractive dollar-denominated oil contracts are to foreign investors — or any investor looking for a safe haven in the turbulent stock market.

The rush of buyers keeps pushing oil futures to a series of new records, and the rest of the energy complex, including gasoline futures, has followed. That pushes up the price of gas that goes into your tank.

"Crude is the driver," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "As long as it stays up there, gasoline's not going to be able to decline much at all, even if demand slips. That's just the way it is."

There is some evidence Americans are buying less gas as the price marches higher, and common sense suggests they would cut back even more if gas rose to $4.50 or $5 a gallon.

Lower demand should mean lower prices — but it takes time for that to happen, given the enormous scale of refining operations that produce gasoline.

"Once demand begins to slow, that needs to translate into inventories, then you get some price weakening," Ritterbusch said. "But it takes a while."

Oil and gasoline prices often move in the same direction, but they aren't linked directly. In fact, while oil prices have more than doubled in the past year, gasoline is only up about 19 percent during the same time.

Oil prices often fluctuate with production decisions from the Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world's crude, or when conflict in the Middle East or Nigeria threatens supplies.

For example, oil prices rose $2.46 in one day last month amid reports a ship under contract to the Defense Department fired warning shots at two boats in the Persian Gulf that may have been Iranian.

A Navy spokesman later said the origin of the boats was unclear, but the news raised concerns that a conflict between U.S. and Iranian forces could cut oil supplies from the region. That same day, gas prices rose another 2.1 cents to a then-record national average of $3.577 a gallon on other supply concerns.

And the rise has only grown more dramatic. Oil sprinted higher this past week, rising more than $4 a barrel on Wednesday alone and past $135 on Thursday.

As for gasoline prices: They're closely tied to demand from U.S. drivers and how efficiently refineries are operating. Falling production or inventories often send prices skyrocketing.

Those prices can vary greatly depending on the region.

The Gulf Coast is the source of about half the gasoline produced in the United States, and areas farthest from there tend to have higher prices because of the cost of shipping gas via pipeline and tanker truck all over the country.

Some of those places, like California and New York, also have higher local taxes that push the price higher.

Oil companies may not set the price of oil and gasoline, but not everyone is willing to sit back and let them claim to be innocent bystanders.

In particular, for the second time this year, Big Oil's biggest executives were on Capitol Hill in recent days getting pummeled by many in Congress for their record profits while Americans struggle with record fuel prices.

"Where is the corporate conscience?" Sen. Dick Durbin, D-Ill., asked the top executives of the five largest U.S. oil companies.

___

Soaring gas prices have led to cries for a variety of answers, from Hillary Rodham Clinton and John McCain's suggestion to suspend the federal gas tax this summer to President Bush's call to open the Arctic National Wildlife Refuge in Alaska and some offshore waters that are now off limits to oil development.

Others have suggested a windfall profits tax on oil companies, although some economists say that might actually hurt supply. Oil companies say they're not to blame for spiking fuel prices, and their earnings, measured against revenue, are in line with other industries.

On top of that, rising oil prices have sharply cut profit margins for refining, and that hits the major oil companies — which both pump oil and refine it for use as gasoline.

A giant like Exxon Mobil can handle the blow. Its refining and marketing profits for the first quarter were down 39 percent from a year ago, but Exxon still banked a nearly $11 billion profit because of the hefty prices earned on crude it pumped out of the ground.

Smaller refiners aren't so fortunate. Sunoco Inc.'s refining and supply business lost $123 million in the first quarter, hurt by lower margins. Tesoro Corp. lost $82 million for the same period.

In any case, huge profits at big oil companies like Exxon Mobil and Chevron aren't because of high prices at the pump. Their massive profits are tied to their exploration and production arms, which are benefiting from record crude prices.

Higher crude costs also have squeezed profits at the refining arms of companies like ConocoPhillips, which don't produce enough crude themselves to refine at full capacity without buying more oil from other producers.

CEO Jim Mulva said ConocoPhillips, the second-largest U.S. refiner behind Valero Energy Corp., buys about 2 million barrels of crude a day at market prices to refine into gasoline and other products.

"If oil costs us $30 a barrel or $40 a barrel or $120 a barrel, that's why the cost of gasoline is what it is," he said. "It's not because of taxes. It's not because of ... refining and distribution. It's because of the cost of oil."

___

But it's not only about the price of oil. Other costs are a factor — though they've remained relatively stable.

For example, federal and state taxes added 40 cents to a gallon of gas in the first three months of this year, roughly the same amount as they added four years ago.

California's 63.9 cents of tax is the nation's highest, Alaska's 26.4 cents the lowest. How the money is used varies from state to state, though the federal take helps to build and maintain highways and bridges.

Marketing and distribution costs — the tab for delivering gasoline from refiner to retailer — were 27 cents to start the year, only 6 cents above the cost four years ago.

The cost of refining added 27 cents to a gallon in the first quarter of this year, a nickel less than what it added in 2004, according to the Energy Information Administration.

That refining occurs at sprawling industrial complexes across the U.S., with most of the biggest along the Gulf Coast. Barrels of crude arrive each day by pipeline, ship and barge. The refineries, by heating, treating and blending the raw oil, turn out products like diesel and lubricating oil.

And, of course, gasoline.

___

What happens when that gasoline makes its way to your neighborhood gas station?

Major oil companies own fewer than 5 percent of gas stations. Most are owned by small retailers — and many of them say they're struggling these days to turn a profit on gas. That's because wholesale gasoline prices have risen sharply in recent months — again, blame it on crude — but station owners have been unable to raise pump prices fast enough to keep pace.

And you can't keep jacking up the price when drivers are buying less.

Gas station owners face a balancing act: They must try to maintain a price that allows them to afford the next shipment of gasoline but not give the competition an edge.

Stations pay tens of thousands of dollars for each gas shipment before they see a cent in the register. Eventually, many make only a few cents on a gallon of gasoline, a margin that can disappear altogether when credit card fees are added in.

Thank goodness for beef jerky and sodas.

Most gasoline retailers long ago got past any illusion they can make money by selling gas. They rely on gas sales to drive traffic to their shops, where they hope auto repairs or food and drink sales will help them turn a profit.

"You're always out there competing with the guy next door — literally with the guy across the street — and worried too about how you're going to pay for your next supply," said Rayola Dougher, a senior economic adviser at the American Petroleum Institute, the oil industry's trade association.

In the Philadelphia suburb of Havertown, Pa., earlier in the week, Sunoco station operator Steve Kehler received a load of gasoline — 9,000 gallons — which, at a wholesale price of $3.729 a gallon, cost him 4 cents more than the previous load.

That left him in a sticky situation: Should he raise prices right away to recoup some of his higher gasoline expenses, or should he hold off for a couple of days in hopes his competitors will also have to raise their prices?

"I'm surrounded by $3.89's, and I'm already at $3.91," said Kehler, referring to his prices and those of some nearby competitors. "I'm going to play a little waiting game right now."

The $33,600 Kehler must pay for his overnight gasoline delivery won't be debited from his bank account for a few days. That gives him a little breathing room, time to hold prices steady. Hiking prices too quickly will hurt sales.

"I'll probably change it tomorrow night, at closing," Kehler said. "I'll go up 4 cents."

That will put Kehler at a gross margin of about 20 cents a gallon. After paying credit card fees, labor and rent, Kehler will be lucky to break even on his gasoline sales.

But many times, he loses money selling gas. Kehler, like most other service station operators, relies entirely upon his car repair business for income.

Of course, the plight of retailers is little consolation for drivers.

Mayra Perez said she works two fast-food jobs to help support her family, and gasoline is becoming harder to afford. She said perhaps the government should step in to help ease the burden, possibly by placing price limits on gasoline.

She was filling the tank of her compact car in Miami this past week to the tune of $3.89 per gallon for regular gas.

"This is horrible," she said. "On the weekend, my husband and I use only one car to save on gas.

"But then there's the cost of food, milk, eggs, the rent."

[Wayne and Carolyn Mathews]

Had to fill up in Salmon, Idaho, on Sunday. Diesel was $4.71 a gallon. It is still holding around the $4.50 a gallon mark in Dillon, Montana.

We have no choice about driving to Texas next month--our vacation has become a mission of mercy to pack up my mother-in-law's home for her, dispose of most of her belongings, and get her house sold ASAP because she's been moved to a nursing home. If we didn't have to take care of the house and its contents, we could actually fly instead of drive and come out ahead. Six months ago, flying was out of the question because of airfares. Now, pulling a trailer on a 3600-mile round trip to Texas and back will cost more than flying.

Carolyn

[Mrs. CountryGuy]

Two hours ago, in Tecumseh (which is one of the highest prices in our county)

reg gas $4.05 and $4.09

Diesel $4.89

[dsprik]

Yesterday in NW Lower Mich: $4.18 for reg. $4.89 fop diesel.

[Jerzy54]

cheapes diesel on Long Island is $5.00

[Charlie]

Is it too late for our leaders in Washington to realize that there could be another ENRON in the making?????

May 24, 2008, 11:19PM
Some wonder if speculators are fueling oil run-up
Debate centers on the rush to cash in on crude


By DAVID IVANOVICH
Copyright 2008 Houston Chronicle Washington Bureau

WASHINGTON — With American motorists struggling to pay record-high gasoline prices, a debate rages in the halls of Congress and across the Oil Patch over the role speculators may be playing in driving up oil prices.

Crude prices have rocketed nearly $70 a barrel in the past year. Some energy experts suggest speculation could account for $20 to $30 of that run-up.

Desperate to help angry constituents, lawmakers have been scrambling to find solutions. They have voted to close the so-called Enron loophole by regulating electronic trading, and they've given the Federal Trade Commission more authority to guard against market manipulation.

Now some energy and trading experts are calling on lawmakers to focus on the pension funds, endowments and other institutional investors — including the University of Texas and the state's teacher retirement system — that have poured billions of dollars into the commodities futures market in the last few years. The trend has exacerbated the crude price run-up, these analysts say.

Institutional investors' interest in oil "is accelerating and emboldening the price rise," said Mark Lapolla of Sixth Man Research, an Atlanta-based financial research firm. "We just can't quantify it."

Last week, oil futures shot past $133 a barrel, while prices at the gas pump, according to AAA, again reached new heights — nearly $3.88 a gallon on Friday for regular.

Oil is just the most visible of a slew of commodities — corn, soybeans, wheat, rice — to see dramatic price rises this year.

Federal regulators admit commodity futures markets have seen "robust growth," but they point to market forces to explain the rise in prices.

"We really don't think the case has been made that speculation is driving prices," John Fenton, director of market surveillance for the Commodity Futures Trading Commission, told a House panel.

Shell Oil Co. President John Hofmeister seconds that argument, noting that neither he, nor his company's trading experts, see any evidence that speculators are a key factor. "I don't believe it," he said.

To be sure, the oil markets give plenty of reason for concern, irrespective of any trading factors. Despite a moribund U.S. economy, world oil demand continues to rise, and fears are growing about whether production can keep up with the global thirst for crude.


No shocking influences
Oil markets can be rocked by any number of disruptions, whether it be political turmoil in Nigeria or production woes in Mexico. And the Paris-based International Energy Agency is reportedly preparing to give the world some worrisome news about future oil supplies.

If oil prices really were so much higher than supply and demand forces would suggest, argues John Felmy, chief economist for the American Petroleum Institute, then holders of crude oil would be unable to find buyers, and inventories would build. But that's not happening, Felmy said.

Still, the world oil markets have not experienced any dramatic shock that many would have thought necessary to cause oil prices to double in a year.

Disruptions in world oil supplies are nothing new. And with the U.S. economy weak, the International Energy Agency recently lowered its projections for demand growth this year.

"We're right back in the soup again — market prices bearing no resemblance to supply and demand," said Urban "Obie" Obrien, director of government affairs for Houston-based Apache Corp., an oil and gas producer.


Getting the reins ready
Lawmakers have zeroed in on an assessment by Exxon Mobil Corp. Senior Vice President J. Stephen Simon that current inventory levels around the world historically would have suggested a crude price of around $50 to $55 a barrel.

But since 2005, Simon said, a weak U.S. dollar, geopolitical risks and speculation have created a "disconnect" between historical norms and current prices.

Speculation, trading experts say, is a crucial component of any commodity market. It provides liquidity for the market and helps buyers and sellers understand what direction prices are headed. No one is suggesting that it would be possible or practical to ban speculation.

"This isn't a witch hunt against speculators," researcher Lapolla said.

But with commodity prices spiking, and motorists complaining loudly about the price of gasoline, lawmakers are wondering whether they should step to rein in the speculators.

Officials at the New York Mercantile Exchange, arguing against any such effort, point to government statistics that suggest the role of "non-commercial" players — those not actually in the business of producing or processing a commodity — has declined, even as prices headed skyward.


Looking for a hedge
But critics argue that the government data mask the real impact institutional investors are having on commodity prices.

Institutional investors started adding commodities to their portfolios of stocks, bonds and real estate about five years ago, as a hedge against inflation and a weak U.S. dollar. And what began as a trickle has become a torrent following the sub-prime mortgage crisis, trading experts say.

The Teacher Retirement System of Texas, for instance, began investing in commodity indexes in the fourth quarter of last year. Now those investments have a market value of $4.4 billion, system spokesman Howard Goldman said.

The University of Texas Investment Management Co., which invests money for the University of Texas System, has about $500 million in commodities, and the California Public Employees' Retirement System, the nation's largest public pension plan, has $1 billion invested.

Lehman Brothers' Edward Morse, in a recent report, estimated that assets under management in commodity indexes ballooned from about $70 billion in early 2006 to $235 billion by mid-April. The bulk of that investment has been in oil.


Equal to China's demand
Trying to assess the significance of that stampede, Michael Masters, managing member of Masters Capital Management LLC, noted that while China has increased its annual demand for petroleum by 920 million barrels over the last five years, these institutional investors or "index speculators" as Masters calls them, have upped their demand for petroleum futures contracts by 848 million barrels during the same time.

"The increase in demand from index speculators is almost equal to the increase in demand from China," Masters told the Senate panel.

The problem, critics say, is that the institutional investors have waded in and bought sizable "long" positions, betting that oil prices — no matter how high they may seem now — will continue to rise.

Because of a loophole in federal trading regulations, experts say, the institutional investors can circumvent typical speculative limits. The cumulative effect, critics say, of all of this lopsided betting that prices will rise has been to propel prices skyward.

Closing that loophole, some lawmakers say, may be how Congress steps into this issue.

"It's not like they're evil or malicious," Masters said of the institutional investors. "It's just they're so big, and they all act the same."

[Les and Julie]

We are in Ontario, Canada, north of Toronto --- diesel here is 1.359 C$ or higher per liter. This converts to $5.15 US per gallon with a dollar about par right now. Oh well.... Les

[H. John Kohl]

I left Rochester, NY Friday and it was $5.09. I got lucky and fueled up at the reservation for $4.47. I noticed diesel is a dollar higher than regular gas. Sheeseeeeeeeeee.