Bob "The Gas Guy" van der Valk

Terry City Council dealing with growth problems

2011-10-29T07:35:00.004-06:00

The Terry City Council met in special night session at the Terry Town Hall on October 27, 2011 to enact an emergency zoning ordinance. It would have prohibited the construction of any new trailer courts, campgrounds, work camps, hotels, motels, or other multi-unit housing complexes, within the Town of Terry and up to 1 mile beyond the corporate boundaries of the town to take effect immediately after passing for an initial period of 6 months with possible extensions for up to 2 1/2 years. Dire consequences, associated with any sudden influx of transient oil workers into the small town of Terry, were outlined in a handout given out to the attendees prior to the meeting.

Terry Town Council - Ron Kiosse, Mayor from right to left around the table from him are Lynn Strassheim, City Clerk, Becky Convery, City Attorney, Josh Helmuth, Tom Pisk, Clinton Rakes and Rolane Christofferson, City Council Members

The meeting was attended by an overflow crowd of about 85 residents, who were allowed to voice their opinions prior to the council taking the ordinance under consideration for their final vote, with most of them indicating opposition to the ordinance. Local Terry resident Steve Phipps, who consults with oil companies in the Bakken oil field, made one of the most eloquent comments defending the hard working people in the oil and pipeline industry. His remarks included the drug screen requirements in the pre-hiring process of any workers as well as ongoing random drug and alcohol testing being conducted by the companies working in the industry. One infraction of the rules, including being found under the influence of alcohol or drugs, may be cause for immediate termination and removal from any facility housing the individual involved.

Many other excellent points were made for and some against passing this ordinance by town’s people well as ranchers and farmers in Prairie County. But the one predominating theme during the hearing was the dampening effect it might have on attracting new people and businesses to move to the small town of Terry, which has a currently population count of 602 per the US census. This ordinance also would have sent a clear message to the oil companies they would not be wanted in Terry and their workers and corporate people would, if given the choice, avoid doing business in the town.

After hearing the comments against the ordinance during the public hearing Becky Convery recommended to the City Council she’d be allowed her to rework the onerously written ordinance. She said she could make it more palatable to any new residents as well as prospective businesses and make it conform with upcoming any growth and zoning studies once the committees complete their work.

Becky offered to take out the most of the offensive and confusing language. Instead of calling it an "emergency zoning ordinance" it would be re-titled an "urgent zoning ordinance". Exceptions could be made on a case to case basis for companies and persons inquiring to move their businesses or establish multi-unit homes in Terry. She agreed to take the word, "transients", which is usually referred to as being "homeless", out of any language in the proposed ordinance.

In addition Becky Convery advised the council during their discussions any previous actions dealing zoning issues, including previous ones limiting keeping horses and chickens on any property within the Terry city limits, cannot be enforced until a zoning and a growth plan first is first adopted by the Terry City Council.

About the Author - Bob van der Valk lives in Terry, Montana and is a Petroleum Industry Analyst with over 50 years of experience. He has been quoted by the news media as well as government entities and be contacted at: tridemoil@aol.com or (406) 853-4251.

How do you feel about having a man-camp in or near Terry?

2011-10-27T05:52:00.002-06:00

The Terry Tribune is conducting a poll to register your opinion about a proposed emergency interim zoning ordinance by the City Council of the Town of Terry at:

http://terrytribune.com/home

This ordinance will prohibit the construction of any new trailer courts, camp grounds, work camps, hotels, motels or other multi-unit housing within the town of Terry and up to a one-mile radius of Terry's town limits. If passed it will be effective for an initial period of 6 months and, after another public hearing, can be extended for up to one year. This ordinance specifically addresses concerns we would have with problems associated with an influx of a large number of transient workers.

POLL

How do you feel about having a man-camp in or near Terry?

1. No, it would bring too many transients and increase crime in our town.

2. No, it would cause too much strain on our water, sewage services and other infrastructures.

3. Yes, businesses and Terry as a whole would benefit from the increase of people it would bring.

4. Yes, but the man-camps shouldn't neighbor our residential area of town.

Please pass this email along to anyone concerned with this issue and either register your opinion with the Terry Tribune on-line poll or respond to my email with your vote. You may also include your view points in your email responses, which I will present to the Terry City Council at the public hearing being held at 7 pm tonight, Thursday, October 27, 2011 at Terry Town Hall.

Your neighbor,

Bob van der Valk
508 S. Washington Ave.
Terry, Montana 59349

tridemoil@aol.com

Terry’s Badlands Café Celebrates 2-Year Anniversary

2011-08-25T20:57:00.003-06:00

It's been two years since they opened their doors in Terry, Montana, and to celebrate the Badlands Café and Scoop Shoppe is hoping you will drop by for a day of giveaways this coming Saturday, September 3rd between 11 am and 3 pm.

You might know their story already, the duo of Arline and Inger Koppenhaver – one born and raised in Montana the other, her daughter-in-law from California – who celebrated the grand opening of their café back on September 5, 2009.

In the above picture from the left Jerry is holding 6-week old Samuel standing along with Paul, Inger, Nathan, Emily, Kayla, Arline Koppenhaver, Bob and Tammy van der Valk at the grand opening of the Badlands Café and Scoop Shoppe in 2009.

While they came from different backgrounds, they have more in common than just their last names. They shared the inkling of an idea for a 50’s themed, family oriented, specialty cafe with many menu items that feature made from scratch items, a variety of unique ice cream flavors and tempting blended drinks plus a full espresso bar all located in the boutique town of Terry, Montana.

"We opened the restaurant during a really tough economy," says Inger.

"Of course our goal was to provide good food and service, but we wanted to do it with great prices as well and we have tried really hard to be able to accomplish our mission."

Arline recalls some of the feedback she received from friends and family when she told them about her plans to open a family restaurant.

"Some close friends threw up some alert flags letting us know that running a café takes lots of time and energy," she says.

"We have discovered that it's never easy in this business, but our hearts are warmed by the fun that we have with our local customers and those who stop in on their way to various vacation destinations. It has been two years and we are even more excited and ready to continue to serve great food to our local patrons and travelers in Eastern Montana."

In honor of their two year anniversary, Arline and Inger are asking you to make Prairie County your vacation destination for Labor Day Weekend to help celebrate their 2- year anniversary on Saturday, September 3rd. Sunday, September 4th is the date for the Fallon Harvest Festival, which annually draws large crowds to its traditional all day and evening Harvest Fest Fun. Plus, Terry is the home of Evelyn Cameron, Pioneer Photographer, and also hosts many delightful specialty shops that will satisfy the most discriminating shopper.

The café will be giving away free regular birthday cake ice cream cones while supplies last as well as featuring an “Off the Menu Surprise Special” on Saturday, September 3rd.

They will also have four big giveaways throughout the 11 a.m. – 3 p.m. day. Fill out a survey and enter it for a chance to win at 12, 1, 2, and 3! Biggest giveaway is a $25 gift Certificate!

Reaching 200 Facebook fans at: http://www.facebook.com/BadlandsCafeMT by Friday, September 2nd, will add another grand prize to be given away. They encourage you to become a fan of their page and pass along the information to others.

Labor Day weekend just might be a really great time for your family and friends to visit Prairie County, Montana. Please find out more at: www.visitterrymontana.com and click on “The 100 Top Things To Do In Terry, Montana” button for more ideas to help make your weekend trip to Terry the best vacation of the summer!.

Belly flopping into a sea of gasoline

2011-05-22T09:49:00.006-06:00

Belly flopping into a sea of gasoline

The market bounced back from steep lows last Friday putting crude oil prices back on track up to the $100 a barrel mark . Crude oil managed a strong rebound even as the US dollar showed strength. June WTI traded as low as $95.99 and bounced back $3.50 to expire at the $99.49 a barrel level gaining $1.05 a barrel. The $96 a barrel was reached at one point as the US dollar rose with big money investors worried about the outlook for global growth and the financial health of countries in Europe. The crisis was abetted by the recent arrest and subsequent resignation of Dominique Strauss-Kahn, the head of the International Monetary Fund.
The euro fell against the dollar as wariness about disagreements on how to tackle Greece’s debt and ahead of a Spanish regional election caused investors to cut back on the euro before the weekend.

The dollar, which often moves inversely to commodities because oil and other raw materials are priced in the US currency, rose around 0.6 per cent against a basket of currencies.
WTI crude oil futures for June, which were due to expire later on Friday, were trading around $96.40 per barrel, down $2.04 by 1400 GMT, after hitting an intra-day high of $99.60 with Brent crude oil for July dropping $2.12 to $109.30. Crude oil prices have declined 15 % from April 29 through May 20, 2011.

This week began with crude prices still battered and bruised from double-digit losses sustained the week prior. The chart above this article shows the trend between Brent and WTI crude oil prices from February 5 through May 16, 2011.

Meanwhile gasoline prices at the pump remained at their lofty heights and oil companies are acting as of nothing is happening. Gasoline is a refined product of crude oil with retail gasoline and crude oil prices tend to move in tandem in the up market.

Domestic crude oil inventories are at all time highs and concerns of potential refinery disruptions in the Mississippi Delta region receded as fast as the drop in water level. Gasoline pump prices were temporarily buoyed even while crude oil prices kept going ever lower. The Mississippi Delta area is home to 11 oil refineries with a combined refining capacity of 2.461 million barrels of gasoline per day, which is 13.1 percent of total U.S. refining capacity. Weather-related disruptions caused by floods or hurricanes could have a serious impact for gasoline prices across the country.

Motorists should finally see the price of gasoline drop at the pump barring any other unforeseen market moving developments in the next several weeks. The relief will be felt just in time as prices will ease heading into the Memorial Day travel weekend with the average price for gasoline in the US heading down towards the $3.50 per gallon mark.

It may be short lived with the summer driving season and threats of hurricanes affecting the Gulf Coast refineries. Belly flopping into the sea of gasoline will make the water splash over the sides of the pool but things get back to normal pretty quickly afterwards.

The Bin Laden Effect on the Oil and Gasoline Market

2011-05-06T05:40:00.003-06:00

ExxonMobil's map showing areas of the US with boutique gasoline summer blend requirements.

The oil market turned around this week and spot market gasoline and diesel prices in turn went back down the week of May 1, 2011. This goes against the grain of what usually happens when American Petroleum Industry (API) and Department of Energy (DOE) inventory reports show draws for both gasoline and diesel.

The average price for unleaded gasoline in the US is $3.982 per gallon on Wednesday and may touch $4 by this Friday. But the demand for gasoline is down with numbers from March showing a steep decline showing the effects of the ever increasing gasoline prices. The AAA Fuel Gauge report on May 4, 2011 showed the following gasoline prices:

Regular
Current Avg.
$3.982
Yesterday Avg.
$3.967
Week Ago Avg.
$3.879
Month Ago Avg.
$3.662
Year Ago Avg.
$2.904

Highest Recorded Average Price:
Regular Unl.
$4.114
7/17/2008
DSL.
$4.845
7/17/2008

The national price for unleaded regular gasoline may peek at $4 per gallon with California currently at $4.265 and the State of Washington at $4.018 staying about the same by the end of this week.

The news of Osama Bin Laden's death on the night of Sunday, May 1st gave the country great relief and a chance to celebrate in spite of our economical situation. The dollar stayed weak but prices for both West Texas Intermediate and Brent crude oil went down, which caused wholesale gasoline prices to go down 20 cents per gallon since Monday.

The world woke up Monday morning with a new attitude and oil traders took heed by turning bearish. Last week’s Commodity Futures Trading Commission (CFTC) report showed paper traders with record longs in the market, a position which bets on oil prices continuing increase.

Money managers increased their net length by 2.8%, setting an all-time high when you look at both futures and option positions. However, this report was prepared before this weekend’s big events in Asia and North Africa.U.S. gasoline consumption fell last week and maintained a deficit to year-ago levels. SpendingPulse report showed demand for gasoline decreased by about 93,000 barrels per day (b/d), or 1%, to an average of 9.157 million b/d for the week ending April 29. Compared to the same calendar week in 2010, demand last week was 0.6% lower and the week's demand was 1.2% lower compared to a year ago, it was the second week in a row in which the year-over-year gasoline demand shrank.

US motorists have been told speculators, unrest in the Middle East and North Africa, natural disasters, a weak US dollar and world demand were the causes for the march towards the seeming inevitability of seeing $5 per gallon gasoline at the pump. However, this march towards a never before reached milestone seems to have been broken for the time being.

However, the US Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) set standards for gasoline creating areas in the country with boutique gasoline requirements. That is the main reason for the huge price differentials in parts of the country other than federal and state taxes. The following ExxonMobil map shows areas of the US affected by these oxy fuel or RFG compliance requirements for gasoline:

The worst area of the country to be hit by these requirements is Chicago with gasoline in the Windy City currently the most expensive in the nation at $4.467 per gallon. They perhaps will hit the $4.50 per gallon mark by the end of this week but then prices will come crashing down.

Fair warning the adage: "Gasoline prices shoot up like rocket, drift down like a feather" will apply as major oil companies slow down passing the lower cost for crude oil along to their branded retail station accounts. The independent non-branded station prices will be the ones reacting quick to their new found advantage by lowering their pump prices.

Busting the myth about oil company profits

2011-05-01T18:20:00.005-06:00

What can we do to stop commodity speculators from causing the rapid hike in gasoline prices? Arrest them, put them in jail, and try them before a jury before we hang them?

Early last week, President Obama started that ball rolling by telling US Attorney General Eric Holder to stop oil market fraud. Eric Holder promptly announced he was appointing a “working group” focused on rooting out the cases of fraud in the oil markets that might affect gasoline prices. This might work in any other business but the petroleum industry is not going to be simple to control.

Later in the week ExxonMobil reported their 1st quarter profits went up a whopping 69 percent to $10.7 billion from the same quarter a year ago. This ignited a firestorm almost immediately raising the ire of politicians and activists alike, who accused the oil industry of profiteering while Americans pay nearly $4 a gallon for gasoline.

Instead of being good news it was reported as bad news on the front page of major newspapers and became the lead off story on most of the TV and radio news broadcasts.

On the other hand Apple, which showed a 95% increase in net profits in their quarter from $3 billion to $6 billion, had Steve Jobs proudly announce those results in his April 20, 2011 news conference.

No one screamed “Off with their heads!” about Apple’s profits, so why all the brouhaha about ExxonMobil and the other oil company’s profits? Surely they are both stalwart organizations making the capitalistic system work for their shareholders, expecting to receive a fair return on monies invested in those companies. They should be allowed to make a profit with products everyone either wants or needs and you can charge for them according to what the market will bear.

ExxonMobil sent out Ken Cohen, their Vice President of Public and Government Affairs, to face skeptic reporters at a news conference on April 28, 2011. He launched a preemptive public relations strike to blunt expected criticism from politicians and the public about of seeing gasoline pump prices increase along with ExxonMobil’s profits.

The following graph from the US Energy Information Agency (EIA) shows the results of what happens to oil company profits when crude oil prices increase:

Ken Cohen wrote an article entitled: "Gas prices and industry earnings: A few things to think about", which can be read it in full on the ExxonMobil Perspectives blog at http://bit.ly/j2qbkB

ExxonMobil does not own the patents to the iPhone or iPad franchise but they have something even better by being the largest company in an oligopoly made of oil companies producing a product we cannot do without . . . . . . fuel.

A few of the talking points used in Ken Cohen’s article need closer scrutiny and examination since they are now been repeated almost verbatim by pundits and analysts alike:

Point: We don’t own 95 percent of our station, and therefore we don’t set the price.
Counterpoint: The first part is correct; however the retail pricing manager for ExxonMobil checks the spot market regularly during the day and makes wholesale pricing decisions dependent on the area of the country. The methods used by ExxonMobil are rack and zone pricing giving them the ability charge whatever the market will bear. The competitive pricing data is gathered for them by third parties such as Oil Price Information Service and The Lundberg Survey. The latter is the most important one since Lundberg gathers Dealer Tank Wagon (DTW) prices for each locale in which ExxonMobil has retail operations. Rack pricing is used to set the wholesale prices for either branded or unbranded gasoline. The DTW prices are charged to those dealers who have branded supply contracts direct with ExxonMobil. These are not the prices posted on the pumps at the station and are the most secretive part of gasoline retailing. Zone pricing, or a Temporary Voluntary Allowance (TVA) method of pricing, controls almost 85% of all the branded-contracted gasoline sold in the US with the difference sold to unbranded non-contracted stations.

Point: Local stations are often owned by a businessman or businesswoman in your community, and they set their own prices based on local market conditions.
Counterpoint: The owner or dealer of a local station receives deliveries of gasoline with the new wholesale price set by the oil companies, and then adds a margin to the gallon of gasoline. They are contractually obligated with long term supply agreements to only buy from the “branded” supplier with whom they signed up.

Point: For every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon.
Counterpoint: Adding all the oil company profits together including their upstream, downstream and chemical divisions and then dividing that amount by the total gallons of fuel sold is somewhat misleading. Each one of those is separate profit centers and not the only products sold by the oil company.

Point: Crude oil is a commodity, and like all other commodities – such as corn, wheat or sugar – the price is determined by buyers and sellers in a global market.
Counterpoint: ExxonMobil is one of five “super major" vertically integrated oil companies in the US controlling the process of refining gasoline from the wellhead to the pump. Crude oil, the raw material from which gasoline is refined, is either purchased or obtained from company owned or controlled wells with prices set according to the gravity of the crude oil. ExxonMobil utilizes the Last In/First Out method of accounting and the last price at which crude oil was obtained establishes the posted price for crude oil delivered to their refinery gates.

Point: ExxonMobil owns less than 1 percent of the world’s oil reserves, and it produces less than 3 percent of the world’s daily oil supply.
Counterpoint: ExxonMobil is the largest oil company in the world and when the elephant in the jungle trumpets, the market listens. The throughput of their refineries and percentage of market share have a big influence on the other oil companies’ reaction on how they in turn price their products.

Point: Last year, our total taxes and duties to the US government topped $9.8 billion, which includes an income tax expense of $1.6 billion.
Counterpoint: This is a somewhat misleading statement since taxes and duties include tax credits allowed on payment to foreign governments. It is another subsidy, devised by the US State Department in the 1950s, which allows US based oil companies to reclassify the royalties they are charged by foreign governments as taxes. Those can then be deducted dollar-for-dollar from their domestic tax bill. That provision alone will cost the federal government $8.2 billion over the next decade, according to the Treasury Department. These are currently allowed to be reported as taxes paid to the US Government. The following opinion re-printed from the Harvard Law Review gives a more detailed explanation on how this works:

BP, ChevronTexaco, ConocoPhillips and Shell, the other four super-major oil companies, said their profits rose in the first quarter because of soaring crude prices and other factors.

Members of Congress and President Obama used the record setting earning reports to step up calls for the repeal of the $4 billion in annual depletion allowance tax breaks for oil producers. John Boehner, R-Oh, Speaker of the House, first seemed to want to go along with eliminating this tax break only for the large oil companies but then changed his mind.

Jeff Sheets, Chief Financial Officer of ConocoPhillips, said that while the industry's profits are higher, the margins are still slim compared to the amount of assets oil companies maintain, and profits haven't risen as fast as gasoline prices. “When critics focus only on the bottom-line number, they lose the scope of what's required to produce that profit," Sheets said
.
The industry further argues that ending tax breaks would cut investment in new oil and natural gas projects, cost new jobs and decrease oil and natural gas production.

Senate Majority Leader Harry Reid, D-Nev., said the Senate as early as next week could take up Obama's proposal to halt the tax breaks and President Obama said the $4 billion a year in oil subsidies would be spent on alternative energy investments.

Holding a commodity off the market and then selling it after the price goes up is only one form of speculation, and it’s not one that works very well in the oil market. Simply put when gasoline prices increase so do the profits at the oil companies.

B of A New Oil Price Target Suggests $4.25 Gasoline in the US by Memorial Day

2011-04-23T07:36:00.003-06:00

While living in The Hague, Holland as a young boy I often wondered what was on the other side of that vast expanse of water known as the North Sea. How could I have known about the vast crude oil reserves lying underneath the angry waters of the North Sea and its eventual exploration by the countries surrounding it?

Economic zones in the North Sea

Brent geese would fly over my province of South Holland much like Canadian geese fly over Montana on their way south. I now live in Terry, Montana, which is a long distance from Holland and the North Sea, but the word "Brent" once again has once again become part of my every day vocabulary while discussing the reasons for the fuel price increases.

The word Brent was originally derived from the naming policy of Shell UK Exploration and Production, operating on behalf of ExxonMobil and Royal Dutch Shell, which names all of its fields after birds. In the case of their North Sea operations the field was called Brent Goose, which was later shortened by the market to Brent encompassing similar type crude oils being produced in the area.

Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties are all part of the Brent crude oil sourced from the North Sea and traded on the Intercontinental Exchange in London (ICE). The Brent crude oil marker is also known as Brent Blend, London Brent and Brent Petroleum and is used to price two thirds of the world's internationally traded crude oil supplies.

Why has the Brent crude oil benchmark price become so important to consumers of gasoline and diesel? The answer: It just recently replaced the New York Mercantile Exchange (Nymex) West Texas Intermediate (WTI) as the reference price for other “crude oil baskets” such as OPEC, Dubai, Russian and even Alaska North Slope crude oils.

The problem lies with the US Commodity Futures Trading Commission (CFTC) not having the power to regulate commodity transactions on the ICE. The big money is being moved into Brent and ICE thereby bypassing the Nymex and putting the WTI crude oil secondary to Brent. Even the Alaska North Slope crude oil posting is now tracking the Brent crude oil posting.

Bank of America Merrill Lynch recently increased its forecast for benchmark Brent crude for 2011 to $122 a barrel, and said that Brent could “briefly” surge above $140 a barrel in the second quarter of 2011. For WTI crude oil, the bank forecasted an average of $101 a barrel for this year, up from $87.

Bank of America also forecasted a 30 percent chance the price of Brent crude oil would reach $160 per barrel in 2011 with global demand for oil increasing and Libya supplying about 1 million barrels per day less than it did before the NATO coalition bombing started on March 19, 2011.

Each dollar differential in the price a barrel of crude oil represents 2.4 cents per gallon change for gasoline and diesel. When the price reaches the $140 level, it will add another 40 cent per gallon to today’s $3.856 per gallon national average price for unleaded gasoline per AAA Daily Fuel Gauge Report. That means $4.25 per gallon for regular gasoline by the end of May, which is right at the beginning of the summer driving season.

The average gasoline price in the US could reach $4.75 per gallon if the Brent crude oil reaches the predicted $160 a barrel sometime this year.

Crude oil prices now are determined not so much by supply and demand but by financial markets like the Nymex and ICE. Most oil is traded using derivative financial instruments that are not based on the physical exchange of crude oil (wet barrels in the trade) between seller and buyer. In the 1990's, physical transactions accounted for about 30 percent of oil traded, but they now number less than 1 percent of contracts traded on the various exchanges.

Crude oil prices soared to new highs in 2005 when U.S. pension funds were permitted to invest their members’ retirement monies in oil futures. The US Congress convened a special hearing in 2008 after prices soared to $147 a barrel for WTI crude oil to consider the influence that speculation has on crude oil prices. Analysts calculated for each $100 million pumped into the oil market the price per barrel was pushed up by 1.6 percent.

In effect, oil has become a speculative commodity whose price is determined by how investors anticipate its value will increase or decrease at a given point in the future.
No sooner had Bank of America Merrill Lynch given its “bullish” prediction than the commodities market rallied and the price of Brent oil surpassed $120 per barrel. Nonetheless, do analysts have at least some idea of an upper limit to prices?

The two dominant theories of the 1970's and 1980's held that oil prices were limited by the prices for alternative energy sources to crude oil or, by contrast, that the price ceiling was determined by the purchasing power of oil consumers who are also unable to reduce demand. This is just partly true today.

In the end, the main “energy resource” of the past 40 years was not oil but energy efficiency, and consumers’ ability to save money by reducing consumption and using alternative energy sources as prices increased.

Keystone Pipeline: 'Just Say No' Could Mean $7 a Gallon at the Pump

2011-04-09T06:01:00.007-06:00

U.S. Imports of crude oil by country

Route of the proposed Keystone XL pipeline

Consumer studies by researchers at Harvard’s Belfer Center for Science and International Affairs suggested a year ago that in order for the Obama administration to meet their target to cut greenhouse gas emissions, Americans will soon be spending $7 per gallon. That day may now come sooner than most Americans think.

The Opinion page of the Sunday April 3, 2011 edition of the New York Times (NYT) carried an editorial against approving the TransCanada Keystone XL pipeline, which was scheduled to transport crude oil from the Athabasca Oil Sands in northeastern Alberta, Canada to refineries in Illinois, Oklahoma, and to the lucrative U.S. Gulf Coast by the end of 2012.

The NYT editorial is in line with the Obama Administration agenda, but will ultimately be bad for fuel consumers by hitting them where it hurts; right in their wallets, while benefiting alternative energy producers with better economics.

The following chart above this article was obtained from the EIA website shows the top 15 countries of petroleum imports of the U.S. where Canada ranks number one with increasing volume from 2010 into 2011.

This increase in imports shows the importance and U.S. reliance on Canada--the friendly neighbor to the north--to replace the more volatile crude oil supplies from countries in the MENA (Middle East and North Africa) region. Imports of petroleum products from Canada for the period from August 2010 to January 2011:

Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11

76,988 74,251 72,698 75,313 84,092 87,619

The Keystone XL pipeline, an expansion project that would raise the line's capacity by 500,000 barrels of crude per day, has already been approved by various state agencies in the U.S. through which it runs.

Two major obstacles to receive the necessary rights of way were eventually overcome with, at times, heavy negotiations. The first obstacle was the local crude oil producers obtaining ramp access into this pipeline for crude oil currently being hauled by rail car and trucks to refineries for processing into gasoline and other fuels. The second one was meeting with constituents in each of the areas being affected with their concerns not only about the interruption of their daily lives, with a massive construction project, but also by ongoing operational problems with the pipeline after it is completed.

The current administration’s Department of Energy now says the pipeline will have a minimal effect on prices since there is already sufficient pipeline capacity to double United States imports from Canada. They are thereby affirming President Obama’s campaign promise of making the U.S. less reliant or needing additional imports of crude oil.

The proposed Keystone XL pipeline will cut across the Bakken and Three Forks oil shale fields from Saskatchewan into Eastern Montana, through South Dakota, Nebraska and Kansas ending up at the major crude oil terminal hub of Cushing, Oklahoma. North Dakota, Montana and other state governors became involved early on in the approval process and addressed local environmental and right of way concerns.

TransCanada executives met with various private and public officials and hammered out agreements to have local oil producers gain access to this much needed pipeline to make the shipping of crude oil more economical for US domestic oil producers. In some cases, due to the lack of takeaway capacity, crude oil is being sold at $10 a barrel discount off the WTI crude oil posting, which is one of the main reasons Wyoming, Montana and North Dakota currently have some of the lowest prices for gasoline and diesel fuel in the US.

The Keystone XL would greatly improve the transportation logistic issues in the Bakken and Three Forks oil shale basins. None of the states involved have put up additional major objections.

Early this year, Secretary of State Hillary Rodham Clinton initially came out, after the State Department report was issued, and said she was “inclined” to support the project. However, after criticism from environmental and alternative energy groups she called for additional environmental impact studies to be reviewed.

President Obama, in his April 2, 2011 Saturday morning radio address, said that even if we used every last drop of all the oil the U.S. has, it wouldn’t be enough to meet the long-term energy needs. So, real energy security can only come from energy efficiency and investing in cleaner fuels and greater efficiency.

The folly involved in President Obama’s approach comes from the fact that only $7 gasoline prices will ultimately justify the cost for those alternative energy projects. Meanwhile, they are supported by the taxpayers in the form of subsidies to the ethanol, solar and wind machinery manufacturers.

The Canadian government has been a staunch supporter of the Keystone XL pipeline project, and perhaps has an even greener approach to their environment and clean air issues than does the US.

The U.S. is now being boxed in from all sides on the energy front. Concerns about the future of nuclear energy, the instability of governments in oil producing countries in MENA, have all contributed to crude oil prices spiking to their highest level since September 28, 2008. What stands in the way of any major decisions to make the US energy secure are politicians not willing to make tough decisions in an orderly and efficient manner.

Meanwhile, the environmental organizations have been trying to block the Keystone XL pipeline at every turn even threatening court actions to stop the start of the construction. The State Department and the White House will have to make the final decision on Keystone XL, since it crosses the Canada-U.S. border.

But it probably will be the end of 2013 at the earliest to having any of the crude being shipped in the proposed pipeline, even if the approval is received from the Department of State by July 1, 2011. By then, there’s a good possibility that gasoline prices would be reaching a record high and the discontent from consumers will be at a fever’s pitch.

Japan Earthquake Could Test U.S. with $5 Gasoline Prices

2011-03-14T07:42:00.003-06:00

The fallout on the fuel market will be severe following the 9.0 Japanese earthquake on Friday, March 11. 2011, since Japan will have to supplement their nuclear energy power production with coal, natural gas and oil-fired power plants.

Information is short and hard to obtain about the status of the nuclear power plants in Japan. Not being a nuclear physicist it is hard to sort the facts from the hysteria but going on past history we are being fed pap by official press officials of the Japanese government about the real situation in dealing with this cataclysmic event. These same officials withheld vital information after the 1995 Kobe earthquake, which killed more than 6,000 people.

We are now hearing and seeing different versions between watching the live feeds on T.V. and Twitter as events enfold and the reports from official press reports. Under the circumstances that may be understandable as the government does not want to cause a panic. But do we believe them or our lying eyes?

Japan is the third largest country in the world in terms of nuclear energy production, following France, and the U.S. which is in first place (see table above). The country gets about 30% of its power from nuclear sources. Reportedly, 11 nuclear reactors and 21 thermal power plants where shut down after the earthquake, and BBC News put the reduction in output at Japan's nuclear power generators at anything from 25% to 50%.

On top of the loss in the power generation capacity, the Wall Street Journal reported that about 1.2 million barrels per day refining capacity in Japan is also shut down after the earthquake disaster. With this much capacity off line, Japan needs to secure alternative means of generating power and petroleum products as well.

Meanwhile, diesel fuel and coal are readily available. Cargoes of diesel fuel can be shipped almost immediately from the U.S. West Coast refineries to meet up with this new found Japanese demand.

The following graph shows the world refining capacity and how much North America and Far East Asia use crude oil for fuel production:

More refineries will have to be brought into production with economics justifying their running at full capacity. It may not cause crude oil to spike up, but it will most likely test whether consumers are going to be willing to pay $5 per gallon for gasoline and diesel fuel in the U.S.

San Antonio-based refiner Valero Energy Corp. (VLO) closed their 235,000 barrels per day located on the island of Aruba in the Caribbean in July 2009, after the plant had been losing tens of millions of dollars a month.

Valero re-started their refinery near the end of 2010 because of improving economic conditions. Valero has since completed refinery wide maintenance at the plant and is ready to go at full capacity. It will be “just in time” to make up the anticipated shortfall in middle distillate demand expecting to increase after the powerful 9.0 earthquake in Japan.

Closer to Japan, one of China’s largest refineries, Sinopec, recently suspended refining operations in Maoming due to high crude oil prices. The 270,000 barrels a day plant stopped delivering fuel and petroleum products in March 2011, because the Chinese government establishes the price for fuels delivered to the market by their local refineries.

Those fuel prices are equivalent to crude oil prices at $85 a barrel versus today’s Brent ICE posting of $113 a barrel. The difference in the allowed fixed price for fuels and the cost of crude oil leaves privately owned refineries with a negative crack spread.

PetroChina Co Ltd, which is Asia’s largest oil and gas company, has been having similar difficulties. It has been losing money in their oil refining segment resulting from an increase in crude oil prices due to the unrest in North Africa and the Middle East.

Diesel fuel prices on the U.S. West Coast are already amongst the highest in the country, and will be impacted by the March 11th earthquake in Japan. The bulk of the price action will likely fall on diesel fuel, but crude oil could be affected as well.

In the end it will not be about the price of Brent or West Texas Intermediate (WTI) crude oil but refineries being geared up to keep up with new found demand from Japan for their fuel products.

About the author - Bob van der Valk is a Petroleum Industry Analyst with over 50 years of experience in the petroleum, gasoline and lubricants industry. He has been often quoted by news media, most recently by Los Angeles Times, and his opinions solicited by government entities, in addition to his daily business of managing large scale supply and marketing operations.

Breaking up with OPEC

2011-03-05T07:12:00.002-07:00

We are in the middle of world events that may result in the eventual break-up of the 'Organization of the Petroleum Exporting Countries' (OPEC), which is an intergovernmental organization of twelve developing countries, made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC is considered a cartel and all of their members are controlled by either Muslim or military dictator style governments.

The start of the break up may have been on September 10, 2008, when the Saudis walked out of OPEC negotiating session in Vienna where the organization voted to reduce production. Although Saudi Arabian OPEC delegates officially endorsed the new quotas, they stated anonymously that they would not observe them. One of their delegates was quoted as saying “Saudi Arabia will meet the market’s demand. We will see what the market requires and we will not leave a customer without oil. The policy has not changed.”The U.S. imports crude oil from other countries. OPEC is not even in the top five of countries from which we directly receive shipment of that precious commodity. Here is how they rank per the latest report from the EIA:December 2010 Import Highlights: Released February 25, 2011Monthly data on the origins of crude oil imports in December 2010 has been released and it shows that four countries exported more than 1 million barrels per day to the United States. The top five exporting countries accounted for 72 percent of United States crude oil imports in December while the top ten sources accounted for approximately 88 percent of all U.S. crude oil imports. The top five sources of US crude oil imports for December were Canada (2,1 million barrels per day), Mexico (1,2 million barrels per day), Saudi Arabia (1.1 million barrels per day), Nigeria (1 million barrels per day, and Venezuela (825,000 barrels per day). The rest of the top ten sources, in order, were Iraq (336,000 barrels per day), Angola (307,000 barrels per day), Brazil (271,000 barrels per day), Algeria (262,000 barrels per day), and Colombia (220,000 barrels per day). Total crude oil imports averaged 8,631,000 barrels per day in December, which is an increase of 23,000 barrels per day from November 2010.Canada remained the largest exporter of total petroleum in December, exporting 2.7 million barrels per day to the United States, which is an increase from last month (2.5 million thousand barrels per day). The second largest exporter of total petroleum was Mexico with 1.4 million barrels per day.

Breaking up with OPEC may be pulled that off without the Western nations having to fire one shot. That old Neil Sedaka song "Breaking up is hard to do" comes to mind when you realize our love-hate relationship may finally lead to a divorce that will relieve the U.S. from our dependency on imports from countries that really don't like us except for our greenbacks. That leads to the reason for this article on why OPEC's existence may be in its final throes and is coming to an end. “Ummah” means unity among Muslims - One nation and one people. Many people have tried to bring Ummah to the Muslim nations. Mohammed was no sooner dead when the Sunni and Shi’a began to fight each other. Then along came the third sect, “Khariji”.

They said Allah would reveal who was to be the successor of Mohammed on the battlefield. They began to slaughter each other. This hatred and killing went on until the 20th Century with 1.5 million Muslims killed by other Muslims in wars between Sunni and Shi’a Muslims reliving the Battle of Karbala in the 8th Century. Why is it that the only way it appears to a Westerner that Muslims can be united is if they have a common enemy? Because it seems unless they have a common enemy they will kill each other. The invasion of Kuwait by Saddam Hussein – raping, burning, and pillaging the inhabitants in the name of reclaiming land that he claimed was rightfully theirs - brought the United States and England into the region to liberate Kuwait. This cycle continues even today with vast crude oil reserves being the main incentive for continued Western involvement. T.E. Lawrence said “Muslims will continue to kill other Muslims”. He was more famously known as “Lawrence of Arabia” and led England’s involvement in helping the Muslims fight the Turks in the early 20th Century. The English were eventually rewarded by completely losing control of the region, which had been strategic to their colonial interest. Since then Muslims have killed each other far more than the Americans, the British, the West, or the Israelis ever killed. The West or the Israelis have never done to Muslims what they have done to each other with half a million killed in the six-year war between Iran and Iraq alone in the 1980’s. The Bahrain and Yemen conflicts are continuing with Egypt, Morocco and now Libya prominently in the news. Disruptions have spread across the Middle East and North Africa. Libya’s 1.6 million barrel crude oil exports are almost entirely halted and renewed unrest in Oman, Iran and Iraq have rattled crude oil traders. An interruption of shipments from any of those countries would further tighten oil supplies, even as Saudi Arabia has rushed to fill the vacuum of Libyan supplies by pumping more oil from its fields. Oman, which is a normally stable Persian Gulf country, ruled by a family dynasty and the largest non-OPEC oil producer in the Middle East, is now in trouble as well. Refiners around the world have been hoping that Iraq, as violence ebbed, would again become a major oil producer, with production stabilizing at 2.3 million barrels a day. But rebels bombed the country’s largest refinery, reducing the refinery’s capacity to refine petroleum products by 75,000 barrels a day. This was on top of a terrorist attack on a pipeline leading to a second refinery north of Baghdad. Saudi Arabia has a total production capacity of 12.5 million barrels a day, and currently produces nine million barrels after increasing its output by several hundred thousand since the beginning of 2011. Saudi Arabia said they are ready to pump what it takes to fill any supply gap, but much of its 3.5 million barrel excess capacity contains sour crudes, which does not easily replace the Libyan sweet crude European refineries in particular desire to produce diesel Donald Trump recently announced his intentions to explore running for President and responded to speculation that the turmoil in Egypt and other countries in the Middle East could push oil prices to as high as $200 a barrel.He said: “It also could go the other way. Frankly, the Middle East is a tinderbox. It’s going to explode. OPEC will probably be destroyed if it explodes, and oil prices could go the other way.“I understand economics. You break up what would normally be an illegal monopoly, OPEC, and break it up very strongly. The Middle East is exploding, and I’m saying that could have a positive impact on oil prices.“If you look at oil right now, it’s soon going to be $100 a barrel. Far too high. It’s set by OPEC. I think OPEC would explode with the Middle East and that wouldn’t be the worst thing in the world.”“I think it’s unfair. I think it’s illegal,” he declared. “If you have a store and I have a store and we collude and set prices, we go to jail”.“Here you have 12 men, in this case all men, they sit around a table and they set the price of oil.”“Abu Dhabi, which has plenty of oil, just went to all natural gas for transportation because they want to sell us the oil at exorbitant prices. When you tell me about Obama and what he’s doing in the Middle East, I don’t think he’s doing anything in the Middle East.” Donald Trump may just be correct that the current revolts and conflicts in the Middle East and North Africa will cause an upheaval in the world oil markets enough to bring about the end of OPEC.

We will have to change from humming that Neil Sedaka song to learning the lyrics to “O Canada” and “Himno Nacional Mexicano”.

A Tale of Crudes: Anybody Got A Big Rig? | EconForecast 財經預測

2011-02-21T10:48:00.000-07:00

A Tale of Crudes: Anybody Got A Big Rig? EconForecast 財經預測

BP's sinking role in setting WTI crude oil prices

2010-11-08T08:08:00.003-07:00

By: Bob van der Valk
Dateline: Terry, Montana
November 7, 2010

In July 2010 BP Plc sold its Cushing, Oklahoma oil tanks, which they used as a major tool in controlling the price of West Texas Intermediate crude oil, to raise funds to pay for the Macondo well fire and oil spill disaster in the Gulf of Mexico.

They did lease back 7.8 million barrels of tank storage space at Cushing from the buyer Magellan Midstream Partners LP, which acquired the tanks as part of a larger $339 million transaction, including some of BP's existing oil inventories.

Cushing is the delivery point for the West Texas Intermediate (WTI) crude oil futures contract, the benchmark oil price in the Americas, and storage levels in the tanks have a major influence over the price of oil and fuel.

BP has been force as an oil trader and in the past has leveraged its space at Cushing for in having a trading advantage. They are still the only major oil company in the top three storage space holders with WTI crude oil inventories. The top two are pipeline companies leasing out space to commodities trading firms, in effect putting Wall Street bankers in control of the WTI crude oil price.

The imminent completion of the Keystone XL pipeline by TransCanada is going to increase Canadian crude oil exports and will end this landlocked crude oil storage facility from being a major factor in determining the world price for crude oil.

Instead, companies with access to the huge tank facilities at Cushing will be making their profits the old fashioned way by storing crude and committing it for sale later. The old fashioned “Buy low – sell high” principle will be back in full force.

The Cushing tank farm hold 36 million barrels of crude, which is just enough to supply U.S. oil demand for nearly two full days The 57 tanks BP sold have a capacity of 7.8 million barrels but operational constraints currently restrict usable capacity to 5.5 million barrels or 15% or the total capacity of the Cushing tank farm.

An additional 2 million barrels of storage is in the planning stages of being built anticipating the pipeline start up bringing in more Canadian oil imports in early 2013.

In June 2009 Attorney General Drew Edmondson sued BP for engaging in the unfair and deceptive practice of manipulating, and of attempting to manipulate, gasoline and crude oil prices in connection with the trading of energy futures on commodity trading markets.

He alleged that the manipulation took place from 2002 until present, through BP's "acquiring and hoarding short-term supplies of gasoline and crude oil".

Drew Edmondson retired this year after losing a run for the Oklahoma governorship in this year’s primaries. And BP may not recover financially enough from the expense of covering the damages and fines related to the Gulf oil spill for them to continue to be a market maker for crude oil pricing. What a difference a year makes in the crude oil trading business.

Full text of HSA Aviation Security Directive SD 1544-09-06

2010-01-01T08:50:00.004-07:00

U.S. DEPARTMENT OF HOMELAND SECURITYTransportation Security Administration
Aviation Security Directive
Subject: Security DirectiveNumber: SD 1544-09-06Date: December 25, 2009
EXPIRATION: 0200Z on December 30, 2009
This Security Directive (SD) must be implemented immediately. The measures contained in this SD are in addition to all other SDs currently in effect for your operations.
INFORMATION: On December 25, 2009, a terrorist attack was attempted against a flight traveling to the United States. TSA has identified security measures to be implemented by airports, aircraft operators, and foreign air carriers to mitigate potential threats to flights.
APPLICABILITY: THIS SD APPLIES TO AIRCRAFT OPERATORS THAT CARRY OUT A SECURITY PROGRAM REGULATED UNDER 49 CODE OF FEDERAL REGULATIONS (CFR)1544.101(a).
ACTIONS REQUIRED: If you conduct scheduled and/or public charter flight operations under a Full Program under 49 CFR 1544.101(a) departing from any foreign location to the United States (including its territories and possessions), you must immediately implement all measures in this SD for each such flight.
1. BOARDING GATE
1. The aircraft operator or authorized air carrier representative must ensure all passengers are screened at the boarding gate during the boarding process using the following procedures. These procedures are in addition to the screening of all passengers at the screening checkpoint.
1. Perform thorough pat-down of all passengers at boarding gate prior to boarding, concentrating on upper legs and torso.2. Physically inspect 100 percent of all passenger accessible property at the boarding gate prior to boarding, with focus on syringes being transported along with powders and/or liquids.3. Ensure the liquids, aerosols, and gels restrictions are strictly adhered to in accordance with SD 1544-06-02E.
2. During the boarding process, the air carrier may exempt passengers who are Heads of State or Heads of Government from the measures outlined in Section I.A. of this SD, including the following, who are traveling with the Head of State or Head of Government:
1. Spouse and children, or2. One other individual (chosen by the Head of State or Head of Government)
3. For the purposes of Section I.B., the following definitions apply:
1. Head of State: An individual serving as the chief public representative of a monarchic or republican nation-state, federation, commonwealth, or any other political state (for example, King, Queen, and President).
2. Head of Government: The chief officer of the executive branch of a government presiding over a cabinet (for example, Prime Minister, Premier, President, and Monarch).
2. IN FLIGHT
1. During flight, the aircraft operator must ensure that the following procedures are followed:
1. Passengers must remain in seats beginning 1 hour prior to arrival at destination.2. Passenger access to carry-on baggage is prohibited beginning 1 hour prior to arrival at destination.3. Disable aircraft-integrated passenger communications systems and services (phone, internet access services, live television programming, global positioning systems) prior to boarding and during all phases of flight.4. While over U.S. airspace, flight crew may not make any announcement to passengers concerning flight path or position over cities or landmarks.5. Passengers may not have any blankets, pillows, or personal belongings on the lap beginning 1 hour prior to arrival at destination.
AIRCRAFT OPERATOR ACKNOWLEDGMENT: The aircraft operator must immediately provide written confirmation to its assigned PSI indicating receipt of this SD.
AIRCRAFT OPERATOR dissemination required: The aircraft operator must immediately pass the information and directives set forth in this SD to all stations affected, and provide written confirmation to its PSI, indicating that all stations affected have acknowledged receipt of the information and directives set forth in this SD. The aircraft operator must disseminate this information to its senior management personnel, ground security coordinators, and supervisory security personnel at all affected locations. All aircraft operator personnel implementing this SD must be briefed by the aircraft operator on its content and the restrictions governing dissemination. No other dissemination may be made without prior approval of the Assistant Secretary for the Transportation Security Administration. Unauthorized dissemination of this document or information contained herein is prohibited by 49 CFR Part 1520 (see 69 Fed. Reg. 28066 (May 18, 2004).
APPROVAL OF ALTERNATIVE MEASURES: With respect to the provisions of this SD, as stated in 49 CFR 1544.305(d), the aircraft operator may submit in writing to its PSI proposed alternative measures and the basis for submitting the alternative measures for approval by the Assistant Administrator for Transportation Sector Network Management. The aircraft operator must immediately notify its PSI whenever any procedure in this SD cannot be carried out by a government authority charged with performing security procedures.
FOR TSA ACTION ONLY: The TSA must issue this SD immediately to the corporate security element of all affected U.S. aircraft operators.
FOR STATE DEPARTMENT: Retransmittal to appropriate foreign posts is authorized. Post must refer to STATE 162917, 201826Z Sep 01, Subject: FAA Security Directives and Information Circulars: Definitions and Handling, for specific guidance and dissemination.
Gale RossidesActing Administrator

Prepare for a drop in diesel and gasoline prices

2009-09-21T17:02:00.002-06:00

September 20, 2009 5:30 PM MDT

You will soon be paying under $2 per gallon again for gasoline and diesel fuel and crude oil will go back down into the 40's. So you can make plans for that trip to see the grandparents for the holidays as well as give the economy a much needed boost. Demand for gasoline in the United States typically falls after Labor Day due to vacation season ending. For the week ending September 4, 2009 demand for gasoline was at its lowest point since January 9, 2008 according to MasterCard Advisors LLC.

Inversion of diesel fuel versus gasoline prices has not been the case in the United States since the Rita and Katrina hurricanes hit the Gulf Coast in August 2005. That event had a major long term impact on inventories of gasoline, distillates and lube stocks on both side of the border. About 25% of the U.S. refinery capacity is located on the Gulf and was severely affected by the weather phenomenon.

Money has been poured into the commodities markets recently as the U.S. dollar fell against the Euro. Crude oil prices have risen from a low of $33 to $72 a barrel last week.

For month investors months have used crude oil as their hedge against inflation, betting that oil prices will likely increase as the economy improves and global supplies start to shrink.

So far 2009 has turned into the first normal year for the petroleum markets since 2004 due to the absence of the high roller speculators and adverse weather conditions. Those investors were burned in the big oil price freefall during the second half of 2008 by following bad advice from their investment brokers.

In August 2009 the U.S. Security and Exchange Commission took initial steps to enforce the strict limitations on dealings between bankers and stock analysts. The law requires investment firms to engage in “fair dealings with customers” and prohibits in-house analysts from issuing opinions and research reports that are at odds with their true beliefs about the market. These opinions are spread fast, far and wide utilizing today’s high tech communications.

The market is also very nervous after news that the Chicago Mercantile Exchange (CME) Group, which runs the New York Mercantile Exchange (NYMEX), notified traders and brokers of tighter enforcement of existing position limits on NYMEX, CME, and other exchanges as of September 14, 2009.

US oil refiners, who were producing diesel in record numbers last year, reversed course earlier this year and made their refining stream fall in line with the flat demand for gasoline and the ever shrinking demand for diesel fuel. Refinery runs have drifted down to 86.94% of capacity from the previous week's 87.2%. Inventories of crude oil and its finished products are at all time high.

That will have the affect of starting the downward slide for gasoline and diesel fuel prices with the price of crude oil following right along.

Bob van der Valk is the Director of US Branded Licensing and Fuel-Pricing Analyst with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (425) 216-9072 or by email at bvan@4refuel.com and web site: http://www.4refuel.com/

Bob’s professional web site is: www.4vqp.com/ourconsultants/thegasguy.html
Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

Gas prices will fizzle out by October

2009-09-03T04:27:00.005-06:00

The van der Valk Gas Price Advisory for September 1, 2009

Dateline: Terry, Montana

We have had some dog days here in Terry, Montana this summer and the price of gasoline has been scorching upward right along with the heat. The spot market for gasoline and diesel prices dropped like a rock Monday, but Tuesday morning brought new hope and both of them are both back up. Gasoline is heading the pack but the price of crude oil is back down some more to $68.05 down $1.91 a barrel for the day.

For a further explanation on why gasoline prices are going up while we are still suffering from a recession we look toward the stalwart of all banking institutions, Bank of America (BAC), and its subsidiary Merrill Lynch.

In a report to investors Francisco Blanch, head of commodities research at Merrill Lynch, said that investors are flocking back into commodities after substantial withdrawals in the second part of last year, on the back of rising prices and a recovery in risk appetite.

"Our estimates put the total amount of money currently invested in commodity indices at about $125 billion, up from a trough of $80 billion dollars in February," he said.

But it does not explain that people filling up their tanks are paying more and driving less due to a slacking economy. The unemployment rate has almost doubled from 5 % in April 2008 to 9.7 % in July 2009 per today's U.S. Bureau of Labor Statistics.

Crude prices have been driven higher since the first of this year by a combination of OPEC capacity cuts and continued strong demand from Asia, particularly China and India. China’s oil demand in July increased 3.5% over the same period last year as imports continue to rise. This has pushed the price of crude up even though consumption is down around the world. But the winter months will exacerbate this already clouded picture with crude oil expected to steep downward from the current $70 to $40 a barrel.

Crude oil and gasoline prices will be scorchers for just another month and like comets fizzle out over the horizon with a trail of rocks tailing behind. Fall will bring welcome relief to the exhausted gasoline consumers. The other good news they will be enjoying is lower heating oil and natural gas prices. Diesel prices will move down with crude oil prices and red dye diesel will be down to $1.50 per gallon in time for a cold winter predicted for most of the country. There seems to be no floor on the price of natural gas, which is now at around $2.50 per million cubic feet versus $16.25 just a year ago.

The lull before the storm for gasoline prices

2009-08-31T06:02:00.000-06:00

The van der Valk Gas Price Advisory for August 28, 2009

Dateline: Issaquah, Washington
By: Bob van der Valk
August 28, 2009 9:00 AM PDT

Right now there is a tropical depression named Terry (after my hometown in Montana) but it is slowly becoming a storm and will then turn into a full fledged hurricane. Of course, I am referring to what is happening with gasoline pump prices. The average price of gasoline over the last seven days has not changed precipitously but that is quickly changing on the oil market weather map. The AAA fuelgauge report shows the national average price of self-serve regular gas is $2.613 per gallon on Friday, down just over a penny from a week ago. The national average price of diesel fuel is $2.697 a gallon, up just over a penny.

For much of 2009, crude oil prices have gone steadily upward from the low 30's to the middle 70's. Meanwhile pump prices have increased nationwide from $1.50 to $2.60 per gallon. At 42 gallons to a barrel of crude each $10 represents about 25 cents per gallon increase or decrease for gasoline. But the market has reacted to the current recession just the opposite of traditional supply and demand dynamics. Instead of gasoline prices staying steady, they went up while the US and Canadian economies were going through their doldrums.

About 50% of the trades on the Nymex and ICE exchanges represent entities who will not take the delivery of one wet barrel of crude oil or fuel when their contracts expire. That is down from 55% at the same time last year before the crude oil price bubble burst. However, it is still higher than the 20% of traders holding paper barrels in 2000. That year is significant because that is when the CTFC took volume requirement off traders dealing on international exchanges. Speculators did what speculators do best and figured out a way to game the system in order to make money.

The big boys are now investing huge amounts of money on the US dollar as a hedge against inflation as well as flow money into the commodities markets, which has served as the primary driver of oil prices.

Gasoline prices are highest in Hawaii, at $3.297 a gallon, and cheapest in South Carolina, at $2.38 a gallon. California meanwhile has remained stable during the week, averaging $3.046 a gallon. The highest price for gasoline is San Francisco, where the average cost is $3.133 a gallon. The cheapest market is Yuba City, with an average price of $2.948 a gallon.

The Labor Day weekend is just a week away and the spot market prices for gasoline have already firmed up. That will translate into higher prices at the gas pump at least until the middle of September. By then the hurricane season for gasoline prices will come to an end when oil companies start switching to refining winter grade gasoline. The supply of gasoline and diesel will increase by 10% and pump prices will ease back down to $2 per gallon by Thanksgiving and crude oil to the 40's.

Why have crude oil and gasoline doubled in price this year?

2009-08-11T05:12:00.000-06:00

Dateline: Terry, Montana
August 10, 2009 12.30 PM MDT

Gas prices are up 14 cents per gallon in the last 10 days across the country but crude oil has remained steady around $70 a barrel since the beginning of July. The American Petroleum Institute’s spokesman John Felmy would like you to reason that when the price of crude oil fluctuates up or down, it will have the same affect on the pump price for gasoline. However, that has not been the case so far in 2009.

The benchmark price for WTI crude oil decreased $1.00 on Friday, August 7th, to $70.93 a barrel after reaching an intra day high of $72.84 a barrel. There was no like response downward in the price for gasoline at U.S. and Canadian gas stations. In fact, gasoline prices have been going steadily upward and crude oil has followed instead of the other way around.

While U.S. gasoline demand usually reaches its ultimate level from June through August, refiners have on the other hand cut production in the three weeks ending July 31. Gasoline stockpiles on that date were 2.9 percent higher than a year earlier, while diesel stocks were 24 percent higher.
The US Energy Information Agency (EIA) reported that total daily fuel use averaged 18.9 million barrels in the four weeks ended July 31, which was 3.1 percent less than a year earlier. However, that is a deceptive number since it includes diesel and jet fuel demand, which has been as much as 20% below last year’s level.

Summer gasoline use is actually on the upswing and will reach its peak demand by Labor Day. This year the holiday weekend falls on September 7th well into the month in which refiners will be switching from producing summer to winter gasoline grade gasoline. That alone has in immediate affect on supply and brings about additional 10 percent of gasoline into the market. Refiners can produce an average of 22 gallons during the winter from a 42 gallon barrel of crude oil versus just 20 gallons out of that same barrel during the summer.

That is good for the consumers but bad for the oil refiners. They will be stuck in the same cycle that occurred last year with gasoline prices and crude oil prices going to a virtual free fall with profits turning into losses. The EIA chart below shows the history of US gasoline prices for the last two years. We started last year out at about $3 then increased to $4.15 per gallon by August. This year we began at $1.55 and went to $2.70 in that same time span.

The Organization of Petroleum Exporting Countries (OPEC) is scheduled to have its next meeting on September 9th with crude oil prices currently hovering around $70 a barrel. That price was quoted as “not bad” and necessary to maintain investment according to OPEC President Botelho de Vasconcelos in Angola over the weekend. OPEC is responsible for 40 percent of global supplies of crude oil and will be reviewing production targets for member countries at their next meeting.

Their big bug-a-boo will be how to handle the massive cheating by some of their members who are exceeding their assigned quotas. July estimates leave the OPEC-11 about one million barrels in excess of the total assigned quota of 25 million barrels of output per day in order to be in compliance with the about 4 million barrels per day crude output agreed upon last year.

You can join the crowd if you are totally confused by all the facts and figures you are reading and hearing on exactly what drives gasoline prices. Yesterday morning I joined a couple of elderly ladies for a cup of coffee at a snack bar table during the Ranch Rodeo being held at the Prairie County Fairgrounds in my hometown of Terry, Montana.

Inevitably, the subject of gasoline prices came up and they wanted to know how they ended up paying almost $1.25 per gallon more at the Four Corners gas station in town since earlier this year. After trying to explain it to them they just rolled their eyes and one of them said that it was just the greedy oil companies making money.

iPhone service in Montana - Enter Dark Territory

2009-08-01T07:10:00.000-06:00

The following email was sent to Randall Stephenson, CEO of AT & T, and Tim Cook, Acting CEO of Apple:

I moved to Montana from Washington in May 2009 and AT & T notified me on July 2, 2009 that they will be cancelling my service as I am in violation of my contract with them. I use my iPhone for business and travel to other parts of the country but apparently Montana is one of the states AT & T in which they cannot service iPhone data economically. It was explained to me by your representatives that the cost for access to other carriers exceeds what I pay on the AT & T flat rate data program.

AT & T cell service in Terry, Montana is about the same as Verizon Wireless. Dropped calls, not receiving calls and voice mail messages not received are the rigor with my iPhone. I had great service in Seattle, Washington where I purchased the phone in September 2008.

An email to each of you resulted in a call back from a representative in the Office of the President of AT & T and Apple. But all I received was sympathy and lots of apologies with no solution. The first customer service representative I contacted offered to switch my account to Verizon for me and suggested buying a Blackberry phone. I have just done so without her help and am waving AT & T goodbye.

The following article from Bloomberg tells the story on how exclusive arrangements like the one between AT & T and Apple is good for you but not good for the consumers is being investigated by the FCC.

"IPhone Probe to Focus on Markets Without Service, FCC Head Says
By Todd Shields
July 31 (Bloomberg) -- U.S. regulators probing wireless- phone contracts will focus on markets where Apple Inc.’s iPhone and Palm Inc.’s Pre aren’t available to consumers, the chairman of the Federal Communications Commission said.
“There are markets in the country where if you wanted an iPhone, if you wanted a Pre, you just couldn’t get it -- from anyone,” Julius Genachowski said in an interview yesterday. “So one question is, is that consistent with broad consumer interests?”
The agency also will consider if innovation is promoted or hindered by exclusive arrangements such as those that limit the iPhone to customers of AT&T Inc. and the Pre to Sprint Nextel Corp. subscribers, Genachowski said.
Genachowski, 46, declined to say what the next steps will be in the investigation, which the agency announced last month after four U.S. senators asked it to examine the exclusive deals. An AT&T executive told a June 17 hearing the deals spur innovation and help lower prices. Verizon Wireless said this month that new deals with handset makers will last no longer than six months, down from one to two years for most contracts.
“Promoting competition is absolutely a main function of the FCC,” said Genachowski.
He took office June 29 as the Obama administration’s choice to head the independent agency that sets rules for telephone, cable and broadcast companies.
Fostering high-speed Internet connections, or broadband, is a priority for the FCC, Genachowski said.
“There’s absolutely a sense of urgency in Congress, the White House, here at the agency, that we need to make sure that the United States communications infrastructure is appropriate for the 21st century,” he said.
Preparing Broadband Plan
Genachowski declined to say whether the agency would seek to write new rules to ensure that Web companies treat content providers equally as it readies a national broadband plan that is due to Congress by February.
The FCC last year censured Comcast Corp. after concluding the largest U.S. cable company had interfered with subscribers’ Web traffic. A lawsuit by Comcast seeking to overturn the decision awaits oral arguments in the U.S. Court of Appeals in Washington.
“We expect to prevail,” Genachowski said.
“There shouldn’t be any doubt that the FCC will enforce non-discrimination,” he said. “The Internet needs to remain open.”
Genachowski said he has devoted time to meeting with FCC staff.
“My visits around the agency have convinced me that the agency needs to be retooled and revitalized, and that that’s not a controversial proposition inside the FCC,” Genachowski said.
‘Shortchanged’ Consumers
At Genachowski’s June 16 nomination hearing, West Virginia Senator Jay Rockefeller, the Democrat who heads the Commerce Committee that oversees the FCC, said the agency has “shortchanged” consumers. Rockefeller told Genachowski to “fix” the agency.
Genachowski said yesterday that he didn’t want to comment “on where the agency has been.”
In December, congressional Democrats said his predecessor, Kevin Martin, a Republican, abused his powers and created a “climate of fear” at the agency. Martin followed the same procedures by Democratic and Republican chairman alike, an FCC spokesman said at the time.
Genachowski attended Harvard Law School with President Barack Obama and helped shape his technology agenda. He was an adviser to IAC/InterActiveCorp Chief Executive Officer Barry Diller, and earlier served as an attorney at the FCC and a Supreme Court clerk."

Last Thursday while I was in Billings dropping off my daughter at the airport I checked with the Best Buy store in Billings on iPhone availability in Montana. After the clerk told me that their store was not allowed to carry the iPhone he proudly told me that he has a family member in town who had obtained one by using his cousin's Denver home address to get one and sign up with AT & T. So it's legal to own and wear a gun on your hip in Montana but AT & T forbids you to use the iPhone there!

Hello Blackberry Storm goodbye Apple iPhone.

AT & T - Apple iPhone service in Montana not allowed

2009-07-28T07:37:00.000-06:00

The email below was sent to Tim Cook, acting CEO of Apple, to let him know about my frustations with the iPhone cell and data service in Montana. Basically AT & T has told me that they do not plan on to service this area of the country.

Bob van der Valk

Mr. Cook:

My original email to Randall Stephenson, CEO of AT &T, received great confusion by their customer service personnel when I asked them a very simple question: "When will AT & T cut off my service?" It took three phone call from Justin Krischenmann in the Office of the President for AT & T to finally get the correct answer. I will be cut off 90 days from the date after receiving my first notice of violation of terms my contract.

I am forwarding you the email sent to Mr. Stephenson to let him know how I feel about his company's service.

Bob van der Valk
508 S. Washington Ave.
Terry, MT 59349
(406) 635-4233
(971) 67-2975

Mr. Stephenson:

I have found out more information about the exclusive AT & T arrangement with Apple by posting my original complaint on your web site at:

http://forums.wireless.att.com/cng/board/message?board.id=reportservice&message.id=43465&jump=true

I work in petroleum marketing and what your company is doing would be called cherry picking in my business. You will not be able to continue promote your brand in the US as you exceed your capacity and the iPhone cell phone concept will sink as a result.

The iTouch and iTouch Tablet will soon take over the main part of the business as Apple continues to promote their many applications which in turn will require more data usage on your system than you are currently unable to service in areas such as Montana. The mobile cell phone business will go to the company with service in the widest service area. Below is the last reply I have posted on your web site.

I look forward to your response.
Bob van der Valk
508 S. Washington Ave.
P.O. Box 711
Terry, MT 59349
(406) 635-4233
(971) 678-2975 cell

"I just received my second text message and email notice from AT &T that I am in violation of our contract. I had asked Justin K. in the Office of the President for AT & T to quit sending notices once a customer has like me reacted. It just infuriates me as I do not like to be threatened.

I now know the consequences of my actions by not reading the fine print in our contract about moving out of one of their prime service areas. Shame of me for my neglect. This thread of postings is being forwarded to Tim Cook, acting CEO for Apple, for his follow up.

On a lighter note I have my daughter Marissa visiting us here in Terry, Montana this week. She is a techi and has now installed WiFi at the place where I work in town in order for me to continue to use my iPhone as an iTouch. She lives in Los Angeles and has Verizon Wireless as her carrier. Of course, in that area cell phone customers have many carriers from which to choose but she thinks Verizon has the best coverage by far not only in LA but also in the hinterlands of the US. Marissa is a Scientist working for Amgen in their Thousand Oaks office and travels all over the US for conferences and meeting people.

This will be last thread from me on this web site as I have given up on AT & T or should I say they have given up on me. When they eventually do cut me off it will be the last time I will do business with them even if I have to start using smoke signals to send messages to my family and friends.

Goodbye AT &T."

When Goldman Sachs wins – You lose

2009-07-19T18:07:00.000-06:00

Dateline: Terry, Montana
July 19. 2009
By: Bob van der Valk

The taxpayers of the US are the losers with Goldman Sachs (GS) employees the winners in this game called “Last Man Standing”. With most of their competitors being either bought out under duress or allowed to go bankrupt they have been left holding the bag. Even a leprechaun could not have been as lucky as to finding a bag so full of gold.

Nomi Prins, a former managing director for Goldman Sachs in New York, was interviewed by Juan Gonzalez for “Democracy Now!” right after the record profits at GS was announced.

Nomi Prins said that GS paid back the $10 billion Troubled Asset Relief Program (TARP) money in order to avoid the type of media scrutiny AIG received after they announced their employee bonus payouts earlier this year. She went on to explain in the interview:

“The bigger amount of money that has gone to Goldman has come through $12.9 billion from the AIG bailout that went straight to Goldman, its biggest counterpart; $28 billion worth of FDIC-backed guaranteed debt, meaning the FDIC put up a program last fall, and it said, “For banks that deal with consumers”—not banks that deal with multibillion-dollar companies or investors, but people—“we will provide guarantees for debt,” which means that those companies can raise debt to help consumers cheaply. Goldman said, “Alright, fine, we’ll take some of that.” And they took $28 billion worth of that, and they have up to $35 billion that they can take under the FDIC program that was never meant for a company like Goldman Sachs.

In addition, there is a ton of money, there are trillions of dollars at the Fed, not all of that went to Goldman, but that has secretly gone to a number of banks in the system, of which Goldman is one, for which the Fed refuses to disclose any information or any detail, which also goes into this. So when Goldman says—has the nerve to say, feels entitled to say—that it’s going to pay its bankers record bonuses after the travesty that it and other banks have created in the markets, it is on the back of federal subsidies that effectively come from our pockets.”

The result of those record profits is that Goldman Sachs (GS) will be paying out record bonuses to their employees this year on the backs of the US taxpayers. Their public relations department has a bunker mentality and has only opened their gun turrets long enough to shoot down any of the arguments being put up by the pundits who are against them paying out those bonuses.

The stock market investment community is also celebrating this turn of events and points to the record profits at GS as a sign that the economy is recovering. It has at least for the employees of GS but the remainder of the country continues to suffer record unemployment and is still looking for answers that will get us out our economic quack mire.

The actual count in dollars the US government is guaranteeing the banking business keeps going up every day. Right now those guarantees are up to almost 14 trillion dollars. As a form of comparison that amount would pay off every single mortgage in this country, healthcare and subsidizing student loans. Do you know of any individual consumer who has actually been able to walk into a GS bank and borrow money for a business or buy a car?

One way to stop this taxpayer bail out mess is for the Federal Election Commission to include a provision in their rules that would prohibit any of the companies receiving TARP money to make contributions to any candidate for federal office under the Federal Campaign Finance Laws. The time limit will be five years from the date the TARP money was paid out and will put an end to this endless cycle of “You rub my back and I’ll rub yours”.

Under Siege - Dark Territory - My AT & T Service Complaint

2009-07-16T05:52:00.000-06:00

Dateline: Terry, Montana
July 16, 2009

I received a call from Justin K., Office of the President, yesterday afternoon responding to my complaint in the email I sent earlier that day to Randall Stephenson, the AT & T CEO, which reads:

"Mr. Stephenson:

I am contacting you direct since I have been unable to obtain satisfactory answers to my question about the lack of service in the area to which I recently moved.It seems like my wife and I, both of us own iPhones, have entered Dark Territory insofar AT & T is concerned.

We purchased our cell phone in Issaquah, Washington back in August and September 2008 after receiving satisfactory service from your company in Las Vegas, Portland - OR, and Seattle since November 2006. We especially liked the fact that you offer roll-over minutes on your program.

Verizon, who had been our carrier for twenty years prior, did not respond to my inquiry as to why did not offer a similar rate program for their cell service.My complaint with your company is that your customer service is more interested in telling me chapter and verse according to AT & T policy rather than dealing with me as a valued customer.

Both customer representatives, whom I am copying with this email, kept apologizing profusely for not being able to help me keep AT & T as my carrier in Montana. The policy and the contract I signed was explained to me in every detail, something your sales people at your store neglected to do, and offered to set up an account for us with Verizon Wireless.

I objected to that only because it will make my iPhone useless other than as a mini-laptop with no access to email etc.My real complaint is that your marketing strategy has become very obvious to me. You are only interested in providing service in areas where you are a direct carrier.

The hardware used towards that purpose has become secondary and as your exclusive with Apple is expiring soon will not be your main driving force to obtain profit for your stockholders.

Thanks for listening to me and would appreciate a response (hopefully positive) back from you as soon as possible.

Bob van der Valk"

Justin said that he would look into my complaint and get back with me today. I will post his response to this blog as soon as it received.

Below are the comments I posted on the Seeking Alpha web site article:

http://seekingalpha.com/article/148431-forget-the-feds-apple-is-doing-just-fine-wrecking-the-wireless-business?source=commenter#comment-590157

Updated, 12:01 p.m.: The expiration date of the exclusive iPhone deal between Apple and AT&T has not been officially released, but in April the Wall Street Journal cited anonymous sources saying AT & T is hoping to extend their deal with Apple into 2011.

Here is my original posting to the AT & T Forum web site:

My personal experience with AT&T has been very bad since moving to Terry, Montana from Seattle, Washington. Upon our arrival I was happy to find out that all of my iPhone applications worked as long as have WiFi is available.

Cell phone service is intermittent in the Eastern Montana area, since we are located near the Badlands, and even the local cell service providers are having problems staying connected.

Lo and behold I received a text message and email from A T & T/Cingular on July 1, 2009 that I was in violation of my contract by being outside of their direct service area. I called the phone number listed in the messages the next morning and was advised that I had 30 days to decide to cancel my contract, without penalty, and find another service provider.

Apparently the contract reads that if I use my cell phone for data and phone use over 40% in areas not directly served by A T & T/Cingular my contract could be voided.

I was surprised but told the person that I understood that they had rules and I had agreed to them. Although I don't remember reading any of the gobble de coop stuff they made me sign when I proudly picked up my iPhone birthday present last September at one of their direct sales stores in Issaquah, Washington.

Here comes the real kicker, the customer service person offered to call Verizon Wireless to change over and set up my account with them. She told me that she would call me back in 20 minutes to confirm it with me.

I told her to be sure that I could keep my iPhone with the new carrier as I am now practically married to it. I bathe, eat, drive and sleep with it. In fact my wife is thinking of becoming one of my applications so I will give her as much attention.

She suggested that I get another phone perhaps a Blackberry since they have similar applications and Verizon is one of their carriers. I declined her offer and am still waiting for a call back from her.

Time is ticking and I have only 17 days left before I am cut off.In case one of the A T & T/Cingular executives happens to read my personal lament, please let me know. I tried AT&T once more this morning (July 14th) and received similar response from their customer service supervisor.

I will be sending emails to her well as her supervisor Rachel. I am also calling the CEO of AT&T later this morning and will post any responses negative or otherwise I receive on this blog. Your comments are invited and you can email them to me at: tridemoil@aol.com

Crude oil – A bridge to our renewable energy future

2009-07-13T07:13:00.000-06:00

The real story behind the Bakken Oil Formation

Dateline: Terry, Montana
July 13, 2009 1:00 PM MDT
By: Bob van der Valk

President Obama is being invited to spend some of his time in his own back yard to rub shoulders with the oil workers of Montana and North Dakota to check on their progress for increasing domestic crude oil production.

The President would be able to obtain greater insight on how to solve this country’s energy needs for the immediate future. Brett Smelser, owner of Border Steel and Recycling, who is the mayor of Sidney, Montana as well, would like to have a chance to speak to him directly about the local effort in making our nation energy independent. He is actively involved in his state’s effort about getting the message out on how to best develop the Bakken’s rich mineral deposits

Exploration for crude oil in the Bakken Oil Formation is rapidly being expanded and its output is expected to expand exponentially as long as oil prices remain above $60 a barrel. The U.S. Geological Survey (USGS) figures it could yield up to 3.65 billion barrels of recoverable oil with additional reserves possible using even more sophisticated and as yet not invented methods. It is the largest oil field in the continental U.S. but it does not come close to the roughly 60 billion barrels of existing proven reserves discovered in the North Slope of Alaska.

The President will learn that oil is the “Life-blood of America” and a national energy policy, not based on politics as usual, is urgently required. What would happen if we had another energy crisis occurs and the Organization of the Petroleum Exporting Countries (OPEC) decides to cut us off again? Our generation still remembers the days of gasoline allocation, even and odd days buying of gasoline and pulling up to the gas station behind the “last car in line” during two energy crises of the 1970’s.

The following map shows how much of the area the Bakken Oil Formation covers:

In addition to having been the mayor of Sidney since 2002, Mr. Smelser was appointed to the Montana Board of Oil and Gas Conservation by Governor Brian Schweitzer in 2007 and serves in his current term until 2011. He spoke to me about the need for cooperation between the different state and federal governmental entities involved in oil production since the area in which he lives and works, which straddles all the way from Eastern Montana to Western North Dakota.

The catch with President Obama’s current energy plans, to increase energy conservation as well as fuel efficiency gains, is that he has decided to pair that up with government intervention. This will reduce demand by installing a cap-and-trade, fuel tax or carbon tax, thereby any savings from efficiency gains will be taxed away or otherwise removed from further economic circulation and therein lies the rub. Crude oil will be more expensive to explore for and produce in North America, especially when compared to the Canadian oil sands.

We need to build a bridge to a renewable energy future in the U.S. Further exploration for domestic crude oil will be a crucial step in filling that gap. Some alternative energy projects may be as far as twenty years of away of getting on-line. By then we may be able to rely on wind, solar and hydro-power as a way to energy independence.

Mr. Smelser said that the first step should be to expand the capacity of crude oil shipping pipelines as well build at least one new refinery in the area. The local sweet crude oil is now trading at $10 discount from the West Texas Intermediate crude oil posted price, and more investments will be required to take full advantage of this domestic oil production.

The USGS estimates the Bakken possesses 3.0 to 4.3 billion barrels of yet "undiscovered, technically recoverable" crude oil and 1.85 Trillion Cubic Feet (Tcf) of natural gas. The formation is also estimated to hold 148 million barrels of natural gas liquids.

The current pipeline is overbooked and some oil wells have already been slowed down or shut down pumping completely until the infrastructure catches up to handling the overabundance of crude oil still in the ground.

This is the part of our country where the real work gets done to keep the oil flowing. The slogan “Get ‘R Done” is seen far and wide in what is commonly known as the Bad Lands. But that slogan will become a household word in the country and soon may be called “Persia on the Prairie”. The locals in Williston, North Dakota are more prone to using their own slogan, “Rockin the Bakken”; in showing enthusiasm for their new found buried treasure.

In between very modest homes and farms we are sitting on top of one the largest reserve of crude oil The underground Bakken Oil Formation stretches from Eastern Montana through North Dakota north to Saskatchewan and Manitoba, Canada and it is just now receiving the national attention it so well deserves.

The heart of the Bakken oil field, which contains three layers of shale, was formed when the area was covered with a relatively deep ocean. It is about two miles down with about two-thirds of the acreage located in western North Dakota. In the year 2000, the Elm Coulee oil field was discovered in the Williston Basin of Richland County, Montana and draws its oil from the Bakken Oil Formation.

This massive rock of shale was initially discovered as an oil source in the mid-1950s, but with extremely low porosity and permeability, it was almost impossible to exploit fully with conventional drilling techniques. At that time crude oil was going for less than $10 a barrel. Other methods were cost prohibitive with more sophisticated but more expensive and not yet invented methods being required.

A joint venture, of Exxon, Unocal and Tosco in Colorado first explored and developed crude oil from shale oil deposits in Colorado during the two energy crises in the 1970’s, quickly dissipated when the Reagan era of hands off policy on government controls on energy took hold.

Their site was located in Parachute, Colorado but was eventually shut down when the U.S. government decided to withdraw the subsidies being paid to the oil companies. The major difference between the Parachute and Bakken operation is the first used a “retort” and the latter “in situ" (meaning in its original form, undisturbed) for their oil shale recovery systems. In situ uses slanted drilling and “fractionation” extraction techniques to bring “Black Gold” up to the surface instead using the standard horizontal drilling.

By itself and without government support the development of oil shale into crude oil was uneconomical especially when the price of a barrel crude oil took another dive in the early 1980’s. But we are now in the affordability range once again with West Texas Intermediate crude oil around $60 a barrel.

The cost of exploring and producing crude oil from shale is still relativity higher compared than that of exploring for conventional crude oil, which can be brought up from underground for about $40 a barrel in even the most far away places in the world.

Perhaps in the year 2109 our future generation of kids will be shaking their heads in disbelief at our futile attempts to stay ahead of running out of energy while watching repeats on television of “Black Gold", "Deadliest Catch" and "Ice Road Truckers”. In their American History classes they will have to listen to lectures about how we used to transport our oil from the Middle East instead of exploring for it in our own backyard.

They will be shocked and awed just as we were when reading about our early pioneers, who actually churned their own butter and had milk delivered to their doors each morning.

Bob van der Valk resides in Terry, Montana and is the Director of US Branded Licensing with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (425) 216-9072 or by email at bvan@4refuel.com and web site: www.4refuel.com.

Bob’s personal web page address is: www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

The backwards Robin Hood effect in trading of crude oil

2009-07-06T15:37:00.000-06:00

Dateline: Terry, Montana

You have heard of Goldman Sachs but may not know that they are the owners of the biggest casino in the world through its commodities-trading subsidiary J. Aron and Company. No, they do not own an actual casino but are merely the stomping grounds for high dollar bettors in the world of commodities.

There are no slot machines or other gaming devices anywhere around their sumptuous offices at 85 Broad Street in New York before you start planning to make reservations to fly in on your private plane, be met by a private limousine with a chauffer, check into your luxury suite and hitting the tables. Better yet, they are set up and are connected to every major commodities exchange around the world.

For some background on this subject, the Commodities Futures Trading Commission in the U.S. has established speculative position limits on trading contracts. These limits are intended to prevent market imbalances that would result in failures for the ultimate settlement of the futures contracts.

J. Aron & Company is exempt from those limits under the Commodity Exchange Act. The reason behind the CFTC decision was that U.S. investment brokers could otherwise do their trades on other world commodity exchanges without any volume restrictions thereby denying the New York Mercantile Exchange from gaining its rightful share of the action. They are the world's largest physical commodity futures exchange and want to keep it that way.

However, that exemption became a license to rob from the poor and give to the rich with Goldman Sachs becoming the owner the world’s biggest commodities betting parlor taking their share from the top no matter whether the prices of crude oil went up or down. The Goldman Sachs Commodity Index tracks the prices of 25 major commodities and is weighted heavily toward crude oil.

Index speculators, who are mostly “long” bettors, seldom take short positions and thereby are betting on prices to rise but they eventually spiral back down. This instability forces prices for crude oil up at times for no other reason than too many paper barrels are chasing the “wet” physical barrels. The balloon eventually burst when the real value of the crude oil barrel kicks in. That cost is equivalent to the cost of getting crude oil out of the ground and shipping it to the refineries.

To break up this monopoly the CFTC will have to eliminate the exemption from the limits on those trades. We just some recent examples of gross violations happen when PVM Oil Futures, trading on the London Intercontinental Exchange (ICE) in Brent crude oil contracts, caused the global crude oil prices to spike to its highest level in eight months last week Tuesday.

PVM, which is the London-based division of the world’s biggest broker of over-the-counter derivatives, eventually lost almost $10 million in those early morning trades on Tuesday.
Steve Perkins, a senior and long-standing trader, apparently unhappy with his first-half year bonus, brokered those contracts and has now been suspended from his post by PVM. They are a privately held company owned by its employees with offices in Vienna, Singapore, New Jersey and Houston.

Mr. Perkins’ trades were hard to explain at the time by other traders on the ICE. He could have done it by intercepting the exchange confirmations thereby hiding the open position or the trades were simply booked as hedges where no corresponding physical position actually existed.

Any disciplinary action by the United Kingdom’s Financial Service Authority regulators, the equivalent to the CFTC in the U.S., will be too little too late. Steve Perkins will eventually be found not “fit and proper” to work in London and banned from trading. But catching him now will be like closing the door after the horse has already escaped out of the barn.

In May 2009 the FSA had taken its third regulatory action against Morgan Stanley this year when it fined Nilesh Shroff, an executive director at the firm, who deliberately disadvantaged clients while conducting their trades. He had traded for the firm’s benefit before making the requested trades from his clients. In addition to a £140,000 fine Mr. Shroff was banned by the regulators from trading. He was the third Morgan Stanley trader to be fined this year with Morgan Stanley having to paying substantial fines for the other two violations.

What may be good for the investors is terrible for the ordinary Joe and Jill trying to fill up their fuel tank at the local gas station while looking for some stability in prices.
Alas, what cannot be cured must be endured.

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

What can be done about diesel fuel prices?

2009-07-04T11:54:00.000-06:00

Dateline: Terry, Montana, U.S.
July 4, 2009

The big holiday and vacation season is once again upon us. Canada and the U.S. just celebrated their respective national birthdays and all eyes in our industry are being kept on whether consumer confidence has re-instilled itself.

Diesel fuel is one of the most critical commodities in keeping the Canadian and U.S. economies rolling. In our transportation and construction industries almost all aspects of operations are fueled by diesel engines. Rising diesel fuel prices can translate to increasing costs of products and services. In order to know what can be done to slow down this increase, you as a consumer need to be aware of its causes and find creative ways to save money on your fuel usage.

There are several basic elements that determine the worth of a gallon of diesel. About fifty-five percent of the cost of diesel reflects the price of crude oil, which is raw material for diesel production. Crude oil is brought from the oil fields to the refineries where the ultra-low sulfur diesel, among other petroleum products, is extracted.

Given a barrel of crude is 42 gallons; the average refinery is able to produce about 8 gallons of diesel and jet fuel or 20 % of the total. About half of the barrel is made into gasoline with the remainder in low end bunker fuel oils and other petroleum products. Refining accounts for nearly fifteen percent of diesel fuel cost.

The remaining elements of the cost of diesel fuel are government taxes and the expense of advertising and delivery. A ten percent excise tax is levied onto all fuel products that are refined in Canada. Although foreign fuel can avoid this tax, it is generally cheaper to buy locally refined fuel as import taxes generally are passed along to the consumer. Marketing and distribution make up about five percent of total diesel fuel cost, but this can often be the most volatile factor affecting the value of diesel fuel.

This is where the diesel fuel consumers may have a sure fire way to save money on their cost for operating their diesel trucks and equipment. They can make arrangements with an on-site fueling company like 4Refuel headquartered in Langley BC, Canada. They currently service most of the Canadian market and recently expanded into the U.S. West Coast market by opening an office in Lynnwood, Washington serving the Greater Seattle area.

Saving fuel and lowering consumption is not only good for the environment; it decreases demand, and ultimately your cost. The factors that affect diesel fuel prices seem complex, but an understanding of the basic principles can empower the individual consumer to make the right decisions.

Bob van der Valk resides in Terry, Montana and is the Fuel-pricing Analyst with 4Refuel LLC in Lynnwood, Washington. He can be contacted at (971) 678-2975 or e-mail him at: bvan@4refuel.com

Good news: Prices are up for crude oil but down for gasoline

2009-07-01T15:58:00.000-06:00

Dateline: Terry, Montana
July 1, 2009

The price of crude oil has been hovering around $70 a barrel for the last week meanwhile gasoline pump prices in the U.S. and Canada are down by about a nickel a gallon or 1 cent per litre during that same time. The average price for a gallon of gasoline is $2.63 today per the AAA fuelguage report. Montana’s gasoline prices are averaging $2.71 barely nudging down from a week ago price.

If there seems to be no correlation between the two, it is because U.S. and Canadian refineries are just now running crude oil they purchased earlier this year. The typical shelf time in shipping from the well to the refinery is about six weeks and crude oil in the tank at the refineries is still at around $40 a barrel. So who do we blame? The greedy oil companies, those evil Wall Street speculators or is it just plain simple Gasoline Marketing 101?

Crude oil accounts for 55 percent of the cost of gasoline. The other big chunk is the federal, state and local taxes, which make up 24 percent of the cost. Then we add refining costs and profits of 15 percent to the cost of gasoline. Distribution and marketing costs made up the final 6 percent of the cost.

The Petroleum Marketers Association reports the profit margin at each local gas station of between 3 and 15 cents per gallon of gasoline.

This morning we wait for the release of the weekly Department of Energy's inventory statistics, which will give some direction to the market. Other factors may be at work as well with a myriad of glitches at U.S. refineries spooking the traders into shoring up their deals before the July 4th weekend. With just three trading days left in the week no one would knowingly get caught at the end of a short stick in keeping physical product flowing into their tanks.

Armed conflicts and threats around the world are receiving the usual buzz by the paper traders and one that is having an immediate affect is in Nigeria. That has resulted in almost 1 million barrels per day of crude oil being cut off from being shipped to the U.S.

The Shell Oil platform and shipping terminal in the Niger Delta was blown up by militants last weekend interrupting vitally needed crude oil from being loaded. The Nigerian government has desperately been trying to deal with the situation and has even offered amnesty to the dissidents if they lay down their arms.
Speculators are hard at work trying to make money by betting on any outcome. But the adage that “For every winner, there is a loser” applies to the investment business just like it does in sports.

Bob van der Valk resides in Terry, Montana and is the fuel-pricing analyst with 4Refuel Inc. in Lynnwood, Washington. He can be contacted at (971) 678-2975 or e-mail to: tridemoil@aol.com

His viewpoints and previous articles about the petroleum industry can be found at web site address: http://www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

Oklahoma Attorney General says BP/Arco manipulates gasoline prices

2009-06-27T12:52:00.000-06:00

Dateline: Terry, Montana
June 27, 2009 6:00 AM MDT

Nationally the average price for regular unleaded gasoline is $2.658 down about 3 cents per gallon from a week ago. Montana's gasoline prices have leveled off at $2.72 with California staying high at $3.01 per gallon. Hawaii gets the prize for the highest cost for gasoline at $3.09 per gallon in the AAA fuelgauge.report. The gasoline spot market price meanwhile has dropped by 20 cents per gallon in the last two weeks but retail pump prices have not reacted in kind and are not expected to drop much more before the end of next week.

Pump prices have barely budged with the spot market gasoline and diesel prices going down another 2-3 cents per gallon at the end of this week. The August WTI crude oil price decreased $1.07 to just above $69.16 a barrel on Friday

Big industry news was published in the Oklahoma Daily Journal on Friday that State Attorney General Drew Edmondson had filed a lawsuit against BP/Arco (BPL). He is accusing them of gaming the price of gasoline and crude oil since 2002. This alleged scheme had previously been brought to the attention of the Federal Trade Commission but Edmondson claims to have found fresh evidence that BP was able to manipulate gas prices by hoarding short-term motor fuel and crude oil supplies.

The Federal Trade Commission (FTC) investigated those same allegations in 2006. At that time, BP/Arco was suspected of manipulating the petroleum market by controlling the physical West Texas Intermediate (WTI) crude oil inventory at the Cushing, Oklahoma terminal. They have since divested some of those assets but they are still dominant in trading WTI at the Cushing terminal.

The initial investigation into trading practices between oil companies was called for by Congress in the wake of the huge gasoline and fuel price spikes, which occurred in the aftermath of the Rita and Katrina hurricanes. Those storms ended up hitting refinery complex located on the U.S. Gulf Coast in August and September of 2005. Extensive damage was incurred to those refineries and interrupted the supply of crude oil, finished fuels and lubricating oils to the market.

The oil companies were absolved of any wrong doing by the FTC in the "Investigation of Gasoline Price Manipulation and Post-Katrina Gasoline Price Increases” published in the spring of 2006. That report concluded that normal supply and demand market forces were the reasons for the price variances in the petroleum markets.

AG Drew Edmondson has announced his intentions to be a candidate for Governor in Oklahoma in 2010. That announcement and the filing of the lawsuit against BP/Arco were coincidentally made on June 10, 2009. Any outcome of this lawsuit will definitely also have an effect on the upcoming election in crude oil rich Oklahoma.

Bob van der Valk is the Director of US Branded Licensing with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or by email at: tridemoil@aol.com

Bob’s web site address is: www.4vqp.com/ourconsultants/thegasguy.html

2009-06-23T17:12:00.000-06:00

Dateline: Terry, Montana
June 23, 2009 2:30 PM MDT
By: Bob van der Valk

April showers may bring May flowers but this year it also brought forth a spring time renewal for oil refiner’s profits. This was in the form of increased demand for gasoline after dismal first quarter results in 2009. But now the June swoon has come too soon and the oil companies are looking forward to those summer breezes peeking just around the corner

I was waxing somewhat poetic while reading a flood of news reports this week about gasoline prices in the U.S. and Canada dropping for the first time in over seven weeks. The average price for gasoline in both countries has dropped a whopping seven tenth of a cent of a gallon or liter this week. Motorists have been practically been dancing in the streets celebrating their new found fortune according to on the spot media reports from many parts of the country. Some are even quoting some experts about gasoline prices having peaked and to be going down for the remainder of this year.

But wait just a minute! How come the price of crude oil dropped $5 to around $69 a barrel in the last two weeks but gas prices have only gone down by a fraction of a cent during that same time? Haven’t we been told by some of the pundits that gas prices always move in lock step with crude oil prices? That for every dollar a barrel change in the price of crude oil we are supposed to see gasoline move up or down 2.5 cents per gallon at the pump?

The answer my friend is blowing in the wind. This time around the major oil companies are not matching the independent unbranded gasoline rack prices down as fast as you were expecting. The difference between the major branded dealer tank wagon and independent unbranded gasoline prices is now over 20 cents per gallon in the U.S. and 5 cents per liter in Canada. This phenomenon is known in our industry as: “Gas prices shoot up like a rocket, and drift down like a feather”.

In this case the oil companies are stocking up to be prepared in case those summer breezes change into hurricanes. Gasoline demand has increased with April being the latest month on record showing an increase over the same month last year. So with Canada Day on July 1st and the U.S. July 4th weekend just around the corner do not expect to see pump prices coming down a lot this week.

Different average gas prices have been bandied about by various agencies of the government and private companies with the motoring public somewhat confused about which number to believe. For instance on June 22nd the Energy Information Agency (EIA) showed the average price for a gallon of regular gasoline in the U.S. to be at $2.691 while the AAA fuelgauge reported it at $2.69. Those two seem to be in sync but on the other hand the gasbuddy.com web site reported the average U.S. price at $2.663 per gallon.

The difference in the two reports is that the EIA and AAA uses information provided through credit card purchases. The gasbuddy.com web site has price spotters, who log in and report pump prices from their local gas stations for both cash and credit cards.

For instance Arco stations do not accept anything other than cash or debit cards at their pumps and are usually the lowest price in their neighborhood. That tends to skew the average price per gallon by about 3 cents per gallon. This is due to dealers, who do accept all types of credit cards, having to price their gasoline higher by having to pay a merchant fee for each transaction to their banks.

In the short term prices will continue to go up another 25 cents per gallon between now and middle of August. After Labor Day gasoline prices will ebb down slowly and by Thanksgiving go back down to about where they were last year at the same time. That means you can start looking forward to $2 per gallon gasoline at a gas station near you by Christmas this year.

Now you know what is going to be happening in the refining and marketing end of the oil industry, you should go fill up your tank by this weekend before gas prices are raised. In the Badlands of Eastern Montana we believe in the moral behind the fable of the “Milkmaid and Her Pail”, which goes: “Do not count your chickens before they are hatched!”

Bob van der Valk resides in Terry, Montana and is the Director of US Branded Licensing with 4Refuel Inc. in Lynnwood, Washington. He can be contacted at (971) 678-2975 or by email at: tridemoil@aol.com

Bob’s web site address is: www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

The insider’s secret on how gasoline is priced

2009-06-18T16:06:00.000-06:00

Dateline: Terry, Montana
June 18, 2009 11:00 AM MDT
By: Bob van der Valk

After emigrating to the U.S. from Holland, at the young age of 15, I learned to speak English by watching Saturday morning cartoons and listening to Elvis Presley songs on the radio.

English was a mysterious language to me and it took a while before I caught on to the finer nuances of speaking English. The kids at North Miami High School in Florida thought that my Bugs Bunny and Elvis Presley voice impressions were a riot and I l quickly was able some good friends.

The U.S. and Canadian motoring public learn much about the cause of the wild gas price gyrations from the same type of sources.

Crude oil prices are usually made out to be the culprit and blamed by the media for the gas price roller coaster rides. But is not the only factor in the current round of fuel price spikes. Today gas prices tend to influence and support crude oil prices. That opinion runs counter to the conventional view that crude oil drives gasoline prices.

It is the inverse of what occurred with fuel prices in 2007 and early 2008 in the petroleum industry. Since August last year, fuel prices have been driving crude oil prices up and down.

It is my prediction that crude oil may hit $85 in the near term and then ebb back down to $40 by the fall of this year. By Christmas 2009 the price of gasoline in the U.S. should be around $2 per gallon with Canada at 90 cents per liter.

In early August 2008, I made a forecast, published in the Pasadena (CA) Star News, that crude oil and gasoline prices would go down in the last part of 2008. In August, crude oil was still hovering around $140 a barrel and gasoline was over $4 a gallon in the U.S.

By December 2008 the average price of crude oil was $33 a barrel and gasoline was at $1.60 per gallon. That severe drop was aggravated by the economy’s plunge into its recession along with the financial crisis.

I made a prediction in the January 2009 that gas prices would hit $3 per gallon again by the summer as quoted in the following article:

http://www.insidesocal.com/news247/2009/01/gas-prices-could-reach-3-by-su.html

I have been in the petroleum industry for almost 50 years with all that time spent in the refining and marketing (R & M) end of the business. In my early career I worked in the retail and wholesale departments for Union Oil Company of California a.k.a. Unocal in Los Angeles. This should qualify me as the ultimate insider and expert on the way the petroleum industry prices gasoline.

The U.S. petroleum industry has returned to the basics of refining crude oil into gasoline. Major oil companies have the ability to explore and produce for crude oil and bring it up out of the ground for around $40 a barrel. Any amount over that price is pure profit to the oil companies.

The competitive battle between Exploration & Production (E &P) and R & M managers at the oil companies is back on. Each cannot stand to see the other make all the profits for their company.

In the days before the price of crude oil became paper driven, the R & M department used to have knockdown-drag out fights with the E & P department about the price of crude oil delivered to our refinery gate. In those days, they would price crude oil based on price posted at the well plus transportation costs. R & M would then add the cost to refine the crude into fuels and add the marketing cost to determine the wholesale or dealer tank wagon prices.

Today, they take the easy way out and relate their refinery gate crude oil price to the West Texas Intermediate (WTI) crude oil price plus or minus a discount for quality and location. For instance, the posted price for Elm Coulee crude oil in Richland, Montana is currently fetching the WTI daily posted price less $10 a barrel at the well head. R & M still has to add their costs to that price and relate that to the current wholesale and retail prices in order to stay competitive.

In March of 2001 Tom O’Malley, then CEO of Tosco, got tired of losing money for part of the year then trying to make it back during the spring time and summer driving seasons. He announced to his refining and marketing management team at a company meeting in their Phoenix headquarters, that they would tie their retail prices to the wholesale spot market price for gasoline and diesel.

The petroleum market is driven by trades in paper barrels for crude oil and finished products on the New York Mercantile Exchange (NYMEX). That in turn gives indications to the spot market and it has become a case of the tail wagging the dog.

The other major oil companies soon followed suit and since then the pipeline spot market has been driving fuel prices up and down. Today’s gasoline prices are based on a “What the market will bear” strategy by the major oil companies. In the 4th quarter of 2008 and 1st quarter of 2009 refineries lost big time money. Some of them, including the Big West refinery in Bakersfield, were forced to close down due to poor economics. This trend will continue as long as the big money investors stay on the sidelines and cause more havoc in the petroleum markets.
Goldman Sachs & Co., Morgan Stanley and other large investors are able to sidestep regulations that limit investments in commodities such as crude oil. They are investing on behalf of pension funds, endowments, hedge funds and other big institutional investors, in part as a hedge against rising inflation. Crude oil investment is used to offset the weaker dollar with the money going back and forth as the world economy continues its slow recovery
A stream of financial deregulation under the Clinton administration, culminated in the Commodity Futures Modernization Act of 2000. These over-the-counter markets are 10 times larger than the futures market with no position limits and almost no regulations to control their investments.
I have now revealed my secrets on the mystery of fuel pricing to you. I hope that the answer is as simple as watching those Saturday morning cartoons in order to learn to speak English.

Bob van der Valk is the Director of US Branded Licensing with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or by email at: tridemoil@aol.com

Bob’s web site address is: www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

2009-06-18T16:04:00.000-06:00

All We Need to Survive: Water, Food and …….Gasoline!

2009-06-04T07:08:00.000-06:00

Dateline: Terry, Montana
June 3, 2009 - 11:30 MST
By: Bob van der Valk

While the market sorted itself out yesterday, I was busy trying to keep from running out of water at the Bob's Big Boy Ranch in Terry, Montana. At one point we not only had our artesian well down but our hard water well had shut down as well. Unexpectedly, we had to make a quick trip and run out to the Terry Super Valu grocery store to stock up on bottled water. We may well be having a similar problem happening right now in the refining and petroleum business.

With crude oil being pumped out of the ground like water, any interruption will cause consumers to look for options to maintain some sense of normalcy. In our case, we almost decided to move back in with our daughter Inger and her family while the repairs were being made. But, what do we do when we run out gasoline? We can't do anything especially when living out in the country where long distances have to be covered by car or truck every day.

The Department of Energy statistics were bearish for diesel and neutral for gasoline today. The wholesale spot market price is down 4 cents per gallon for diesel and no change for gasoline, so far. So far the July WTI crude oil price is down $2.21 to $66.34 a barrel. The Nymex is off for now but there is doubt it will stay down that much at the close of business today with buyers perched to jump in as soon as they sense the low has been reached.

This year it's all about oil refineries being able to keep up with the expected increase in demand of gasoline for the upcoming summer driving season. Petroleum traders will be concentrating on the supply issues with the biggest focus on refinery gasoline output.

This morning's Department of Energy report is the tale of the tape for an upcoming fight between the bulls and the bears in the petroleum market. There are plenty of points to go around supporting both sides of the arguments to reach conclusions that crude prices and therefore gasoline prices may either shoot like a rocket or go back down with a bullet.

President Obama was greeted by Saudi King Abdullah upon landing in the Middle East today. He also received the news that the Saudi Arabian Oil Company Aramco had raised their crude oil prices from $1.05 to $3.25 a barrel for shipments in July 2009. The heavy crude oil is the one at the lowest with the light crude oil selling at the highest price. All of their crude oil prices are ratcheted up or down from the posted Brent crude oil price.

Our water situation will be resolved within a day or two but the current market situation for gasoline prices will continue to play itself out throughout the summer months. Right now the Four Corners gas station in Terry still has plenty of gasoline in the tank but it us 10 cents per gallon more today then it was a week ago.

We better keep the horses saddled up and ready just in case we will need them for back up. There may come a time when I will have start reporting the prices of hay and alfalfa instead of gasoline.

Will Motorists Suffer a Memorial Day Gas Price Hangover?

2009-05-26T15:50:00.000-06:00

Dateline: Terry, Montana
By: Bob van der Valk
05-26-2009 10:00 AM MST

The July WTI crude oil price is a basic no change down 21 cents to $61.46 a barrel. The spot market gasoline price is up 1 cent per gallon and diesel no change so far this morning. The average price for regular unleaded gasoline is $2.421 per gallon in the U.S. with the West Coast at $2.667 per gallon.

U.S. motorists were expected to drive a little more this Memorial Day weekend with renewed optimism that the economic slump has hit bottom. Expectations of gasoline use were put at 1.8% higher than Memorial Day last year with the economy in the recovery mode.

The consumer confidence index for May jumped to 54.9 from 40.8 in April 2009. The index is now at its highest since September 2008 based on a graph published by the Confidence Board based on research done by TNS, Taylor Nelson Sofres PLC is the world’s largest custom market research company in 80 countries, shows the following:

Over the weekend we did have some bad news with the possibility that Nigerian violence will cut oil output. ChevronTexaco was forced to cut off about 100K barrels of crude oil supply representing about one fourth of the total output for Nigerian crude oil. Most of that crude oil is destined for U.S. refineries and any interruption in the supply of crude oil will have an immediate impact on prices.

On top of that North Korea successfully set off an underground atomic blast and also fired off a couple of missiles over the weekend. This was in an apparent attempt to prove that they are going to be capable of launching an atomic weapon at any of their enemies.

By far the most positive comment for stability in the immediate future of oil prices was the statement released by the Saudi Arabia oil minister Ali al-Naimi over the weekend. He stated that OPEC will likely stay the course with regards to production cuts at the upcoming meeting this Thursday in Vienna. This was an advance signal for discussions between him and Steven Chu, the U.S. Energy Secretary, to show support their in assisting the economic recovery.

Take a little "Hair of the Dog" if you are having a weekend hangover but keep your gas tanks full as gasoline prices are not expected to come back down before the fall of this year.

It’s a Real Gas to Talk Gasoline Prices

2009-05-19T11:50:00.000-06:00

Dateline: Terry, Montana
May 18, 2009
By: Bob van der Valk

My wife and I recently struck up a conversation with a very nice elderly couple while shopping and waiting in line to have some fabric cut at the Jo-Ann store in Bellevue, Washington. The wait was almost 45 minutes so we had plenty of time to discuss various subjects. Our conversation quickly turned to the state or our economy after comparing how many years each of us have been married to our spouses.

The wife lamented about prices of everything including food and rent skyrocketing recently. She also brought up the price of gas – my favorite subject – and how it could have reached $4.50 per gallon in the middle of last year and then come down so fast by the end of the year. I responded to her that we are currently paying less for gasoline then we have in the past ten years.

The woman then said that she remembers paying 36 cents per gallon 40 years ago. I recollected paying just 20 cents per gallon to get our 1952 Dodge Coronet filled up at the Sinclair gas station across the street from my home in North Miami, Florida in 1957 after my family emigrated there from Holland.

To prove my point I went to the Energy Information Agency (EIA) web site and found out that the average price of gasoline in the first quarter of 2009, compared to what we paid in previous years, has become a relative bargain once again.

The Energy Information Agency research chart below shows the average price for a gallon of regular unleaded gasoline, which so far in 2009 is the lowest price since the hit $1.40 per gallon in 1998.

The average price in 2008 was the highest since 1981 when the Reagan years started our economy booming once again after enduring the two oil embargoes in the 1970’s, which spiked the price of gasoline to an all time high. Using 1900 as a baseline, each US dollar provided $1 worth of purchasing power in 1900.

By 1950, the relative value or purchasing power associated with each US dollar had declined to 33.3 cents—one third of its value in 1900. By 2007, the relative value of a US dollar had further declined to 4.6 cents, less than 5% of its value in 1900.

The boom of the last ten years with Wall Street excesses leading the way is over if President Obama according to the interview published in last week’s Sunday edition of the New York Times Magazine. He said that Wall Street is not going to play as dominant a role in the economy as regulations reduce "some of the massive leveraging and the massive risk-taking that had become so common".

On the other hand Steve Forbes was asked about this article on the Sunday morning Fox and Friends of the Fox News Network. He said to be careful for what we wish as this from the top down regulation on a free enterprise will result in more from the top down government control.

Mr. Forbes also said that the exotic derivatives programs cooked up by Wall Street investment firms did themselves in and now is the time to let the free market decide where to better invest our time and money.

Please stop me anytime while I am waiting in line and bring up the subject of the price of gasoline. As of next week you can catch me at the Netzer Hardware store in Terry, Montana as we are moving into our newly remodeled home in the middle of town. Better talk fast as the check out line will not be as long as the one in Bellevue, Washington.

Crude Oil and Gasoline Prices Undergoing Stress Test

2009-05-08T10:49:00.000-06:00

Don't look now, but the price of crude oil has been moving sharply higher over the last couple of weeks That is now up 80 per cent over the last 3 months with the price of WTI crude oil increasing from $32 to $58 a barrel in just a short thee months. The price of was up another 85 cents per barrel early Friday heading towards the $60 a barrel mark by the end of the day. Fuel prices for gasoline and diesel are going up in lockstep with another 2-3 cents per gallon increase today.

At the same time the national gasoline price per the AAA fuelgauge report from went from $1.56 to $2.16 per gallon as of today. This would normally set off alarm bells in the media with articles about suspected gas price gouging. These would then be followed up with the usual threats of investigation by head line grabbing politicians and divergent government agencies.

Reporters have been quick to report that at $2.16 we are still paying almost a buck and a half per gallon less than we did before Memorial Day last year. Their question of the day remains: “Why are prices now heading back up to $2.50 on the West Coast and the national average to $2.25 per gallon?”

In plain and simple terms the refineries have finished making their switch to summer gas and it reduces supplies by 10% per cent. This year, however, as gasoline prices have been going back up the price of crude oil has been dragged up along with it.

Along with that President Obama's current budget proposal, which must be approved by Congress, includes ending "unjustified tax loopholes" for oil companies. That will raise $26 billion over the next 10 years for alternative energy development.

The White House rejected as "unfounded" industry claims that by ending the tax breaks it would take a significant toll on US domestic oil and gas production. It said oil and, to a large extent, gas are internationally traded commodities whose prices are determined on the world market. "The oil and gas subsidies are costly to the American taxpayer and do little to incentivize production or reduce energy prices," the administration said in its budget package submitted to the Congress.

The budget also includes increasing federal road taxes on gasoline and diesel with 10 and 14 cents per gallon being added to the 18.4 and 24.4 cents respectively.

Price of gasoline is not going to going back down any time soon perhaps not until the fall of this year. But that will be another story for another day.

Happy Cinco de Gaso

2009-05-06T06:19:00.000-06:00

It is Cinco de Mayo in the US to celebrate Mexican heritage and pride. We also commemorate this day in Holland as Bevrijdingsdag or Liberation Day. It is celebrated each year on May 5th in the Netherlands (the official name for Holland) to mark the end of the Nazi occupation during World War II.

The nation was liberated by Canadian troops, with the assistance of the British and American armies. After the liberation in 1945, Liberation Day was commemorated every 5 years. Finally, in 1990, the day was declared to be a national holiday with the liberation celebrated every year.

The provinces of Utrecht, North and South-Holland were the last provinces in Holland to be liberated. The population in that area suffered greatly during the winter of 1944-45 from starvation and bombings. My family lived in The Hague, South Holland and was able to survive the hunger winter. We eventually were able to immigrate to the US on special visas issued under the Refugee Relief Act of 1954.

We have been in the US for almost 53 years and I have spent 50 of those working in the petroleum business. My family was fortunate to have been given the opportunity to live and work in this country with its many generous people.

The June WTI crude oil price is down 50 cents back down to below $54 a barrel. The spot market prices for gasoline and diesel are down 2 cents per gallon this morning as well.

The oil traders are now looking ahead to the weekly Department of Energy inventory statistics being published tomorrow morning. Gasoline prices will spike up if they show another big draw for gasoline stocks as they did last week. This will be regardless of crude oil stocks anticipated to increase once more.

May is the typical month in which summer driving season starts. Gasoline prices will be staying firm with lower than normal supplies available. Refineries are also keeping a tight hold on production

OPEC is also providing support for the oil price by indications that they are not happy with $50 a barrel and hinting at further production cuts when they meet later this month in Vienna, Austria. Warren Buffet emerged from his office and sounded positive notes providing support to the raw commodity markets as well.

Stop the Swine Flu Bug

2009-05-02T07:29:00.000-06:00

Super Bowl Fever is gone, March Madness is over and April swine flu fever is now spreading throughout the world. This dreadful disease has to be stopped in its tracks at least by calling it something else.

At a news briefing, Homeland Security Secretary Janet Napolitano and Agriculture Secretary Tom Vilsack took pains to repeatedly refer to the flu as the "H1N1 virus."

The "H1N1 Influenza Type A Virus" is the actual correct, but hard to remember, name for the current swine flu epidemic sweeping throughout the news media.

Israel has already rejected the name swine flu, and opted to call it "Mexico flu." Jewish dietary laws forbid the eating of pork. The Muslim world has also joined the cause and came up with their own suggestion to call it "Netanyahu flu".

The CDC has now decided to conduct a contest to give this dreadful disease a more appropriate name in the US. They will be using the newly adopted name in their news conferences keeping the anxious public updated. Following are some of the sample entries received so far:

- Hamthrax- Aporkalypse- Hypefluenza- Sowmonella- Global Hamdemic- Epigdemic- Hamageddon- Baconsumption- Wilburculosis- Smallporx

Additional entries should be forwarded to the White House attention of Joe Biden, Vice President of the United States. He will evaluate them for further consideration by a panel of judges appointed by the President.

Perez Hilton, Tom Vilsack and Janet Napolitano have tentatively been picked by President Barack Obama to judge this contest to decide the winning entry.

Timothy Geithner is considering instructing the Treasury Department to take over the pork industry and combines it with the banks and auto industry. The Department of "Babe" is the name tentatively picked for this new government controlled entity. Bill Clinton has shown interest in running this new company and has promised to get us to at least start talking about something or someone else for a while.

You can do your part and join the "Stop the Swine Flu Bug" (SSFB) movement by signing up in the comment section at:

http://bobthegasguyvandervalk.blogspot.com/

Flu Bug Bites Oil Market

2009-04-28T17:44:00.001-06:00

Petroleum traders have been keeping a weary eye on the news about the swine flu spreading to other parts of the world. But by now they are used to having the least amount of bad news effect crude oil and in turn fuel prices.

However, the current scare may be short lived as the real story behind the headlines is just beginning to develop. Another medical authority in the field, Dr. Jay Gordon from Santa Monica, CA, has been sending out Twitter messages in the last few day to let people know that the World Health Organization has only able to confirm 7 deaths in Mexico, from the new H1N1 swine flu virus strain, not the 20 being reported far and wide by various media outlets.

Dr. Gordon says that the reason the swine flu pandemic being hyped by the media is to get people to obtain unnecessary vaccinations with Tamiflu to prevent from getting this disease.

The WTI crude oil price is went another 22 cents to 49.92 a barrel on fears that this new flu strain is going to further depress already bleak oil demand. Gasoline and diesel spot market prices on the West Coast dropped 1 - 3 cents per gallon. Pump prices will follow and the average price may even get back down below $2.30 per gallon for regular unleaded gasoline by the end of this week in California. The average price of $2.05 per gallon for gasoline will dip by about the same amount to $2.02 per gallon for the whole of the US.

Oil prices tumbled yesterday under a sea of panic as "swine" flu fever gripped the world's media and the worlds oil markets. Although the probabilities of this evolving into a world wide killer pandemic are still small, the fears of such an occurrence happening are enough to spark short selling in the energy markets. Air travel has already been affected, with the current media hype exaggerating the outbreak of this new strain, as people avoid areas with outbreaks of the flu.

The other shoe will drop on diesel and jet fuel prices if this havoc continues any longer. Jet fuel will start backing up into the distillate stream of the refineries and cause a free fall in both jet and diesel fuel prices.

In other news the Shell refinery in Anacortes, Washington is still struggling to get back up into full operation and is now expected to be up as soon as tomorrow. The Shell and the Tesoro refineries in Anacortes went down on Friday, April 24th due to an unexpected power outage. That will keep fuel prices up and supplies tight in the Northwest US.

Welcome to the Bountiful Age of Crude Oil

2009-04-22T17:30:00.000-06:00

This week’s DOE inventory statistics came in way over expectations for crude oil stocks rising almost 4 million barrels, twice the number predicted by industry analysts. For the time being, we've got plenty of crude oil on hand but will it continue to be enough for the future?

Finished product prices have remained flat and crude oil prices on the Nymex remained unchanged. In plain language, that means while crude oil prices meander up and down, gasoline and diesel prices are staying firm due to the expected increase in summer demand.

The June WTI closed up roughly 30 cents at $48.85 a barrel today. That price had jumped up a whole $2 a barrel from the May crude oil price, which had settled at $46.64 a barrel on Tuesday afternoon.

Short sellers came into the market on Monday squeezing crude oil prices down almost $5 a barrel before it started recovering late Tuesday. Goldman Sachs, the only investment company with positive earnings in the last quarter, led the charge causing prices to reflect the advice they had issued to their investors over the weekend.

Gholamhossein Nozari, Iran's OPEC governor, spoke at a recent news conference and declared that the oil cartel may decide to cut production at their forthcoming meeting being held in Vienna, Austria at the end of May. He also said that the market continues to remain oversupplied due to the high level of crude oil inventories currently being stored in consumer countries.

The International Energy Agency (IEA) in Paris, France announced a week ago that global demand for oil will decline by 2.4 million barrels per day (bpd), giving credence to economists’ consensus that the world’s economy will not recover until 2010.The IEA stated that such a decline in demand has not been seen in almost 30 years. At the current level of 83.4 million bpd, the world’s demand for oil is already a full one million bpd lower than expected.

The petroleum market awaits the eventual recovery of the US and world economies. But, as our economy shows signs of healing, crude oil and fuel prices will start rising steadily again. It means that you can relax and enjoy your time of plenty with gasoline staying between $2 and $2.50 per gallon for about a month.

Another Day - Same Old Story for Crude Oil and Gasoline Prices

2009-04-17T14:26:00.000-06:00

The van der Valk Gas Price Advisory for 4-17-09

Dateline: Issaquah, Washington
April 17, 2009 12:30 PM PST
By: Bob van der Valk

The May WTI crude oil price is up 35 cents to $50.33 a barrel at the close today. The wholesale spot market price for gasoline and diesel went up about a penny per gallon almost in concert with the crude oil price

It's another day - same old story in the petroleum markets.

First - The US Federal Reserve announced a 1.5% month on month decline in industrial production and capacity yesterday. Crude oil prices reacted the other way of expectations by going up this morning in reaction to that bad news

Second - Last week the International Energy Agency, headquartered in Paris, lowered its forecast for global oil demand for this year by 1 million barrels a day down to 83.4 million barrels, which is 2.4 million barrels a day below the 2008 level.

Third - US crude oil inventory levels are now at a 20-year high and refineries are running at just 75% of their current capacity. Fuel conservation has forced the oil companies to reevaluate their 2009 game plan in view of the uncertainties in our economy.

Fourth - Gasoline prices went up some more this week. It's no wonder the average motorist cannot figure out what will be happening to fuel prices in the next month or for that matter the rest of the year. The US average price for gasoline is hovering around $2.05 per gallon today per the AAA fuelgaugereport. The price on the West Coast is still around $2.32 per gallon.

Crude oil will continue to hover around the $50 per barrel mark when at the same time gasoline and diesel prices will be increasing steadily upward. On the West Coast the average price for gasoline is predicted to be $2.50 by Memorial Day and $3.00 by the middle of summer if the current trend continues but... you never know what may be around the corner when a world crisis, weather or refinery problems causes prices to go haywire again. Retail diesel prices will stay about 10 cents per gallon above gasoline prices. The remainder of the country will follow suit and their average price for gasoline will be around $2.50 per gallon by mid-summer.

Refiners have been successful in putting their foot firmly on the hose to constrict the flow of fuel to the market. They have reduced utilization below capacity before their usual planned, maintenance-related springtime reductions. Some shut production down completely earlier this year in order to perform spring maintenance known as turn-a-rounds. The combination of planned and unplanned reductions put 2009 refinery use at its lowest level in the last four years.

The US petroleum industry understands one thing very well and that is that you have to continue to make a profit in order to stay in business. It's either that or going broke and then they will be out of a job.

Go aplusk!

Highway Robbery for California Gas Station Owners

2009-04-13T21:38:00.000-06:00

Samuel Johnson said: "Hell is paved with good intentions." It seems that saying applies to unhappy independent service station owners in California today. They made it a through a down turn in the economy and barely survived a recession that is still taking its toll.

Then along comes the bad news in the form of inaction by the California Air Resources Board (CARB) on the letter from Governor Schwarzenegger requesting a delay or holiday in the implementation date set for the Enhanced Vapor Recovery Phase II regulation.

Air Quality Management District personnel have been out in force in the field for the last 10 days. They have been writing up their Notices of Violation to any service station property owner not meeting the mandated April 1, 2009 deadline.

Collateral damage has been caused in the form of gas stations and truck stops being forced to lock up their gasoline pumps or worse yet shut down their whole facility. By CARB’s own count about 5% of the gas stations, designated as Gasoline Dispensing Facilities (GDF), have already done just that.

The number of stations being reported as being in compliance by CARB and the Air Districts are confusing at best.

In some cases stations with pulled permits are already being counted as being in compliance when in fact they have not yet been fully certified. A good faith effort apparently suffices just to make their numbers look better.

By any count almost 40% of the 11,500 California gas stations have not fully complied with the EVR Phase II regulation. Of that number about 1,000 are expected to hang up their nozzles for the last time and lock up their pumps by December 31, 2009. That is the drop dead date by which station owners will have to make the investment to install the vapor enhancement equipment or be shut down by the air districts.

Fines are being imposed based on the level of compliance and volume of gasoline pumped ranging anywhere from $1,000 to $4,000 per month for each station.

Apparently this was meant to serve as notice by the regulators to recalcitrant owners, who did not heed the warnings given out as early as 2000, that the rule would be enforced. Fact of the matter is that the regulation passed through the approval process by CARB and the California legislature without those technologies even being in place.

Major oil companies jumped on the band wagon early by insisting that the law be enforced if they were going to be making the required investment. The service station equipment manufacturers went to work and one system was approved by CARB in 2005. As late as 2008 two more systems were certified and at this writing one more is in the works to be approved by CARB.

As magic would have it each system became more economical than the one before. It was even made it possible to retrofit the nozzles being used by stations equipped with the Phase I equipment. The earlier approved system was only able to interface with its own equipment and was not adaptable to the other systems. Initially station owners had to make a choice to replace their whole system or wait it out until 2008 to retrofit their existing nozzles and install the scrubbers with the CARB certified equipment made to fit their own equipment specifications.

Up jumped the devil just as things were beginning to look up for the independent service station owners. The recession came along with the resulting financial tightening of the credit market. Station owners in the process on obtaining loans were put on hold and told to wait until the banking situation straightened itself out.

Accusations are now being made by regulators and clean air organizations such as the Sierra Club that this group of station owners is not doing their part for cleaner air in California. The station owners are citizens, who live and breathe the same air just like the rest of their fellow Californians. In the past they have made improvements to their facilities to aid in the clean air effort and have plans to continue to do so in the future.

In-Station Diagnostic (ISD) portion of the law takes affect in a year and the EVR Phase II compliance date could have easily been coincided with the implementation of that program. One program interfaces with the other when both of them installed at the same time could save the owners money.

Also starting in 1998 new automobiles in California had Onboard Refueling Vapor Recovery (ORVR) systems installed on them. The ORVR system captures the gasoline vapors that are displaced when gasoline is dispensed to the vehicle tank and stores those vapors in a canister filled with activated carbon. When the vehicle engine is started, gasoline vapors stored on the carbon are purged and burned in the engine. The ORVR system on new cars interferes with the ISD system creating false readings that throws the system into alarm at the station.

As of 2008 about 65% of the automobiles and light trucks in California are equipped with the ORVR system and about 94% of them will be so equipped in another ten years. In other words the ORVR and the EVR Phase II system will overlap each other recapturing the gasoline vapors during fill ups. California station owners will have spent a lot of money for little gain all in the name of attaining cleaner air.

Reasonable people should be making reasonable choices and this time Californians are going to get hurt right where it will hurt them the most – in their pocket book.

It’s time for each of us to open our windows and stick out our heads and yell like broadcaster Howard Beale did in the movie Network: “I’m mad as hell, and I’m not going to take this anymore”.

Has the US Petroleum Industry Learned from its Past?

2009-04-09T15:53:00.000-06:00

The van der Valk Gas Price Advisory for 4-9-09

Quoting George Santayana: "Those who cannot remember the past are condemned to repeat it".

The amount of money being poured into commodities investments was $1.5 billion in the first quarter of 2009; almost triple that of the end of 2008. That amount of money was being invested significantly when oil dipped below $50. Investors in commodities have a great influence on crude oil prices as the lessons from the past years have taught us.

The June WTI crude oil price is up $1.89 at $51.27 a barrel this morning with several factors, including gasoline demand exceeding supply poised to send prices even higher. Crude oil will be pulled up by the price of gasoline instead of vice versa.Equities have also been given a boost as well and are up this morning based on a strong earnings report from Wells Fargo. The West Coast spot market gasoline is up 7 cents and diesel 4 cents per gallon so far today.

Gasoline and diesel pump prices continue their march upwards regardless of the ups and downs in crude oil prices. Per the AAA fuelgaugereport the average per gallon prices for gasoline range all the way from $2.36 in San Diego, $2.33 in Los Angeles to $2.313 in Seattle up about 1 penny per gallon from the day before. The average price in the US is at $2.051 and prices are expected to increase with the holiday weekend traveling ahead.

With no relief in sight it would not be a surprise see prices heading back up at $3 a gallon on the West Coast of the US by the middle of summer
Prices will be being affected by adverse weather such as hurricanes, rising crude oil costs and now hopes that the worst of the recession is behind us.

California has in own unique blend of gasoline and it costs more to produce California Air Resources Board Oxygenated Blend (CARBOB). With the "Oxygenated Blend", refiners must mix a complex gasoline and ethanol concoction to cut down on emissions. CARBOB gasoline coupled with a seasonal change from a winter to summer-grade gasoline blend have tightened supplies and therefore raised the price at the pump. But rising gasoline prices also contribute to state and local government treasuries as well and are taking in a share of the increased prices at the pump.

Only time will tell if the petroleum industry has learned a lesson from their past mistakes.

"Springtime for Oil Refineries and the US"

2009-04-07T07:59:00.000-06:00

The van der Valk Gas and Diesel Price Advisory for 4-7-09

This is in deference to Mel Brooks for using the title of his play as a parody on what is happening in the world of petroleum products. But the springtime recovery of the US economy will be directly responsible for having the rest of the world's economies follow us as well.

That goes for the world of petroleum products as well with demand for gasoline remaining relatively flat compared to last year. In fact we have returned to 2004 levels on the demand levels on gasoline. On-road diesel demand is down the worst with an about 20% decrease in the same time period as last year.

Gasoline prices on the West Coast are remaining over $2.30 per gallon with diesel at $2.45 per gallon today. Yesterday's dip in the wholesale spot market prices for fuel did not have any immediate affect on pump prices. That market looks to be flat again today perhaps down 1-2 cents per gallon. Gasoline pump prices are expected to reach $2.50 per gallon by the Memorial Day weekend given the usual circumstances with ever tightening supplies of summer grade gasoline.

California has seen its average gasoline price jump up 7 cents per gallon since last week Wednesday. About 3 cents of that was the 1% increase in their state sales tax rate. That rate is now as high as 9.25% in some counties in California.

Along with that the wholesale rack and dealer tank wagon prices for gasoline on the West Coast have increased 10 cents per gallon. In California the sales tax is applied a tax on the total cost of the product including federal and state road taxes. In other words 10 cents per gallon increase represents another penny increase in the price for gasoline as well.

This is the usual time of the year when gasoline prices will spike up on any signs that supply will not meet demand. The completion of the cycle, in switching over of inventories of gasoline from winter to summer gasoline, will be April 15th for the West Coast and May 15th for the remainder of the country.

Tomorrow morning the Department of Energy will be releasing its weekly inventory report, which has shown growing builds for stocks of crude oil and gasoline in the past months. At 359 million barrels crude oil stocks are about 40 million barrels or 10% over year ago levels. That alone should keep the WTI crude oil price hovering around the $50 mark. That price is down about $1.50 from yesterday's settle of $51.05 a barrel

Lately crude oil is reacting more to the equities market than basic fundamentals. The oil production cut backs by OPEC are being adhered to at an about 80% rate of the assigned quotas by member countries. The firming for the price of crude oil is also reacting to the weakening US dollar as more money is being printed by the Treasury Department to stimulate the sagging US economy. Crude oil is used as a hedge against inflation by savvy investors.

Summer driving season will be a key indicator of how much the economy is hurting although more people may choose to stay local and drive rather than fly to vacation spots
Refinery glitches and weather related issues such as hurricanes will happen and with supply tightly meeting demand those will be having its usual bumping up affect on prices for crude oil and their finished products. Price of gasoline is expected to go to $3 per gallon in the middle of summer than settle back down to $2 per gallon before the end of the year.

Crude Oil and Fuel Prices Won't Back Down

2009-04-06T10:57:00.000-06:00

The van der Valk Gas and Diesel Price Advisory for 4-6-09

The average prices on the West Coast went over $2.30 per gallon for gasoline and $2.45 per gallon for diesel as of today. These prices reflect the latest increases in the wholesale spot market prices for both of those products since the first of the year. This morning the spot market pipeline prices actually did come down 2 cents per gallon for gasoline and diesel but that may not last given the current geo-political conditions in the world.

With all the bad news there is also have some good news "Gas and diesel prices are lower this year". In fact they are about $1.25 per gallon for gasoline and $1.75 per gallon diesel lower than they were at this same time last year.

After setting a record setting average price of $4.764 per gallon in mid-July, the diesel price average is now at $.2264 per gallon, per the AAA fuelgaugereport, falling for 33 out of the 38 weeks by April 6, 2009. Crude oil prices have increased from $33.98 on February 12th to $52.51 a barrel on April 3rd, for an about 60% increase in seven weeks. For every dollar per barrel variance in the price of crude oil, fuel will increase or decrease 2.4 cents per gallon accordingly.

Per AAA the average price for gasoline in the US today is $2.039 per gallon, up from December 29, 2008 when it hit a five-year low of $1.613 per gallon. The average price for gasoline has increased by 42.6 cents per gallon, for about 27% and it has increased in the last 13 of 18 weeks. Still, that price is $1.244 below the same time a year ago.

Normal gasoline and diesel demand will not be recovering anytime soon from the blows dealt by the high prices from last summer. That was right after that the double whammy, with the spreading economic and banking crisis problems, hit us like a ton of bricks.

After a brief rally in September, when hurricanes hit the US Gulf Coast, gasoline was actually selling at below the value of crude oil for much of the fourth quarter in the US. Summer pump prices rising above $4 per gallon prompted many Americans to drive less, but now that prices are back down to $2 per gallon, demand has remained relatively flat from a year earlier.

Tom Petty wrote the following song lyrics applicable to what is happening in today's petroleum market:

Well I won't back down,

no I won't back down,

You can stand me up at the gates of hell,

But I won't back down

The van der Valk Gas Price Advisory for 4-3-09

2009-04-03T20:37:00.000-06:00

Gas Station Owners Delt Blow on CARB's Enhanced Vapor Recovery Phase II Rules

This advisory calls for the Governor to ask for the resignation of Mary Nichols, Chairwoman of the California Air Resources Board, for her intransingence in dealing with the current EVR Phase II debacle, which is threatening to permanently close at least 10% of the California gas stations.

I sent the email below to John Myers, commentator for PBS radio stations in California, after hearing his pod cast this morning. I was listening to his broadcast in which he discussed the actions taken by CARB in an attempt to tone down the rhetoric created by station owners talking to the media about the predicament in which they have found themselves.

Most of the service stations owners are willing to comply with the regulation but have been unable to obtain the financing in time. Subsequently the equipment needed is now on back order and installers have been also been backed up with installation requests. The owners are now being written up with orders of violation that includes fines or worse yet being shut down by their local air management districts.

JMyers@kqed.org
Sent: 4/3/2009 12:11:05 P.M. Pacific Daylight Time
Subj: CARB Enhanced Vapor Recovery Phase II - Open Letter to Gov. Schwarzenegger

John:

I have been keeping updated with happenings in Sacramento on your Capitol Notes web site and have listened to your pod casts as well. During your discussions about this subject it was mentioned that non-compliance, with the EVR Phase II CARB imposed deadline, would be treated like a jaywalking ticket in New York City.

Instead the experience station owners are encountering is more like a cop handing out a ticket after someone goes through a red light. The violator is then told to take it to the judge if he wants to argue about whether the light was still green or orange when the car went through the intersection.

Some California air management districts will also see this as an opportunity to cull the herd of their miscreants by using selective enforcement on those who dare to protest their treatment.

CARB Chairwoman Mary Nichols that she would urge the use of restraint in enforcement by the Air Quality Management District in her April 1, 2009 press release. That CARB press release was issued by Dimitri Stanich apparently in response to last Friday's letter from Governor Shchwarzenegger to Mary Nichols seeking her to delay the EVR Phase II implementations date.

On April 2, 2009 the Ventura County Air District enforcement personnel did not use any restraint in their approach on enforcing the new regulation. They were out in force issuing misdemeanor orders of violation to station owners not yet fully in compliant with the EVR Phase II program.

The station owners were asked to sign an agreement with a date certain by which they would be compliant or face having the County close down their station in 10 business days. Personnel in that district have apparently not made aware or told to use restraint in their enforcement.

Two stations in Ventura County cited are independently branded and owned by my brother Andre van der Valk. Andre also leases two stations from Shell in the San Fernando Valley that are in compliance. In addition he owns a 76 station in Santa Monica that is not yet in compliance. He has all intentions to be and keep compliant at all of his stations.

The system installed at his two Shell stations since August last year is having numerous maintenance issues with breakdowns of the new nozzles and the scrubber system installed on the underground tanks. He is under warranty for one-year on the EVR Phase II equipment but becomes responsible for their upkeep after August 2009. The problem he is encountering is with replacement parts that are on back-order with the manufacturer for as much as six weeks leaving dispensers out of service for that duration.

I hope this information will assist you in getting a better picture of what is actually happening on the ground. Please feel free to contact either myself or Andre at jalidat@aol.com phone number (818) 970-9037 about this very important issue for the service station business community.

Below is my letter to Governor Schwarzenegger beseeching him to take immediate action.

Thanks,

Bob van der Valk
(971) 678-2975
tridemoil@aol.com

From: Tridem OilTo: governor@governor.ca.govSubject: Open Letter to Governor Schwarzenegger - EVR Phase II CARB Mandate

April 1, 2009 - 7:00 AM PST

Bob van der Valk to Governor Arnold Schwarzenegger – Capitol Building – Sacramento, CA

Today anywhere from 1000 to 4500 gas station owners will have to make a decision to close down or pay hefty fines to their local air quality management districts. They did not meet the deadline imposed by the California Air Resources Board (CARB) mandate, which requires all service station owners in California to install new enhanced vapor recovery (EVR) nozzles and scrubbers to capture 98% instead of the current 95% gasoline vapor emissions, April 1, 2009.

A bi-partisan group of California legislators has already called on CARB and you to extend the deadline for compliance by one year to April 1, 2010.

The unfairness in the current CARB edict is that the technology had not yet been refined to meet this newly required standard when the mandate was passed the legislature in 2000. Then those same people decided that by delaying implementation until April 1, 2009 the petroleum equipment industry would eventually solve the problem for them and it would result in finding a solution to meet the stricter requirement.

Major oil companies and other service station owners, with the financial ability to do so, retrofitted their pumps with EVR Phase II nozzles and vapor scrubbers expending about $11,000 per dispenser.

Along with the rush to supply the demand product quality problems have been encountered including shoddy workmanship of the new EVR nozzles. Nozzle spouts can be twisted off by hand and nozzles malfunctioned causing the system to close down. The nozzles and scrubber system are under warranty for one year but after that the station owners are responsible for repairs or replacement of defective parts.

CARB needs to review the concepts of "benefit cost analysis" and "diminishing returns" when these EVR nozzles capture just another additional 3% of the gasoline vapors escaping while filling up our tanks. In this case the costs should also include shutting down businesses and workers losing their jobs.

Governor Schwarzenegger push is now coming to shove and about one-third of the station owners of the over 11,000 stations in California did not comply by the April 1st deadline for one reason or the other. It is estimated by conservative standard that an estimated 1,000 service stations in California will not be able to comply with the mandate at all. This will result in some, including those with major oil company brands, to shut down permanently and not be re-opened.

California Assembly Member Anthony Portantino sent you a letter on February 23, 2009 requesting that you issue an executive order directing CARB to extend the deadline for EVR Phase II compliance deadline date until April 1, 2010. This letter was sent on behalf of the Assemly Member’s constituents including independent service station owners.

That resulted in you belatedly sending regulators and legislative leaders a letter on March 27, 2009 urging a six-to-12-months delay in Enhanced Vapor Recovery (EVR) Phase II enforcement.

You wrote: “I am not writing to argue against the value or soundness of the measure,” to California Air Resources Board (CARB) Chairwoman Mary Nichols. “But I am writing to suggest that more time is needed before it can be successfully enforced without significant negative effects on our state's economy.”

The CARB board, appointed by you, pledged in response to “work closely with the air districts throughout the state to extend the April 1 enhanced vapor recovery enforcement deadline while still striving to meet our collective air quality goals."

On March 12, 2009 Senator Roderick Wright wrote in his letter to you that the result of this action will be that minority and inner city areas will be especially hit hard. Specifically:

· Closure of service stations serving the Inner City: Stations, who cannot meet the deadline, will be forced to shut down - creating a major a void in inner-city communities and resulting in dramatic prices increases at a time when our hardworking families can least afford new costs.

· Loss of revenue for the State and increased unemployment that is already shooting towards 12%: Service station closures will further hurt our struggling economy and aggravate an already dismal budget situation by putting more individuals out of work and reducing critically needed tax revenue - resulting in less money for the State's general fund and ultimately lead to further decreases in badly needed community, health and educational programs.

· Increased blighted areas and increased pollution: Station closures will become community eyesores, set back our efforts to revitalize our inner city community's and most ironically, likely result in increased pollution as individuals drive more to find an open gas station - undermining the original intent of the regulation.

· Hardship on minority owned small businesses: Major oil companies have divested some of their service stations to minority, disabled veterans, women and others individuals over the last several years. Without an extension of the compliance deadline, these small business owners will be financially ruined and their dreams of a better life for their families vanquished.

Governor Schwarzenegger it is time for you to cut this bureaucratically created Gordian knot by issuing an executive order to CARB to delay implementation of the EVR Phase II program. A thorough study should be made about the way this issue has been handled by an intransigent board appointed you and request Chairwoman Mary Nichols’s resignation for her intransigence in dealing with this very important issue.

The solution to avoid this crisis is very simple – issue the executive order extending the deadline by one year and give everyone a chance to catch their collective breaths.

You may contact me at: bvan@4refuel.com or phone (971) 678-2975

Bob van der Valk is the fuel pricing and petroleum industry analyst with 4Refuel LLC in Lynnwood, WA. 4Refuel provides on-site fueling and fuel management systems to businesses and governmental agencies in the State of California.

This letter was submitted to the Governor of California on his official web site at: http://gov.ca.gov/interact
Letter from State Senator Roderick Wright to Governor Schwarzenegger:

CAPITOL OFFICE -STATE CAPITOL, ROOM 5064SACRAMENTO, CA 95814(916) 651-4025FAX (916) 445-3712DISTRICT OFFICEONE MANCHESTER BLVD., SUITE 600INGLEWOOD, CA 90301(310) 412-0393FAX (310) 412-0996E-mail:senator.wrightl@sen.ca.govwww.sen.ca.gov/wrightCalifornia State SenateSENATORRODERICK D. WRIGHTTWENTY-FIFTH SENATE DISTRICTRepresenting the Communities of Alondra Park, Athens, Compton,Gardena, Florence-Graham, Hawthorne, Inglewood, Ladera Heights,Lawndale, Long Beach, Los Angeles, Palos Verdes Peninsula, SanPedro, Watts, Westchester, Westmont, and WillowbrookGOVERNMENTAL ORGANIZATION CHAIRBUDGET & FISCAL REVIEWBUDGET SUBCOMMITTEE #4on State Administration, General Government and CorrectionsENERGY, UTILITIES AND COMMUNICATIONSPUBLIC SAFETY SELECT COMMITTEES:CALIFONRIA’S WINE INDUSTRYCALIFORNIA’S HORSE RACINGINDUSTRY - CHAIREARTHQUAKE AND DISASTER PREPAREDNESSJOINT COMMITTEE ON RULES

March 12, 2009

The Honorable Arnold SchwarzeneggerGovernor, State of CaliforniaState CapitolSacramento, CA 95814

Dear Governor Schwarzenegger:

The California Legislative Black Caucus represents and advocates for the interests of Black people throughout California. Among our many valued and principled objectives is our commitment to reducing inequities and creating employment opportunities and economic security for African Americans. It is for that reason that we are writing to you to share our serious concerns about a pending regulation by the California Air Resources Board (CARB) that we believe could have major impacts on inner-city and minority communities.

The issue involves the looming enforcement by the CARB of the Enhanced Vapor Recovery Systems (EVR). It is our understanding that several years ago CARB adopted regulations requiring gas stations to install EVR upgrades by April 1, 2009 to help reduce air pollution levels – a goal we strongly support. However, our concern lies with that fact that due to major bureaucratic delays by CARB in approving products for use by station owners, coupled with extremely high fees and onerous regulations by local jurisdictions. Only 1 in 5 stations have to date been able to install these systems. With just 30 days until the enforcement deadline, more than 78% of California’s 11,000 gas stations will not be able to meet the standard and will be forced to shut down.

The result of this action will be that minority and inner city areas will be especially hit hard. Specifically:\
-Closure of Service Stations Serving Inner City: Stations that cannot meet the deadline will be forced toshut down – creating a major a void in inner-city communities and resulting in dramatic prices increases ata time when our hardworking families can least afford new costs.
-Loss of Revenue for the State and increased unemployment: Service station closures will further hurt ourstruggling economy and aggravate an already dismal budget situation by putting more individuals out ofwork and reducing critically needed tax revenue. This would result in less money for the State GeneralFund and ultimately lead to further decreases in badly needed community, health and educationalprograms.
-Increased blighted areas and increased pollution: Station closures will become community eyesores, setback our efforts to revitalize our inner city communities. Most ironically, it will also result in increasedpollution as individuals drive further to find an open gas station – undermining the original intent of theregulation.
-Hardship on Minority Owned Small Businesses: Major oil companies have divested most of their servicestations to minority, disabled veterans, women and others individuals over the last several years.

Without an extension of the compliance deadline, these small business owners will be financially ruined and their dreams of a better life for their families vanquished.

It is for all these reasons why we are respectfully requesting that you intervene on this critical issue.Specifically we request that you direct CARB to allow for a two year extension of the EVR installation mandate.

This request is consistent with Senate Bill 155 (Cox), which you signed. SB 155 granted rural gas stations a two year extension, postponing enforcement of EVR until April 1, 2011. Your support would allow urban gas stations the same consideration given to rural gas stations. Urban station owners should also have until April 1, 2011 to make these necessary upgrades. Without an extension thousands of stations going out of business resulting in major impacts to communities that can least afford to deal with all of the negative consequences.

Sincerely,

Senator Roderick D. Wright

CC: Members of the Senate and Assembly Black Caucus,Ms. Susan Kennedy, Chief of Staff to Governor Arnold Schwarzenegger, Ms. Mary Nichols, Chairwoman of the California Air Resources Board, Honorable Gil Cedillo, Chair of the Latino Caucus, Honorable Tony Mendoza, Vice-Chair of the Latino Caucus

Get In The Mood For Crude!

2009-03-27T07:51:00.000-06:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 3-27-09

West Texas Intermediate crude oil price settled at $54.37 a barrel yesterday, up from below $32 just after New Year’s Day this year. Wholesale and retail diesel prices have increased 2.5 cents per gallon almost in lockstep for each one dollar increase in the price for a barrel of oil. There are 42 gallons in a barrel of crude oil.

Fuel prices will be rising further but we will not get back up to the highs of last year. Each $10 a barrel rise in crude oil prices will translate into a 25 cents per gallon increase for fuel prices.

It went almost unnoticed that the average gasoline price in the US went over the $2 per gallon mark this week. That price is still $1.25 per gallon below the average price on the same date a year ago.

Retail gasoline prices usually have a delayed immediate reaction to their wholesale price increases. Those costs are being absorbed by refiners and service station operators in their attempt to retain volumes. Most of the independent unbranded stations such as Costco are posting pump prices inverse to their costs. In plain and simple terms they are “upside down” selling gasoline for less than what they are paying their refiners or wholesale distributors.

West Coast gasoline prices are now over $2.20 per gallon, up 4 cents per gallon in one week and 11 cents from just a month ago. The latest wholesale price increases for gasoline indicates that there is still strength for that price to increase up to $2.30 per gallon by the end of next week. The rest of the US will be feeling lucky to only be paying $2.10 per gallon by that time.

The OPIS wholesale rack prices for regular unleaded gasoline in Los Angeles shows the following: 3/27/09 3/11/09 DifferenceBranded Rack Average 1.5584 1.4808 + .0776Unbranded Rack Average 1.6783 1.3967 + .2816

With the average between the branded at unbranded gasoline prices at the “Los Angeles rack” being around $1.62 per gallon, the total price with taxes and distribution costs will be $2.30 per gallon.

The May WTI crude oil price is expected to run up in the high 50's within the next week driven by demand for gasoline and investors looking for a hedge from inflation. The most liquid commodity is oil futures and an increase in open interest and contango for crude oil is an indication of that trend. The price of crude oil will firm up when The US Commodity Futures Trading Commission (CFTC) data, being released later today, confirms whether that trend is continuing.

This week California service stations owners were notified by certified mail about the fines to be imposed on any stations not in compliance with the new Enhanced Vapor Recovery (EVR) Phase II regulation going effect on April 1, 2009.

The California Air Resources Board approved implementation of the EVR program in March 2000, providing a ten-year phase-in of multiple standards to reduce gasoline vapor emissions from the storage and dispensing of gasoline.

About 11,000 service stations in California are affected and about one third of those are not going be in compliance by the looming deadline. The result will be that about 10 per cent of the stations will shut down instead of paying the hefty fines being imposed. California motorists will be surprised to find some of their favorite gas stations closed down and think that it might be an April fool’s joke.

Gasoline Prices To Be Or Not To Be Higher?

2009-03-27T05:55:00.000-06:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 3-25-09

The quote by William Shakespeare is one of the Bard's best and something will come of something in the petroleum industry with all that is happening in the petroleum market today.
Crude oil prices were lower earlier this morning but are expected to go back up after the release of a bullish "durable goods" report. A 14-month high for February 2009 was reported by the US Department of Commerce that durable goods orders increased 3.4% to $165.6 billion in the latest month.

The WTI crude oil price for May was down 70 cents to $53.28 a barrel after the DOE released their weekly inventory statistics this morning. Indications are that energy prices remain strong, even stronger than equity markets, managing to hold on their new price levels. The WTI crude oil for May settled at $53.98 a barrel on Tuesday, which is the highest settlement price since November 28, 2008.

Retail gasoline prices were higher this week as well with the West Coast once again leading the rest of the country going at the pump. Today’s AAA fuel gauge report showed that gas prices went up over another penny per gallon. The average price for regular unleaded gasoline will go over the $2.20 per gallon by this week Friday.

The OPIS wholesale rack prices for regular unleaded gasoline in Los Angeles showed:

On March 25, 2009 On March 11, 2009 Difference
Branded Rack Average 1.5731 1.4808 + .0923
Unbranded Rack Average 1.7113 1.3967 +.3146

Translated that means the price of gasoline with taxes and distribution costs added to the rack price should be somewhere between $2.25 at the branded major oil company stations and $2.40 per gallon at the unbranded independent stations between now and the end of this week in Los Angeles. Zone pricing by the major oil companies will ease that a little bit by stations only increasing their price 2 - 3 cents at the pump. Meanwhile the Indies will be suffering losses on every gallon of gasoline they sell at their stations below $2.40 per gallon.

This morning's Department of Energy inventory statistics showed crude oil stocks increasing another 3.3 million barrels for a total of 356.6 million barrels. An additional 1.8 million barrels were pumped into the Strategic Petroleum Reserve in Louisiana.Gasoline stocks fell 1.1 million barrels to 214.6 million barrels along with demand increasing 145 thousand to over 9 million barrels per day. That will keep gasoline prices increasing in its usual upward march in the springtime for the last five years. Diesel prices are strong based on harsher than normal weather conditions in the East and Midwest part of the country.

The lyrics from a Jackie Wilson song from the 1950’s are an appropriate end to the gas price advisory today. With apologies to Mr. Wilson it has been slightly altered to read: "Your Gas Prices Are Lifting Higher and Higher". Sing it, Jackie!

Rescue Me and Take Me In Your Arms!

2009-03-27T05:53:00.000-06:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 3-23-09

Aretha Franklin's signature song is being revived by the banking industry and US Government to convince the skeptical American taxpayers to throw more of their good money after bad investments made by the Wall Street banks. Other bad news will follow as crude oil will follow suit and increase in response to this program, which is the government's latest attempt to keep the financial industry afloat.

Crude oil for May delivery raised towards the $53 a barrel mark this morning, the highest in almost four months. This was mostly supported by a weak dollar after the Treasury Secretary Timothy Geithner announced plans to remove toxic mortgage assets from bank balance sheets. The administration's new rescue program will consist of the US Government going into partnership with private institutions and spend more taxpayer’s cash for mortgage trash.
This new enterprise tentatively called the Congressional Legacy Asset Program or CLAPCO, to go along with the other government created debacle AIG for Ain't It Grand, may have Congress back pedaling on giving this new program their automatic stamp of approval.

The US government rolled out the new plan on Monday with the hopes that it will purge banks of up to $1 trillion in toxic assets in an attempt to pull the economy out of its current recession.
May WTI crude oil is at $52 a barrel, having earlier climbed to $52.90, the highest price since December 1, 2008 The crude oil price increased from below $33 a barrel in December, 2008 and has been boosted since that time with production cuts by the Organization of the Petroleum Exporting Countries.

On the West Coast refiners are buyers for Los Angeles pipeline gasoline. The BP/Arco refinery in Carson reported a flaring problem last Friday causing the spot market gasoline to spike another 7.5 cents per gallon to $1.61 per gallon.

That relates to the price for unbranded unleaded regular gasoline at the pump in California to be at $2.30 per gallon. The AAA fuelgauge report showed gasoline prices leveling off at $2.13 in Los Angeles and up slightly to $2.18 per gallon in Seattle over the weekend. The prospect for gasoline prices to increase over the next week look better than the chances for the new financial rescue program to be approved by Congress.

Last Friday the US congress passed a bill that will spell the end to the big pay days for any employees of bailed out institutions, imposing a 90% special tax on any pay outs. This move has railed the Wall Street investment community, with some bankers declaring it similar to the McCarthyism from the 1950's. The term being used is that they will now have to learn to live with Obamanism.

It's Heartbreak Hotel Time for Gasoline Prices

2009-03-21T16:32:00.000-06:00

The van der Valk Gas Price Advisory for March 19, 2009

Dateline: Terry, Montana

If Elvis was alive today he would have been on his knees looking forlorn at his adoring audience while singing one of his songs making you feel even bluer after all that is happening in the world today.

Unemployment is skyrocketing, our economy is the dumps and un seemingly large handouts are being doled out by our government to those same entities and people, who were the cause of all our problems. So maybe it's time to bring the curtain down as have Elvis sings: "Are your lonesome tonight?"

As predicted and with assistance from Bette Davis, it's has been a rocky night! After we all went to bed last night crude oil future went up $3 past the $52 a barrel mark. Increases for gasoline and diesel prices followed right on their heels with an almost 10 cents per gallon bump up this morning.

The oil markets are taking their lead from signs that world oil supplies are tighter because of OPEC and non-OPEC crude production cuts along with some indication that U.S. gasoline demand may be stabilizing. A recent Energy Information Agency report showed demand for gasoline up 2.2 per cent for the first two months of 2009 over the same time last year.

A weaker dollar and aggressive action from the Federal Reserve are also behind this morning's rally. Equity markets are taking heart that the recent rallies may actually be holding this time. The big news was the Fed announcements yesterday of a $300 billion qualitative easing package to buy up 2-10 year treasury bonds, in a bid to ease credit liquidity and kick start the economy. The markets were not expecting this move but gave its support by showing their money.

There is also word going around in the hallowed halls of power in Washington and New York that Timothy Geithner, the US Treasury Secretary, will be made the scapegoat in the Obama administration and take the blame for the current AIG mess. The joke going around is that AIG is the acronym for Arrogance, Incompetence and Greed.

His resignation is widely anticipated as he will not want to embarrass President Barack Obama even more. Outraged Republicans were very vocal in their opposition to Timothy Geithner's appointment right from the beginning. That came after his tax problems were revealed only after he had already been nominated for President Obama's economic team's cabinet position.

Between Bernie Madoff, Allen Stanford and a cast of thousands you will soon be able to see a High School Musical type revival of "Jailhouse Rock" presented at the Federal Correctional Facility nearest you.

Why Do Gas Prices Go Up This Time Each Year?

2009-03-16T14:10:00.000-06:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 3-16-09

US Energy Secretary Stephen Chu's mission accomplished what the Obama administration asked him to do. He was sent to Vienna last week to visit with the Saudis, who are shouldering the brunt of OPEC production cuts, while other non-compliant nations continue to produce barrels beyond their quotas.

Secretary Chu had to impress on all of the oil ministers the urgency of not lowering their oil shipments even more than their quotas. This had to be done in order to assist the US and in turn the world economies in recovering from their current recession. Saudi Arabia is one of the OPEC members actually adhering to its assigned quota.

The stock market continued to rally this morning, which in turn sparked gains for oil futures pulling crude and products prices up out of earlier negative territory. Crude oil passed $46.80 a barrel as the Dow and S&P 500 charged higher for the fifth straight session. Earlier this morning April WTI crude oil prices had dropped $1.50 to less than $45 a barrel on the New York Mercantile Exchange, as the OPEC announcement leaving production quotas unchanged sunk in.

The ministers noted that "the worst global economic recession in decades" had contributed to lower demand for crude oil and said it would continue to monitor cuts made since last October. Their next meeting is scheduled for May with the summer driving season in full swing by then.

One positive aspect of continued lower crude oil prices is that any oil production with higher costs will not find a market, which will assist industries to stay economical. In other words with the cost of energy remaining stable for the remainder of the year our economy should be able to recover from its current recession.

The average price of gasoline in the US was at $1.91 per AAA fuelgaugereport up slightly from last week. But get ready for the big spike in gasoline prices as we warm up from the summer. Last week the temperature in Terry, Montana was a chilly minus 18 degrees F with a wind chill factor of minus 31 degrees F. Today that temperature will soar all the way up to 59 degrees so hope springs eternal that we are coming out of one of the coldest winters in recent history. But with summer around the corner, gasoline prices will go up along with the temperatures around the country.

West Coast gasoline prices have already firmed up some more after units at the Tesoro refinery in Wilmington, CA were taken down for maintenance last Friday Gasoline prices usually spike up with refineries coming out their spring turn-a-rounds. Here is a brief overview of "Gasoline Refining 101" and why gasoline prices go up each time this year.

The transition from winter gasoline results in reducing gasoline supply by 10 per cent over the winter grade. The West Coast refineries start out this process by the middle of February each year with the remainder of the country switching over to the stringent Environmental Protection Agency (EPA) requirements by the middle of April.

In order to meet the stricter summer grade the refineries have to lower the Reid Vapor Pressure (RVP), which is a standard measurement of a liquid's vapor pressure in pounds per square inch at 100 degrees F and is an indication of the propensity of the liquid to evaporate.

Gasoline must have an RVP below 14.7 PSI (pounds per square inch), which is normal atmospheric pressure; if a fuel's RVP were greater than 14.7 PSI, excess pressure would build up in the gas tank, and the fuel could boil and evaporate and cause "knocking" in the engine of your car. Depending on the part of the country, the EPA's standards mandate an RVP below 9.0 PSI or 7.8 PSI for summer-grade fuel. Some local regulations call for stricter standards. Because these varying RVP standards, up to 20 different types of boutiques fuel blends are sold throughout the U.S. during the summer [Source: Slate].

Because RVP standards are higher during the winter, winter-grade fuel uses more butane, with its high RVP of 52 PSI, as an additive. Butane is inexpensive and plentiful, contributing to lower prices. Summer-grade fuel might still use butane, but in lower quantities -- around 2 percent of a blend [Source: The Oil Drum].

Blending alcohol into ethanol gasoline causes an additional problem for refiners in that it causes the RVP to increase once again. For areas of the country with ethanol gasoline the RVP requirement has to be lowered to 5.7 PSI, which means a refinery has to run an additional process in order to meet that standard. That last process is the one causing the supply of gasoline to be reduced by 10 per cent.

U.S. Plans for Boosting Alternative Energy Supplies and Conservation

2009-03-11T11:26:00.000-06:00

Pimp My Ride, Flex My Fuel

Quoting from President Barack Obama’s campaign speech,
“We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times… and then just expect that other countries are going to say OK. That’s not leadership. That’s not going to happen.”

The year of 2009 was rushed in with President Obama announcing that U.S. energy independence would be his administration’s second priority right behind getting the U.S. economy back on track.

In order to do that, the President will have to keep his campaign pledge to push for the country to use 60 billion gallons of “advanced” bio fuels and substantially reduce carbon emissions by the year 2030. According to an article in Bio Diesel Magazine, the current usage of on-highway diesel fuel in the U.S. is 33 billion gallons per year. If all of the vegetable oil and animal fat were used to produce biodiesel, we could only replace about 14 percent of the current demand for on-highway diesel.

Compare that to the fact that we have consumed just 197 billion barrels of U.S. oil since the first domestic oil well was drilled in Pennsylvania in 1859. President Obama also promised to require all new vehicles sold in the country to be “flex fuel” vehicles, which will be able to use fuel containing mostly bio fuel by the end of his first term.

Jack Lee, 4Refuel’s President and CEO, says that his company’s fuel management system goes a long way in answering President Obama’s mandate on the use of alternative fuels as well as to reduce carbon emissions.

Bill Bishop, 4 Refuel's Vice President of Marketing, says that greenhouse gas emissions are averted through the company’s on-site fuel management approach. Innovative use of biodiesel will assist with greenhouse gas reductions. “If you start using say a B20 blend, you'll get about a 15 percent reduction in greenhouse gas emissions,” Bishop says.

There are unquantifiable benefits to appealing to customers’ increasing awareness of becoming “ecologically friendly”. 4Refuel feels that their business model can and should be replicated in the U.S. They disclose that their model will re-energize end users of fuel with overall cost savings while at the same time aiding in the reduction of green house gases with the use of bio fuels. 4Refuel believes it will also be a win-win situation for both petroleum distributors and the environment.

In January 2009, the Senate Finance Committee approved $31 billion in tax credits and financial incentives to boost alternative energy supplies and promote conservation. Their plan included most of the $20 billion in energy tax breaks approved by the House Ways and Means Committee, plus more incentives to help alternative energy companies. Most of those energy related items are contained in the $787 billion Stimulus Package signed into law by President Barack Obama on February 17, 2009.

Establishing the new “Green Plan” will come at a great cost to the average consumer’s pocket book. President Obama, with Congressional approval, will have to increase taxes on gasoline and diesel fuel in order to create the necessary cash to pay for all the projects he is proposing in order to become energy independent.

One of the ways to raise financing will be to increase the present Federal Road Excise Tax on gasoline and diesel. The National Surface Transportation Infrastructure Financing Commission has already recommended an increase of 10 cents per-gallon on gasoline and 14 cents per gallon on diesel, as well as indexing the federal excise tax to inflation.

During their meeting on February 26, 2009, the panel also backed the adoption of a controversial system to begin charging motorists based on how many miles they drive by the year 2020. However, this plan may not be seen through to fruition because President Obama has already stated his opposition.

To increase the Federal Road Excise Taxes will a very simple task to accomplish as it will only take simple majority approval by Congress, which is now being controlled by the Democrats. The justification for these additional taxes could be based on the current administration’s attempt to discourage the use of fossil based fuels as the primary energy source for our automotive and industrial needs.

For the moment, fossil fuels will remain the answer as we search for alternate energy sources to replace a larger percentage of the products refined from crude oil. Solar power, nuclear, wind and even natural gas will only be able to replace a small percentage of our total energy requirements in the next decade.

The "National Clean Energy Project" forum, chaired by Senator Harry Reid, was held in Washington on February, 23, 2009. It was attended by such governmental luminaries as former President Clinton, Former Vice President Al Gore, Speaker of the House Nancy Pelosi and Energy Secretary Steven Chu.

Their report outlined a plan to develop a secure, reliable, interoperable, national, and clean electricity grid to power America’s coming clean energy economy. Particular policy recommendations focused on the principle bottle necks for building grid projects.

One of the participants was former oilman T. Boone Pickens, who is now promoting wind power to generate electricity. He was interviewed by Neil Cavuto for Fox News Network. Mr. Pickens announced that the panel was going to formulate a new energy policy for the first time in forty years.

Notably absent from the forum were representatives from either the major oil companies or their trade organization, the American Petroleum Institute. Their intentional exclusion tells the tale of what is yet to come in the world crude oil markets.

You will soon see more flex fuel automobiles and large trucks running on natural gas driving on the highways and byways in the U.S. In other words, Americans better get ready to pimp their cars or trucks for the new century.

Crude Oil Trading Is Playing the Game: "Rescue Boat"

2009-03-04T12:53:00.000-07:00

The WTI crude oil price gained $1.50 a barrel yesterday with news about more rebel attacks on Shell facilities in Nigeria. There was also more speculation swirling around that OPEC will cut additional production at their March 15th meeting in Vienna, Austria. The up note in energy markets was contrary to the continued weakness in the equity markets, which were all dangerously close to forming fresh lows again yesterday.

Today the price for WTI crude oil shot up another $2 to over $44 a barrel after bearish Department of Energy inventory numbers were released. On the West Coast spot market gasoline and diesel prices jumped up another nickel per gallon today with increase in demand for gasoline and cold weather in the East driving both of those prices up.

The retail price of gasoline is leveling off in the U.S. but will be increasing in the next few weeks as refineries are switching to shipping the lower Reid Vapor Pressure summer gasoline to their terminals.

There is still a big disconnect between the price of crude oil as the refiners are now ruling the roost on what they will pay for their crude oil instead of the other way around. The equilibrium point will be reached when demand for gasoline starts equaling supply once again.

Various recent EIA and DOE reports are pointing to that already starting to happen. Speculators are no longer a factor in the oil markets and oil refiners are now operating strictly on a "What the market can pay" for their finished products rather than the other way around. That will allow them to get back to making a profit once again.

And just like the game "Rescue Boat", there are no winners in the oil trading business, only survivors!

Bob van der Valk is the Director of U.S. Branded License Program and Fuel-pricing Analyst with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or email tridemoil@aol.com

My viewpoints can be viewed at: http://www.4vqp.com/ourconsultants/thegasguy

Let The Crude Oil Spinning Wheel Spin

2009-03-03T18:02:00.000-07:00

THE VAN DER VALK GAS PRICE ADVISORY FOR MARCH 3, 2009

Yesterday was a Blue Monday or should we say Black Monday for the stock and petroleum markets but Tuesday we were humming a different tune.

What goes up must come down, Spinning wheel got to go 'round, Talkin' 'bout your troubles, it's a cryin sin, Ride a painted pony, let your spinning wheel spin . . . . .

Those forecasters, who had prophesied that the equity markets were due for an adjustment may be feeling a little smug today, but for most others the outlook is bleak.

Equity markets closed out one of the worst days since the recent recession/depression began and in recent years, with S+P 500 trading at an 11 year low. Unsurprisingly, energy markets tanked in sympathy with the WTI April crude contracts losing over $4 a barrel to stay just over $40 a barrel. On top of all this bearish news, Iran was quoted as being doubtful around further OPEC cuts at the March meeting.

Oil traders are as usual keeping an eye on equities' index with a strong bounce in the S&P or Dow could increase the pace of buying. WTI crude oil was back up to $41.23 a barrel on the close today with gasoline down 2 cents and diesel up two cents per gallon. The West Coast spot market is very weak today with most refineries finally back up and running at full efficiency.

This could be a case for the "wiggles" as we anxiously await the Wednesday Department of Energy report. If that shows larger than anticipated draws or builds in oil inventories, the numbers could change instantly. Last week's report strengthened the oil markets when it showed an increase in gasoline demand from the previous week.

Blue Monday for Crude Oil and Gasoline Prices

2009-03-02T10:46:00.000-07:00

April WTI crude oil is down over $4.50 to just barely over $40 a barrel so far this morning. That should be good news for oil refiners as long as the prices of gasoline and diesel do not start coming down again. Even though wholesale spot market pipeline prices for gasoline and diesel on the West Coast dropped 8 cents per gallon this morning, retail gasoline prices in the U.S. increased over the weekend. Increases in pump prices will unfortunately be a continuing trend regardless on where crude oil prices are heading at least for the next two months.

U.S. oil refiners have been able to keep their foot firmly on the hose to keep from flooding the market with surplus gasoline. The spring refinery turn-a-rounds, switching from winter to summer gasoline, are now in full swing. This morning energy consultant Peter Beutel predicted another 30 cents per gallon increase for gasoline prices to come in the U.S. by the middle of May this year.

The U.S. economy once again felt more downward pressure on Friday, reporting 6.2% reduction in the fourth quarter, this included a downward revision of -3.8% and helped all the vulnerable equity and energy markets to start Monday on a negative note. On top of that AIG received another $30 billion bailout today from the U.S. treasury to keep them afloat.

The Dow Jones Average dipped under the $7,000 mark on all the negative economic news with no strengthening in sight for equity markets. That will drag down crude oil prices even more, even though an Energy Information Agency report showed that gasoline demand was back up slightly in January.

To end this on a positive note, remember part of the lyrics of the Fats Domino Blue Monday song includes: "Saturday mornin', oh Saturday mornin', All my tiredness will be gone away!"

SPRING TIME FOR OIL REFINERIES IN THE U.S.

2009-02-28T05:33:00.000-07:00

Hope springs eternal for motorists with West Coast spot market pipeline diesel and gasoline prices down 3 cents per gallon on Friday. But this is just an adjustment of the big upward momentum in prices of the last two days for these two products with diesel up 7 cents and gasoline up 16 cents per gallon.

Federal Reserve Chairman Ben Bernanke, Secretaries Paulson, Geithner and President Obama are finally all singing from the same song sheet. They are now defending the new rescue plan for banks and it does seem that investors are now feeling assured that US banks will not be allowed to fail in the manner that Lehman's did back in September.

Equities markets and the petroleum markets have been taking cues from each other for the last six months in their ups and downs but mostly downs. But what that has to do with the price of potatoes. . . ., or should I say gasoline, is absolutely nothing!

Crude oil and gasoline prices have lately been moving as if they are in their own universe. Crude oil went back down under $43 a barrel on Friday as rumors being spread around in the market, about more OPEC production cuts, were being absorbed in the markets.

The spot market gasoline prices bumped back up this week after seeing major weakness last week. A myriad of confirmed refinery problems in the U.S. along with at least one confirmed permanent closure of the Big West refinery in Bakersfield has tightened supply of this precious commodity. Along with that are the full blown annual spring turn-a-rounds with refineries turning to starting to produce summer gasoline.

This will cause gasoline prices to stop going down and firm up some more in the next few weeks. Better fill your family buggy this weekend because gasoline prices will be going back up 2-5 cents per gallon by the end of next week. You may want hum the parody to the theme music of Mel Brooks' "The Producers" while you are driving to your neighborhorhood gas station today.

"OH BROTHER CAN YOU SPARE ME A DIME. . . . FOR GASOLINE?"

2009-02-26T10:42:00.000-07:00

There is good news or bad news these days depending on which side of the fence you are dealing in the petroleum market. The April WTI crude oil price surged back over $44 a barrel today. This was mainly due to The United American Emirates cutting back on some more oil exports to Asia in anticipation of the March OPEC meeting.

To cut to the chase, this and last week’s downward trend in the petroleum markets has come to an end. Wholesale gasoline rack prices are firming up once again this week due to a myriad of oil refinery problems in the U.S.

There is still is disconnect between the prices of gasoline and crude oil. With a cacophony coming out from oil analysts it's not no wonder motorists are confused about the reasons for the ups and downs for what they pay at the pump. That price is now being determined by the oil refiners who will only pay for crude oil by what the market will bear for gasoline. Therefore gasoline pump prices are now actually leading the price for crude oil. This is may be a classical case of the tail wagging the dog.

Building on this week’s Wednesday increase, crude and refined products futures on both sides of the Atlantic are seeing gains mainly bolstered by signs that gasoline demand in the U.S. may finally going back up.

The Department of Energy inventory statistics report showed an unexpected gasoline stock decline. According to Wednesday's DOE report, motor gasoline demand over the last four weeks has averaged 9 million barrels per day, up 1.7% from the same period last year.

This could be due to the start of another springtime gasoline-led price rally when the oil refineries switch from producing winter to summer gasoline. The process takes an extra refining process and results in a reduction of ten per cent supply of finished gasoline. The typical oil refiner will take a barrel of crude oil and produce about 21 gallons in the winter with only 19 gallons in the summer. There are 42 gallons in a barrel of crude oil.

Bob van der Valk is the Director of U.S. Branded License Program and Fuel-pricing Analyst with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or e-mail to: tridemoil@aol.com

My viewpoints can be viewed on my personal web page at: http://www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

Imminent Enforcement of Vapor Recovery Systems in California

2009-02-25T07:27:00.000-07:00

A letter was written by California Assembly member Anthony Portantino on February 23, 2009 and was sent to Governor Arnold Schwarzenegger. Mr. Portantino is the Assembly member of the Forty-Fourth District. In it he is requesting that the Governor issue an executive order delaying implementation of the California Air Resources Board EVR Phase II regulation scheduled to go into effect on April 1, 2009.

The upcoming debacle will not only immediately close a lot of low volume gas stations but high volume stations as well as any car washes with gasoline islands will not be able to comply as well. Currently over 50% of the 13,000 gasoline stations are anticipated not to be able to meet the imposed deadline.

This is currently a very hot subject being discussed between the California Air Resources Board and California service station owners. Andre van der Valk has been given the opportunity to speak before the CARB board meeting being held on Thursday, February 26, 2009 board at their Sacramento headquarters. It is during the public agenda part of the meeting, and the board does not have to respond to any of his concerns if they choose to do so.

Below this blog is the alert article I wrote last week about this issue.

Another Day, Another Dollar for Crude Oil

2009-02-24T07:58:00.000-07:00

THE CRUDE REALITY AND MARKET UPDATE FOR 2-23-09

“ANOTHER DAY, ANOTHER DOLLAR DOWN FOR CRUDE OIL”

It was a case of another day, another dollar, or rather another weekend another taxpayer dollar, with the news rife that Citigroup, the US banking conglomerate will be rescued by the US government later today, with a 25% to 40% stake in the cards. That is better news than a complete takeover and the market today will reflect that somewhat more positive approach to yet another bailout.

WTI crude oil price did not retrace its December’s lows last Friday when March prices expired and instead slipped just 54 cents to $40.03 a barrel. Monday's April crude oil price reflected the overall feeling in the market and closed down about a dollar at $38.44 a barrel.

Algerian Oil Minister Chakib Khelil was active in the press over the weekend and was again talking about possible production cuts. Mr. Khelil said that cuts were very likely at the upcoming meeting on March 15th in Vienna. Despite doubts around the compliance of OPEC their actions since September have largely succeeded in stopping oil prices reaching a number much lower than $30 a barrel.

On the gasoline pricing front we finally have some good news for a change for motorists with West Coast oil refineries coming out of their spring turnarounds. The wholesale spot market already dropped 40 cents per gallon last week and unbranded independent gasoline rack prices are back under their branded major oil company counterparts. However both the ChevronTexaco El Segundo and ExxonMobil Torrance refineries have had flaring problems during their start ups over the weekend.

Gasoline and diesel prices will be settling down and gas prices are expected to drop 2 to 5 cents per gallon in the next few days. The next gas price spike will occur before the Memorial Day weekend, which is usually the start of the summer driving season and demand for gasoline goes up.

Say Your Goodbyes To The Mom & Pop Gas Stations In California!

2009-02-15T17:28:00.000-07:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 2-16-09

Posted on February 16, 2009 - 06:55 AM EST

By: Bob van der Valk

This is not an April Fools joke but you may want to pay a visit to one of those conveniently located small gas stations before midnight on March 31st this year. Because that may be the last day you will be able to stop off for two bucks worth of gas and a quick cup of coffee so you can get you to work and back.

That little gas station located around the corner from your home or in the small farm towns in California is currently being threatened. This time it is not an earthquake or a forest fire but a sweeping state regulation requiring them to update their vapor recovery systems at the nozzle on their pumps.

The forewarning came from the California Air Resources Board (ARB), who so far has steadfastly refused to issue a waiver to postpone the mandated deadline of April 1, 2009. It will result in the loss of the jobs and incomes related to many independently owned stations in California.

Most of the gas station owners knew the regulation was coming but did not realize until it was too late that the enforcement for the implementation of the ARB Enhanced Vapor Recovery (EVR) Phase II and In-Station Diagnostics (IDS) rules would mean the death knell of many of their small businesses.

Currently only about one third of the 13,000 gas stations in California are in full compliance with only about 50 per cent of them expected to meet the upcoming deadline. The average cost to install the equipment required to meet the new standards is about $80,000 per station. That amount is costs prohibitive when most of the independent owners are already working on very slim profit margins.

Some of the low volume older gas stations will not be able to afford to install the new equipment on their pump islands even if they are given more time. They will wait for the agents from their local air district to show up with the dreaded red tags and lock up their pumps.

Most but not all of the major oil company stations controlled or owned by Shell (RDS.A), ExxonMobil (XOM), ConocoPhillips (COP), BP/Arco (BP), Chevron Texaco (CVX), Valero (VLO) and Tesoro (TSO) are expected to meet the mandate. They in fact have been pushing the ARB to start enforcing the regulation on time. But some of the branded major oil stations are owned by individuals or small companies and are in the same financial squeeze as their unbranded independent station owners.

There will be a hearing held by the ARB at their Sacramento headquarters on Thursday, February 26, 2009 to review progress or lack thereof for implementation of the new EVR Phase II and IDS rules. The EVR rules go into effect on April 1, 2009 with the IDS rules being phased in two stages with the first deadline in September 2009 and another in September 2010. Enforcement action has been threatened against those stations that do not comply with those deadlines.

Bob van der Valk is the Director of U.S. Branded License Program and Fuel-pricing Analyst with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or e-mail to: tridemoil@aol.com

My viewpoints about the petroleum industry can be found on the Seeking Alpha web site address: http://seekingalpha.com/author/bob-van-der-valk/articles/latest as well on my personal web page at: http://www.4vqp.com/ourconsultants/thegasguy.html

Any views expressed in this newsletter are those of the writer, except where the writer specifically states them to be the views of the 4Refuel group of companies.

The van der Valk Gas Price Advisory for 2-13-09

2009-02-14T07:38:00.000-07:00

I hope you have had your morning coffee as the following may be somewhat tedious. It requires me to get down into the down and dirty details of crude oil trading in order to explain disconnection between crude oil and gasoline prices:

The front month (March) WTI crude oil price is up 75 cents to $34.70 a barrel so far this morning, while the April contract is down 20 cents at $41.97 a barrel. Meanwhile gasoline prices spiked another 2 cents per gallon across the country per the AAA fuelgauge report. Monday's Presidents Day Holiday has some short covering going on but the market is keeping a nervous eye on gasoline demand levels improving after the stimulus package is passed.

The market has been ignoring the March WTI crude oil price and is now concentrating on April. The March price is being squeezed by investors with positions and being used to manipulate the price by the players in the game.

That has been happening every month in the past few months as the future prices are higher than the current month (contango). Those with wet barrels in storage at Cushing, OK in the current month are trying to trade them to forward months in order to find an advantage.

Refiners are at the same time buying crude oil at premium to the WTI crude oil price postings to allow feed stocks (wet barrels) to continue flowing into their facilities. That is opposite of the history where the wet barrels were usually being traded at a discount to the WTI posting.

The March Brent crude oil expires last night and the question now will be that if the WTI/Brent arb trade is lower than it did when it expired last month it could be a sign of further weakness in the landlocked WTI crude oil prices. It will now possible that we will see crude oil dip down into the 20’s but with no appreciable affect on gasoline prices.

On the West Coast gasoline prices firming were caused by refinery delays from coming out of their annual Spring turn-a -rounds along with some glitches with other ones. The average price of regular gasoline will hit $2.25 per gallon as soon as next week Tuesday.

The wholesale gasoline pipeline price is expected to drop 10 cents per gallon today but that price has been out of whack with the rack prices and needed this adjustment. Diesel will be down 2 cents per gallon for the same reason. Oil Price Information Service switches their pipeline market report from 3rd to 4th cycle today and the prices in the last cycle for shipping in February were lower.

The West Coast market is a precursor for the rest of the country with the other refineries switching from producing winter to making summer grade gasoline. That process requires an additional process to lower the Reid Vapor Pressure in gasoline to accommodate the use of ethanol into gasoline as the choice for using oxygenate.

I will be off traveling to Las Vegas next week for the annual Western Petroleum Marketers Association Convention. We will be exhibiting the 4Refuel Fuel Management Online program at their trade show in my current capacity as the Director of U.S. Branded License Program.

I will continue to post my viewpoints and observations at: http://bobthegasguyvandervalk.blogspot.com/

There is no soft cushion for crude oil in Cushing

2009-02-12T21:03:00.000-07:00

THE VAN DER VALK GAS PRICE ADVISORY FOR 2-13-09

This is a follow up to a question asked of me by Gary Richards, reporter with the San Jose Mercury News, about to details on how Wall Street has had a stranglehold on the crude oil trading market.

In the financial markets the relevance of continuing to use the West Texas Intermediate crude oil price for trades is just now coming into question. The posting relates to a storage tanks a at a terminal currently filled to the brim with the WTI crude oil in Cushing, OK. The position of the terminal is such that crude oil can be shipped by pipeline to various refineries in other parts of the country mainly the Gulf Coast of the U.S. Today’s decline in the March WTI crude oil price was achieved amid exceptionally brisk volume even though the contract is set to expire on February 20th.

The discount of West Texas Intermediate (WTI) crude oil, the grade traded at the New York Mercantile Exchange (Nymex), to London’s Brent crude oil posting widened to a record $10.67 a barrel today after supplies at Cushing, Oklahoma, rose once again.

The market is now already ignoring the March WTI price and concentrating on April. The March price is being squeezed by investors with positions and is being used to manipulate the price by the players in the game.

That has been happening every month in the past few months as the future prices are higher than the current month. Those with barrels in the current month are trying to trade them to forward months in order to find an advantage. The contract is nearing five-year lows of 32.20 dollars hit on December 18.

Refiners are at the same time buying crude oil at premium to the WTI crude oil price postings to allow feed stocks (wet barrels) to continue flowing into their facilities. That is opposite of the history where the wet barrels were usually being traded at a discount to the WTI posting.

The March WTI crude oil price, which settled below $40 a barrel in each of the last three sessions, traded down below $34 a barrel today. That is the lowest level seen in more than three weeks. This was based on builds of inventory reported on the weekly DOE stock statistics published yesterday.

The other posting widely used by financial circles is the Brent crude oil price, which is now about $11 higher than the WTI crude oil price. That means the WTI price disparity has grown larger with no real connection to what refiners are paying for their supply of feedstock. The Brent crude oil price is usually only about a few dollars higher.

The March Brent crude oil expires tonight and the question will be that if the WTI/Brent arb trade is lower than it did when it expired last month it will be a sign of further weakness in the landlocked WTI crude oil prices. It is now possible that we will see crude oil dip down into the 20’s but with no appreciable affect on gasoline prices.

The results of what has been happening on the Nymex in the last few years, with crude oil and gasoline prices, is all the proof one needs to see that Wall Street was in charge of determining the price we paid for the energy to run our industry. The true cost for exploring and producing oil has to eventually relate to what it takes to find it and bring it to the market.

The Oil & Gas UK organization, representing most of the major and independent oil producers in that country, came out with a report yesterday that said: "The cost of developing and producing oil and natural gas in 2008 rose by 12% compared with 2007. The break even oil price for new field investment is now over $40. Brent crude oil was posted at around $45 yesterday. Only a third of new developments now under consideration break even at current costs."

There is a disconnect between the price of gasoline in the U.S. especially on the West Coast with the price of crude oil price The price of gas has been increasing pennies a gallon almost every day and is now hitting the $2 per gallon mark in the U.S.

In California that price is already at $2.25 per gallon with the Greater Seattle area hitting $2.19 per the AAA fuelgauge reports. Meanwhile crude oil went down to $35 a barrel on the Nymex today from being at $40 on Monday. In the last few years gas prices would have followed in lockstep with crude oil prices.

A $5 a barrel drop in the price for crude oil would have typically meant an at least 10 cents per gallon drop in the price of gas. Instead the price in Washington State will be heading up some more and go over $2.20 per gallon as soon as tomorrow.

On the West Coast the gasoline and diesel spot market prices were basically flat today. The wholesale gasoline pipeline price did jump up another 6 cents per gallon yesterday. That makes the increase a total 17 cents per gallon for gasoline since Monday with the total affect not yet having been passed along to the pump price.

Meanwhile Billings, Montana has seen the biggest price spike for gasoline in the country. Their pump prices went all the way from $1.34 to $1.74 per gallon in less than three weeks.

In Phoenix the inversion between unbranded and branded rack gasoline is still an amazing 50 cents per gallon. In other words the independent unbranded gas stations have to buy their gasoline at a higher price than their branded major oil company neighbors.

Shippers have been hesitant to nominate tenders being shipped from El Paso to Tucson and in turn to Phoenix through the Longhorn pipeline. With questions about ownership of the product w being trans-shipped in the Longhorn pipeline. Without the Longhorn Pipeline volumes to the Phoenix market will be squeezed. In such an environment the independent refiners, like Western have also been hurting and are trying to keep their gasoline prices up.

The Crude Reality and Market Update for 2-11-09

2009-02-11T17:38:00.000-07:00

The March WTI crude oil price is back down a to a little over $36 a barrel today. Apparently there is no support for crude oil prices after comments made, by former OPEC President and current Algerian oil minister Khelil , that OPEC will make further cuts in oil production if crude stays below $40 a barrel.

Bearish factors for crude oil prices include:

1. Crude oil inventories have risen for the 18th time in the last 20 weeks when the DOE publishes its weekly inventory statistics later this morning.

2. Concerns that global oil demand will weaken further after the drop in Japanese machinery orders for the third straight month in December.

3. That the French economy will slip into recession in the first quarter of this year for the first time in 16 years, and that French business confidence and manufacturing may weaken further in the coming months.

Bullish factors for crude oil prices include:

1. The drop in the dollar index to a 1-week low.

2. Hopes that U.S. energy demand will increase if the US economic stimulus package is successful in boosting the US economy.

3. Comments from OPEC Secretary-General Abdalla el-Badri that the cartel is prepared to cut production again when it next meets in March.

4. The American Petroleum Institute on Tuesday said that gasoline stocks dropped by nearly 3 million barrels for the week ending Feb. 6 and the DOE statistics this morning supported that number.

5. Treasury Secretary Geithner's laid out general plans yesterday to fix the nation's ailing financial sector and resuscitate the U.S. economy. It was in turn greeted very coldly by the investment community, who just saw more of the same in recent attempts by President Barack Obama to stabilize the country's banks.

It will be another balancing day between the doldrums crude oil prices have been in and the continuing rise in gasoline prices in spite of depressed demand levels.

On the West Coast gasoline prices are up 5 cents and diesel is up 2 cents per gallon this morning. No hopes are on the horizon to see any relief soon as the pump.

The rest of the country is also now starting to react to production cuts and unanticipated maintenance problems at U.S. refineries with the ever upward movement in gas prices now reaching the $2 per gallon mark.

Washington state motorists should consider themselves fortunate that they don't have to buy gasoline in California today. The price there is already at $2.239 and climbing steadily upwards.

Another spike in the wholesale pipeline price of 7 cents per gallon has not yet been factored into the pump price. As California has led the price of gas down when the bottom fell out of the market last year, they will be showing the lead in the up market as well.

To Pass Or Not To Pass The Stimulus Package? That Is The Question!

2009-02-10T12:04:00.000-07:00

Here we go again with a new day but the same old routine. WTI crude oil price was back up rounding the $40 a barrel mark this morning. Then went zig zagging all day and went back down to settle around to $39 a barrel. Meanwhile, on the West Coast, gasoline was very strong again up 5-7 cents and diesel down 2 cents per gallon.

This is an almost instant replay of what happened on Monday. Tuesday morning's market reminds me of the movie Groundhog Day. In the film, Bill Murray plays Phil Connors, an egocentric T.V. weatherman who, during a hated assignment covering the annual Groundhog Day event in Punxsutawney, PA finds himself repeating the same day over and over again.

So what's new today? Well, on Tuesday morning hope sprang eternal when the U.S. Senate passed its version of President Obama's stimulus package. The oil traders are now banking on the fact that at the end of the long process it will give the economy a much needed boost and in turn improve crude oil and fuel prices.

With the vote of the Senate to pass the stimulus package, all that is missing now is putting the Christmas bow on the box. The final result reminds me of the old saying about a camel being a horse designed by committee.

Even though actions in Washington are expected to have some affect on the petroleum prices, they are still firming and have completely ignored their raw materials costs. That is not because of any geo-political events but because the refineries are retooling for their annual switchover from producing winter to making summer gasoline.

On top of that, we have had some refinery glitches in California causing gasoline prices to spike at the pump in the Golden State. The Chevron El Segundo and Exxon Mobil refineries in the Los Angeles basin have both reported flaring over the weekend, which is indicative of some impairment with one or more of their units.

The big news in the Midwest is all about Crescent Oil stopping the supply of gasoline to its branded and unbranded stations in six Midwestern states after filing for bankruptcy last week. Crescent distributes fuel to more than 340 locations in Kansas, Oklahoma, Arkansas, Missouri, Illinois and Louisiana.

The Midwest petroleum market was in turmoil Tuesday morning with the fuel supply stoppage at Crescent. Other wholesale distributors are stepping in to grab additional market share. Crescent declared bankruptcy due to rapid expansion and faced strong competition in the retail market from Quik Trip; a Tulsa, OK based major supplier and retailer. They also direct-operated 35 convenience stores and retail price volatility was the main reason given for the company's financial woes.

In Phoenix, Arizona the unbranded and rack prices are now inverted by 50 cents per gallon due to almost no availability of gasoline in the spot market. That is a either good or bad indicator that the worst news is yet to come for gasoline consumers on the West Coast.

One independent wholesaler in Los Angeles has already raised its wholesale price for gasoline by a whopping 13 cents per gallon Tuesday night. Their rack price for unbranded gasoline will be up to $1.83 per gallon resulting in a break even price at the pump of $2.35 before dealer margin is added. In other words $2.50 per gallon for regular unleaded gasoline at the pump is now in sight for Californians.

But no matter which way the wind blows or the direction in which the stimulus package is headed, it will not have the expected changes in the petroleum industry. It will be the same as it was yesterday, is today, and will be tomorrow. The process on how gasoline prices are determined will be not be changed just by passing a law.

We can only hope that an Andie MacDowell will be around to comfort us at the end of the day. Or if not, then at least we can listen to Sonny and Cher sing "I've Got You Babe" over and over again.

The Crude Reality and West Coast Market Update

2009-02-09T09:35:00.000-07:00

March WTI crude oil went up $2 and was last traded back over $42 a barrel this morning. There has been no more downward talk after last Friday's skirting with the $40 a barrel threshold. That was due mainly to large long March position being forced to roll into April contracts at the lower number. The Nigerian rebels have called off their truce over the weekend. This has once again threatened that country's continuing to ship their most wanted sweet crude oil to the U.S.
On the West Coast the wholesale spot gasoline prices has been a strong performer for the last month but is now started to show some weakness down 5 cents per gallon this morning. But don't get your hopes up that pump prices will be coming back down any time soon. The average price in the U.S. is still headed to over $2 per gallon in the next week due to overall production cuts by the refineries. Diesel meanwhile is showing some strength with a 2 cent bump.

The price of gasoline is already at $2.20 per gallon on the West Coast per the AAA fuelgauge report. The break even price for unleaded regular gasoline at the spot market unbranded rack has been over $2.25 per gallon for the last week and that is where the overall price should be by the end of this week.

Crack spreads at the U.S. West Coast refineries are an amazing $35 a barrel today. There is a differential of 25 cents over the the branded by the unbranded wholesale gasoline price. That is the main cause for the strengthening of the refinery crack spreads as they do not have any surplus gasoline to sell in the spot market. So remember to keep your car's gas tank gauge on high.

Tomorrow's Gas Prices, Today

2009-02-08T21:34:00.000-07:00

The van der Valk Fuel Price Projection

The price of gasoline for February 9, 2009 will be:

Los Angeles/
Long Beach
2.180
Up .1 cent

San Diego
2.252
Up 4.5 cents

Bakersfield
2.308
Up 2 cents

Las Vegas
2.124
Up .8 cent

Orange County
2.174
Up 1 cent

San Jose
2.187
Up 2 cents

San Francisco
2.246

Up .4 cent

Seattle
2.159
Up 1.8 cents

Billings
1.729
Up 2.1 cents

Boston
1.892
Up 1 cent

*The methodology in determining tomorrow’s gasoline prices includes a spot market wholesale/refinery rack price differential calculated from the benchmark WTI crude/NYMEX gasoline prices. These are the average prices per gallon for regular unleaded gasoline includes all applicable federal, state and local taxes.

Why Are Gas Prices Up While Crude Oil Is Down?

2009-02-07T07:24:00.000-07:00

The WTI crude oil price is trading below the $40 a barrel mark after the unemployment rate rose to the highest rate since 1992 at 7.6%. But not even bad unemployment numbers and the stalled stimulus package have been able to keep gasoline prices from heading back up all across the country.

Demand concerns for the moment is the key for oil trading front month WTI at a low of $39.31 a barrel. On the West Coast product prices have both moved down in symphony with both gasoline and diesel down 3 - 4 cents per gallon.

Meanwhile back at the ranch in the U.S. the AAA fuel gauge report shows that price of gasoline is going up almost overnight. Why that is happening has motorists fondly remembering the good old days from yesteryear (or was it just last month?) when gas prices were around $1.50. There was even talk then that we might be heading back down to a buck a gallon. Most of the country will be heading up to $2 per gallon within the next week. The West Coast has already been over that magic $2 mark for the last two weeks.

Motorists have now come to the realization that even with crude oil prices down gas prices just seem to be going up, up, up almost overnight. The usual pundits and analysts are scratching their collective heads and are trying to come up with various reasons as to why that is happening.

The answer is simply that the petroleum market has finally gotten tired of losing money on refining fuel. With refineries either cutting back production, or in at least one case shutting down, the supply has come down to the lower demand level.

On top of that the West Coast refineries are now switching over from producing winter to making summer grade gasoline. That by itself is a planned event but the market loses 10% of its supply almost overnight because of the mandated lower Reid Vapor Pressure pressure. The rest of the country's refineries will be doing the same thing in about a month.

So if you have been waiting for gas prices to drop back down you may now know how the Phoenix Cardinals felt after losing Sunday's Super Bowl game. Or as the line from the movie The Fly goes: "Be afraid, be very afraid! You're afraid to be destroyed and recreated, aren't you?"