Summer gas supply looks tight

JOE CARROLL; Bloomberg News
The News Tribune

May 12, 2004

ConocoPhillips, the largest U.S. oil refiner, is producing as much gasoline as it can, and Valero Energy Corp.'s 15 plants are processing 20 percent more crude oil than a year ago.

They aren't keeping up with demand.

Gasoline futures are close to the highest in 20 years of New York trading, and retail prices have been at a record for six weeks. Drivers are burning fuel at the fastest pace in at least five years, and stored reserves are as much as 16 percent below normal in some regions.


Supplies may run short this summer when vacationers hit the road and push demand to a peak, Valero CEO Bill Greehey said last month.


"We could be in for a nightmare," said John Saxon, 47, product-supply manager at Haycock Petroleum, which supplies fuel to 47 filling stations in Las Vegas and Salt Lake City. "We're in uncharted water with gasoline. Supplies are going to stay pretty tight for the foreseeable future."


The U.S. average gasoline pump price jumped 9.7 cents, or 5.3 percent, in the past week to $1.94 a gallon, the sixth all-time high in seven weeks, the Energy Department said Monday.


The high prices aren't limited to the United States: Filling stations in the Vancouver, B.C., area are charging 97.5 Canadian cents per liter, or the equivalent of $2.65 a gallon.


Crude oil prices, which touched $40 a barrel on Friday in New York, on Monday slid 2.5 percent to $38.93 after Saudi oil minister Ali al-Naimi called on OPEC to increase output quotas by at least 6.4 percent. Gasoline futures fell 3.2 percent to $1.2963 a gallon.


Crude-oil supplies in the United States are up 4 percent from a year ago after rising in nine of the past 10 weekly reports by the U.S. Energy Department. Gasoline supplies are down 1.8 percent.


"There is plenty of oil on world markets," ConocoPhillips CEO James Mulva said last week at a meeting with reporters. "It's a question of limited refining capacity."


No one has built a new refinery in the United States since 1976, even as surging fuel demand swells refining profits, because of daunting environmental hurdles, said Mulva, 57.


"Our company and the industry as a whole are running at full capacity to meet consumer demand," he said. "Supply and demand are very tightly balanced."


Futures prices fell Monday on speculation an influx of additional oil onto global markets could spur refiners in Europe and Asia to produce more fuel for the United States, said Steve Enger, an analyst at Denver-based Petrie Parkman & Co., which has done investment banking for Marathon Oil Corp., Premcor Inc. and Frontier Oil Corp.


"The thinking is that if OPEC and the Saudis in particular are keen on increasing oil supplies, then gains in fuel inventories will follow," Enger said. "The tough question with regard to the U.S. market is if there's some place available to refine" additional crude supplies.


Sen. John Kerry of Massachusetts, Democratic candidate for president, has said oil destined for the Strategic Petroleum Reserve should be released to the market to lower prices. He also has said the Bush administration should pressure OPEC to pump more.


U.S. Energy Secretary Spencer Abraham last week said Democrats in Congress who want to tap the reserve should instead pass the energy bill President Bush backs to help boost drilling.


Gasoline consumption is rising at a time of year when it usually declines, hindering efforts by refiners and wholesalers to build reserves for July and August, the period of highest gasoline needs.


Inventories normally rise by 12.2 million barrels from a first-quarter low to 215 million barrels by the second week of June, based on 10-year averages.


Inventories bottomed out this year at 197 million barrels on April 9. If refiners stockpile fuel at the historical rate, reserves will only reach 209.2 million before summer, 5.8 percent below the 10-year average.


Fuel producers and wholesalers had 204 million barrels of gasoline on hand at the end of April, the most recent figures available from the Energy Department.


Houston-based ConocoPhillips, which produces 16 percent of the nation's gasoline, had record profit of $1.62 billion in the first quarter after Mulva boosted operating rates at the company's 12 refineries to 97 percent from 93 percent a year earlier.


Exxon Mobil Corp., the second-biggest U.S. refiner, had its highest first-quarter refining profit in 13 years. San Antonio-based Valero, the No. 3 refiner, had a 46 percent surge in first-quarter income.


In California, the biggest gasoline-consuming state, prices are up 16 percent in the past year to $2.245 a gallon, a state record, AAA said. Washington state's average price is $2.127 a gallon, fifth-highest in the nation.


Prices around the Sound


Monday's gas prices again hit records around Puget Sound:


Tacoma: $2.119


Seattle: $2.151


Olympia: $2.118


Bremerton: $2.082


Washington state average: $2.127


SOURCE: AAA Washington,


per gallon of unleaded regular

 

 

In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]

Back to Current Edition Citizen Review Archive LINKS Search This Site