Gasoline Prices To Be Or Not To Be Higher?

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!