Headwind for consumers again:
Gasoline Rising to Holiday High as Storm Surge Presses Obama
By Asjylyn Loder
August 28 (Bloomberg) — Hurricane Isaac and a deadly blast at Venezuela’s Amuay refinery pushed gasoline to an almost four- month high and threatened to revive a debate about energy costs in the run-up to the presidential election in November.
Futures jumped yesterday in New York as Isaac forced closures of Gulf Coast refineries and reduced rates at others. That market is also reeling from an Aug. 25 explosion in Venezuela that killed at least 48 people and closed the country’s largest fuel-making plant. Futures are up 23 percent since their 2012 settlement low of $2.5501 a gallon on June 21.
Prices at the pump will be the highest ever for the U.S. Labor Day holiday, AAA said yesterday. The surge reignites an issue that has pitted President Barack Obama, who has called for the elimination of billions of dollars of subsidies enjoyed by the oil and gas industry, against the presumptive Republican nominee Mitt Romney. It also spurs speculation that Obama will release supplies from the Strategic Petroleum Reserve to ease prices for consumers.
“Given this administration’s belligerent rhetoric against the oil industry, it’s going to be very easy for Romney to pin the blame on Obama,” said Stephen Schork, president of Schork Group Inc., a consulting firm in Villanova, Pennsylvania. “The White House will be on the defensive. It makes an SPR release likely sooner rather than later.”
Gasoline for September delivery advanced 7.68 cents, or 2.5 percent, to $3.1548 a gallon yesterday on the New York Mercantile Exchange, the highest level since April 30. Futures fell 2.87 cents, or 0.9 percent, to settle at $3.1261 today.
Retail Prices
Retail prices for regular grade increased 0.6 cent to $3.756 a gallon yesterday, the highest level since May 7, according to AAA, the largest U.S. motoring group. Gasoline at the pump cost $4.138 in California yesterday, $4.008 in Connecticut and $3.973 in New York.
The nationwide average fuel cost rose to $3.75 a gallon on Aug. 26, the highest price ever for that day, Michael Green, a spokesman for AAA in Washington, said in an e-mail.
“We expect the national average price of gasoline for Labor Day this year to be the highest ever for the holiday,” he said.
Drivers could be paying $4 a gallon by the end of September, Schork said. The first presidential debate is scheduled for Oct. 3.
Winter-Grade Fuel
Gasoline futures for October delivery fell 0.6 percent to settle at $2.9333 a gallon, 19.28 cents a gallon below the September contract. The discount reflects speculation that demand will slip as peak driving season ends with the Sept. 3 Labor Day holiday, and the switch to winter-grade fuel that doesn’t have to meet as stringent emissions rules and is cheaper to produce.
Obama has described his energy strategy, unveiled in March, as an “all-of-the-above” approach that encourages fossil fuel development, energy efficiency and renewable technology. He has also called for a repeal of what he estimated is $4 billion in subsidies every year.
Romney’s energy plan, released last week, faulted Obama for discouraging drilling on federal land, stifling offshore exploration, imposing costly regulations and subsidizing uncompetitive technology that can’t survive without government backing.
Solyndra LLC, a solar-panel maker in Fremont, California, that received a $535 million U.S. loan guarantee, sought bankruptcy protection in September and fired its 1,100 workers.
Refinery Shutdowns
Gasoline advanced yesterday as refiners including Exxon Mobil Corp., Phillips 66 (PSX) and Valero Energy Corp. (VLO) said they are temporarily shutting down Gulf Coast plants as Isaac churns toward the Louisiana coast.
Six plants with a combined ability to process about 1.15 million barrels of crude a day are shut, according to data compiled by Bloomberg. That’s 6.7 percent of U.S. capacity.
In addition, plants including Motiva Enterprises LLC’s Norco, Louisiana, Exxon’s Baton Rouge operations and Marathon Petroleum Corp.’s Garyville facility are at lower rates. Valero’s Memphis plant was said to be operating at minimum rates after Royal Dutch Shell Plc shut the Capline pipeline that transports crude oil from the Gulf to the Midwest.
“Right or wrong, higher gasoline prices don’t help Obama,” Kyle Cooper, director of research for IAF Advisors, a Houston consulting group, and Cypress Energy Management LP, a $20 million natural-gas hedge fund based in Houston, said by phone yesterday. “All Obama’s rhetoric and all his propaganda can’t do a thing if the refineries are flooded. He can’t change physics. And Romney will take the other side of it, but this storm is not Obama’s fault.”
a $20 million natural-gas hedge fund based in Houston
Are you kidding me? a 20 million fund is now a source of authority? I have more than that in A dormant scottrader account. I should start going on these shows if all it takes is 20 million for people to think you know something (sigh) I thought you had to at least have your own intelligence agency to be able to be considered a big dawg, sad…
@Save America
Not easy to tell if you’re complaining or bragging.
President Barack Obama, who has called for the elimination of billions of dollars of subsidies enjoyed by the oil and gas industry
Wouldn’t a “subsidy” be like a check from the government to an oil company just for being in business, kind of like those that the ag department sends to the farmers? Or are these so-called subsidies tax exceptions that every industry enjoys in one form or another? And, since the goal is cheaper motor fuel, would elimination of these “subsidies” actually result in cheaper fuel or would it, in fact, raise the cost of driving? Since ethanol, which now consumes 40% of the US corn crop, has driven up the price of that corn to astronomical levels, wouldn’t the same logic apply to corn farmers and ethanol refiners as well?
@chuck martel,
I believe that when the Dems talk about subsidies for the oil and gas industry, they are referring to the depletion allowance. This is the deduction companies can take for the amount their asset (e.g. oil well) is depleted as they extract resources from it. I don’t think there is anything wrong with this deduction, although it can of course be gamed. It’s not really any different from depreciation, which all companies can use to reduce taxable income.
@ESM, There is a difference between using up something that was built and needs to be rebuilt or replaced and getting paid for using something up that you got for free in the first place.
@Monica Smith,
I get to depreciate the computer I use in my business. As Obama might say: I didn’t build that.
Likewise, oil companies might not have built the oil deposit itself, but they didn’t get their oil wells for free. They bought drilling rights, explored for oil, and then built enormous drilling rigs to extract the oil (if they actually found it). Have you ever looked at the economics of oil/gas exploration and development? It’s very capital intensive. Would you have them only take a capital loss for their investment once the asset is depleted?
Capitalism is based on the profit motive and doesn’t exist without it.
@Monica Smith
I had no idea it was so easy and so lucrative. The small contribution in taxes that the oil companies make (The three biggest US oil companies paid $42.8 billion in income taxes in 2010) http://cnsnews.com/news/article/top-3-us-oil-companies-paid-428-billion-income-taxes-2010 and their gargantuan profits: “The API further reported that in 2010, oil and natural gas companies averaged a net profit of 5.7 cents per dollar of income. Also, an average of 49.5 cents of every dollar oil companies made in 2010 went to income taxes.” would seem to make it a great business. When are you drilling your well?
“And Romney will take the other side of it, but this storm is not Obama’s fault.”
He’s right. It’s George Bush’s fault.
Republicans are not that shallow to blame Obama they believe that storm has been sent from Jesus to punish black people for voting Obama and that all black people must respect their masters as Condi Rice has done
@Paula,
The racism displayed openly by some liberals against conservative blacks is truly breathtaking. It’s the last vestige of politcally correct racism remaining in this country.
@ESM,
Spot on ESM. Brilliant.
I just want to note that the title of that report, as well as the first paragraph, is a great example of “false attributions of agency” and a failure to distinguish between consequence, coincidence and cause and effect. It’s no wonder the thinking of so many of our people is muddled.
http://news.yahoo.com/beyond-wind-rain-isaac-could-stir-oil-232333929.html
Yah, BP Oil spill getting stirred up Hurricane. Time to call all my lawyers again and get some more money now that all my coastal real estate and business interests are going to suffer SOME MORE. Nothing like making lawyers richer suing oil companies! Just need a few more people to die from swimming in the ocean and thier blood getting thinned too much.
@Save America, According to the National Hurricane Center, Isaac is likely to cause significant erosion of 89 percent of Mississippi’s beaches.
I use to pick up gold coins on the beaches, from wrecks 200 years ago, every hurricane would wash up new gold coins, paul ryan sometimes beat me to them, but most times I got them first – LOL!
See I told all those guys, plowing that oil and corexit under on the beach with big construction equipment makes no sense, next hurricane gonna tear it all apart, they said hey that is job security, we will get to plow it under again (sigh)
Job Security through broken windows and broken cleanup strategies. Lawyers are gonna have another field day with this! I almost feel ashamed taking another 10 million away from BP.
common, it is only a few black people and white trash down there standing in the way of progress.
God created that entire coast to be a huge delta and swamp so that we good Christians could pull out the gasoline.
Obama needs to wall off the delta, as Bushed tried to, and let the trash down their go out to sea.
Let us hope Obama succeeds where Bush failed.
@GW, Schadenfreude makes sense when a person gets his just deserts. However, a mean-spirited response to unwarranted distress suggest the person is trying to compensate for some deep-seated feelings of impotence. My condolences.