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

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.