Is OPEC losing control on world’s crude oil prices?

Since October 16, 2013 West Texas Intermediate (WTI) crude oil decreased in price from $102.49 to $94.11 a barrel, for an 8.2 percent loss, with more to come on the horizon. Good news for consumers with oil companies having enough on hand in cash reserves to make it through yet another pricing adjustment as happened in July 2008. The question on the Oil Producing Export Countries (OPEC) controlling the world’s energy market has been resolved. It has been exactly 40 years since Saudi Arabia and other members of OPEC imposed an embargo on exports of crude oil. Since 1973 US consumers have seen gasoline prices go from $.369 to almost $5 per gallon. Crude oil has rallied back up over to $100 a barrel since the early days of 2009 when West Texas Intermediate crude oil bottomed out at $32 a barrel. Since then the price has been influenced by wars and rumors of wars as well as being threatened by domestic terrorist attacks such as the Boston Marathon bombing earlier this year.

More downside should be expected for crude oil and the dive is just beginning now. Major technical support lies at $60-$62, and oil may not bottom until it falls to as low as $40 The weekly Department of Energy inventory report shows a rise for seven straight weeks. Last week, they rose 5.2 million barrels. Over the past four weeks, inventories have risen by 22 million barrels, the second largest increase since February 2009. Domestic oil production, mainly being fed by hydraulic fracturing, is on the rise and the good news is North America will become energy secure by the end of 2014. OPEC has slowly been losing control on pricing the world’s crude oil requirements. Bob van der Valk lives in Terry, Montana and is currently the Senior Editor of the Bakken Oil Business Journal as well as Fuel-pricing Analyst for US petroleum distributors and retail station owners. He can be contacted at: editor@bakkenoilbiz.com

Hearing on the America’s Energy Future

Testimony of Michael Ziesch Manager, Labor Market Information Center Job Service North Dakota Before the Committee on Oversight and Government Reform United States House of Representatives Hearing on the America’s Energy Future A Blueprint for Domestic Energy Production July 14, 2012 Chairman Issa, Ranking Member Cummings, and members of the Committee on Oversight and Government Reform, thank you for the opportunity to testify on: A Blueprint for Domestic Energy Production, and North Dakota’s contribution towards the Nation’s energy independence. I am Michael Ziesch, Manager of the Labor Market Information (LMI) Center of Job Service North Dakota (JSND). Ours is the state workforce agency that administers the unemployment insurance program, labor exchange systems connecting job seekers with openings posted by employers, and various workforce programs for North Dakota. Detailed information related to our agency and its mission, as well as links to job openings, and our LMI website can be accessed at www.jobsnd.com As a subset of JSND, the Labor Market Information Center operates as the provider of choice for data related to North Dakota’s labor market by policy makers, businesses, the public and media. Our staff collect, edit, compile, and disseminate employment, wage and labor force data under cooperative agreements with the Bureau of Labor Statistics. We also conduct special survey activities related to labor market and economic topics in North Dakota. Background North Dakota has experienced a long period of economic strength and employment opportunity. Activity has been led in recent years by agriculture and energy. But, the economic gains have also been more widespread throughout the industries of North Dakota. This gives evidence of a balanced economy in the state and is highlighted in several labor force statistics. For example:  In the month of May 2012 (the most recent period state data are available) North Dakota’s not seasonally adjusted unemployment rate was 2.7%; compared to 7.9% nationally. o North Dakota has posted the lowest not seasonally adjusted unemployment rate in the nation since April 2009.  Not seasonally adjusted Nonfarm Employment year-over-year, for the month of May, showed an increase of 6.8%; compared to 1.4% for the nation. o All employment sectors showed increase, with the exception of Government. For a longer term perspective, comparing calendar year 2000 and 2011 annual averages, there has also been considerable growth in Covered Employment and Wage levels. Please consider:  The number of employer worksites increased 4,374 (19.0%); from 22,994 to 27,368 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 Total Private Ownership Establishments in North Dakota Source: Quarterly Census of Employment and Wages program 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011  Covered employment grew by 70,210 (22.3%); from 309,223 to 379,433 Annual Average Covered Employment in North Dakota Source: Quarterly Census of Employment and Wages program 400,000 300,000 200,000 100,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011  Annual average covered wages increased $17,095 (69.3%); from $24,683 to $41,778 $50,000 Annual Average Covered Wage in North Dakota Source: Quarterly Census of Employment and Wages program $40,000 $30,000 $20,000 $10,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 As mentioned, energy development has been an important contributor to the State’s strength. In North Dakota there are many components to energy production. A subset includes:  Oil & Gas  Coal  Biomass  Geothermal  Solar  Hydroelectric  Wind On topic with this morning’s Committee Hearing, oil & gas exploration and production activity in the Bakken Formation will be focused upon. The impact of the Bakken Formation on employment and wage levels in the state has been significant. However, measuring its total contribution to the state’s economy is challenging. This is because the activities taking place in the Bakken include companies involved in direct exploration and production industry codes (which are subsets of the mining industry and easily identified), as well subsets of related industries. For instance, a portion of employment and wages from companies across all industries codes could possibly be associated with the Bakken play, especially those located in the northwest portion of our state. Industries with strong Bakken relationships would include:  Transportation o Oil, water, sand & gravel, other materials and supplies.  Construction o Roads, bridges and well pads, commercial and residential buildings, specialty trade contractors.  Wholesale trade o Equipment, supplies, and material.  Professional and business services o Engineering, surveying, and geology companies.  Utilities o Providing infrastructure and supply.  Manufacturing o Storage tanks and specialized equipment.  Other services o Repair and maintenance of equipment. With that being said, to get an idea of the Bakken’s impact, we will look at employment and wage impact geographically (oil & gas producing counties), and by industry. We will look at the data pre-Bakken, using 2004 calendar year, with 2011 annual average being the most recent time period available. Comparing 2004 and 2011 annual averages in oil & gas producing counties versus North Dakota show:  Total covered employment grew 48.3% in oil & gas producing counties; compared to 18.2% statewide. o From 67,911 to 100,717 in oil & gas counties. o From 321,108 to 379,433 statewide.  Total covered wages (payroll) grew 178.6%; compared to 70.3% statewide.  Annual average wages increased from $27,275 to $51,244 (87.9%) o This was nearly double the statewide percentage increase of 44.1% in the same period ($28,987 to $41,778). More specifically, the impact of just the oil & gas exploration and production companies can be viewed over time. For instance:  In calendar year 2004 annual average covered employment, of exploration and production companies, was approximately 2,050; increasing to nearly 15,000 by 2011 (631.7%).  Annual average covered wages nearly doubled from approximately $50,000 a year in 2004 to over $90,000 in 2011. o Annual average wages include the influence of such things as over-time pay and bonuses. Current Condition The current period job creation environment, which is a demand indicator for North Dakota, can be gauged by looking at labor exchange system data administered by JSND. For the most recent time period, (June 2012), there were 22,695 open and available positions posted with our agency. This was an increase of 8,321 (57.9%) from prior year. The job openings, posted by employers in the state, were across all major occupational groups. They varied from those more general and statewide in nature such as:  STEM (Science, Technology, Engineering and Math) related in: o Business and Financial Operations o Computer and Mathematical o Architectural and Engineering o Life, Physical and Social Science.  Health Care Practitioner and Support  Sales and Related  Office and Administrative Support To those more closely related to Bakken activity:  Construction and Extraction o 1,915 in June 2012; up from 1,188 in 2011 (61.2%)  Transportation and Material Moving o 2,298 in June 2012; up from 1,796 in 2011 (28.0%) As mentioned, job opening activity in the state has been influenced by the strength of the Bakken. However, slightly less than 1/3 of the state’s job openings are in the oil and gas producing counties of western North Dakota. The majority of open and available positions are in the balance of state, anchored by the three largest metro areas (Fargo, Bismarck and Grand Forks). Current supply information is available by incorporating job seeker data from the labor exchange system. In June 2012 job seekers, posting resumes, numbered 15,099; down slightly from 15,835 in prior year. The data include both out-of-state job seekers, and North Dakotans, utilizing the system to find employment. Future State The Job Service LMI Center also produces industry and occupational projections for short-term (2 year) and long-term (10 year) periods. We have recently completed a new set of projections for each time period. During the process we relied heavily on data from our state’s Department of Mineral Resources regarding production activity forecasts. The next set of short-term projections, which cover the 2011 to 2013 time period, will be available in August of this year. The current data covers the 2010 to 2012 time period, with percent change of employment expected to be 4.4%. Gains were projected to be widespread among most industries and occupations, with the largest increases in those most closely related to the Bakken activity. The new set of long-term employment projections will be available on July 20th 2012 and will cover the 2010 to 2020 time period. This puts us at the end of the 2008-2018 data sets. During that timeline (2008-2018) employment was projected to have a percent change growth of 9.2% and occur across most industries. As with short-term projections, industry gains will be led by those associated strongly with the Bakken (Mining, Construction, and Transportation). Occupational growth is also expected to be widespread and led by jobs closely associated with Bakken activity (construction & extraction, and transportation and material moving positions). Conclusion North Dakota has enjoyed a long period of economic strength among businesses and employment opportunities for job seekers. It has benefited greatly by activity related to oil & gas exploration and production in the Bakken fields. But, it’s employment and wage growth has also been balanced across other industry sectors and geographies in the state. I thank you for this opportunity to present and would welcome any questions you may have. Michael Ziesch has worked at Job Service North Dakota for the past 15 years. He is a Manager (BLS), in the Labor Market Information Center, which is charged with administering the federal/state cooperative programs related to North Dakota’s labor market. He also acts as a Governor’s Liaison to the U. S. Census Bureau. A native of North Dakota, Michael holds a Bachelors degree in Business Administration from North Dakota State University. He lives in Bismarck with his wife Cathy and step-son Noah. JUNE 2012 ONLINE JOB OPENINGS JOB OPENINGS • Online job openings totaled 22,695 open and available positions in June 2012. Openings were lower by 2.8 percent (-655) over the prior month but 57.9 percent higher (+8,321) than one year ago. • Of the 22 non-military major occupational groups, Office and Administrative Support reported the largest number of openings with 2,385, followed by Transportation and Material Moving with 2,298 and Sales and Related with 2,290. Six other occupational groups also reported job opening counts greater than 1,000 (Management; Healthcare Practitioners and Technical; Food Preparation and Serving Related; Construction and Extraction; Installation, Maintenance, and Repair; and Production). • Nineteen of 22 major occupational groups reported over-the-year gains of 100 or more led by Office and Administrative Support with a gain of 1,155 openings. • Cass County reported the largest over-the-year increase in the number of job openings with 2,721, followed by Burleigh County (+1,337) and Grand Forks County (+704). Five counties reported over-the-year decreases. ACTIVE RESUMES • Active resumes totaled 15,099 in June 2012. Active resumes were lower by 3.3 percent (-514) over the prior month and 4.6 percent lower (-736) than one year ago. There were a total of 11,148 in-state active resumes and 3,951 out-of-state active resumes. • Of the 22 non-military major occupational groups, Office and Administrative Support reported the largest number of active resumes with 3,111, followed by Construction and Extraction with 2,076 and Transportation and Material Moving with 1,818. Two other occupational groups also reported active resume counts greater than 1,000 (Management; and Production). • Three of 22 major occupational groups reported over-the-year gains in active resumes with two reporting gains of 100 or more (Construction and Extraction; and Transportation and Material Moving). SUPPLY/DEMAND RATES • North Dakota’s job openings rate was 5.2 percent in May 2012, the latest month for which data are available. One year prior, North Dakota’s rate was 3.6. The U.S. rate for May was not available at the time of publication, but an April 2012 comparison showed North Dakota at 5.5 percent versus the U.S. rate of 2.7 percent. The job openings rate is the percentage of all jobs in the economy open and available. • North Dakota’s rate of unemployed persons per job opening was 0.5 in May 2012, the latest month for which data are available. One year prior, North Dakota’s rate was 0.8. Again, the U.S. rate was not available at the time of publication, but an April 2012 comparison showed North Dakota at 0.5 unemployed persons per job opening versus the U.S. rate of 3.2. Twenty-seven North Dakota counties reported unemployed-per-opening rates of less than 1.0 which indicates more job openings than resident labor supply. One year ago, ten counties reported rates of less than 1.0. • North Dakota’s rate of active resumes per job opening was 0.5 in June 2012. One year ago it was 0.9. Twenty of the 22 non-military major occupational groups reported rates of less than 1.0 while one year ago nine occupational groups were in that category. All 22 non-military major occupational groups reported rate decreases from the prior year. JOB OPENINGS DATA JOB OPENINGS--TOTAL JUNE 2012 ONLINE JOB OPENINGS REPORT--JOB SERVICE NORTH DAKOTA 30,000 25,000 20,000 15,000 10,000 5,000 0The job openings rate is simply the percentage of all jobs in the economy open and available and is calculated by taking the number of job openings divided by total nonfarm employment (filled jobs) from the Current Employment Statistics (CES) program plus job openings (unfilled jobs). A higher rate is an indicator of increased job opportunities for seekers. This supply/demand rate includes those working more than one job and commuting from out of state. The latest month for which North Dakota employment data are available is May 2012. The latest month for which U.S. job openings data are available is April 2012. U.S. data taken from the U.S. Bureau of Labor Statistics. BACKGROUND Online job openings statistics provide a timely overview of the current supply/demand dynamic of North Dakota's labor market. The Online Job Openings Report (OJOR) is the earliest published monthly indicator of North Dakota’s labor market activity. Data publication generally occurs the first Tuesday of the month following the reference period. The report involves the monthly collection, processing, and dissemination of online job openings posted by employers and active resume activities of job seekers. Both job openings and active resumes are published for the major occupational groups at the statewide and regional levels. Data for counties are only available at a total aggregate level. Various supply/demand rates are calculated for major occupational groups and select geographies. Job openings and active resumes data are used to calculate the rate of active resumes per job opening. Unemployment data from the Local Area Unemployment Statistics (LAUS) program is used to calculate the rate of unemployed per job opening and employment data from the Current Employment Statistics (CES) program is used to calculate the job openings rate. All these supply/demand rates provide users with alternate views of the local labor supply/demand situation. For comparability, national level job openings data from the U.S. Bureau of Labor Statistics (BLS) are extracted from the Job Openings and Labor Turnover Survey (JOLTS) and featured in the report. For a detailed description of the various supply/demand rates, see the ‘Terms and Concepts’ section. METHODOLOGY AND COVERAGE The OJOR is essentially a universe count of all North Dakota worksites with online advertised jobs posted either directly with Job Service North Dakota or indirectly through other online job sites. It should be stressed that coverage is limited to jobs posted online. Job vacancies advertised strictly through word-of-mouth, local print-only newspapers, outdoor signage, or any other non- online means are not counted. The database from the Job Service North Dakota online labor exchange system is the underlying source for the OJOR and its corresponding time series. The data are a combination of local openings brought into the system either internally or externally. An internal job opening is submitted directly to the labor exchange system by either local office staff or authorized local employers. An external job opening is "spidered" into the system from outside online job sites including corporate, educational institution, newspaper, government, private job board, and recruiter sites. Keep in mind, almost all of the online job openings and active resumes data are self-reported by the employer and job seeker, respectively, so accuracy cannot necessarily be guaranteed though system checks are in place to flag potential errors. Every effort is made to ensure the report is constructed using unduplicated data. The unduplication process involves the systematic analysis of key fields of each opening, such as company name, job title/description, and location, against all openings, flagging potential duplicate matches. An analyst reviews and eliminates legitimate duplicates. The OJOR is not subject to the typical sampling error and non-response error components associated with most statistical surveys. Non-sampling error sources would include population under-coverage due to missing a portion of the targeted population (e.g. a large Internet job board), and over-coverage due to the inability to fully eliminate duplicate job openings. Additional potential sources of non-sampling error would include occupational and/or geographic coding errors which could affect the proper classification of individual job openings. Occupational coding is done at the 6-digit Standard Occupational Classification (SOC) level and the 8-digit O*NET level. The SOC coding used in the OJOR is the same definitional coding used for federal employment and unemployment statistics. It should be noted that are no changes at the major occupational group level in the 2010 SOC revision, though the detailed composition of the groups may have changed but not enough to be significant at the group level. The geographic coding for an internal opening is determined by information submitted directly to the labor exchange system by either local office staff or authorized local employers. An external opening is coded against location information from the original posting. Data are not seasonally adjusted and subject to revision. Dashes (---) indicate data not available. TERMS AND CONCEPTS DATA REFERENCE PERIOD. The OJOR collects data using a mid-month reference period (the week that includes the 12th of the month), which is standard for most BLS programs and provides a more accurate comparison for measures using data from those sources. JOB OPENINGS. Job openings include all open and available online openings during the reference period. This figure may include openings posted no more than 90 days prior but still active during the reference period, as well as new openings. ACTIVE RESUMES. Active resumes are all online resumes that have been created or otherwise modified during the reference period. This figure may include resumes posted no more than 90 days prior but still active during the reference period, as well as new resumes. Active resumes may include those created by out-of-state candidates. Candidates may post multiple online resumes so active resumes should not be interpreted as an individual candidate count. Active resumes are not necessarily an indicator of unemployment since candidates posting resumes may or may not be unemployed. SUPPLY/DEMAND RATES. Supply/demand rates, as outlined below, only provide a measure of relative slack of the labor market and whether a potential imbalance exists, but does not suggest that the qualifications of the job seekers directly align with the requirements of the advertised vacancies. Over time, these rates tend to trend closely with the general economic cycle, specifically labor market contractions/expansions. JOB OPENINGS RATE. The job openings rate is simply the percentage of all jobs in the economy open and available and is calculated by taking the number of job openings divided by total nonfarm employment (filled jobs) from the CES program plus job openings (unfilled jobs). The number of unfilled jobs is an important measure of the unmet demand for labor. With that statistic, it is possible to paint a more complete picture of the state's labor market than by looking solely at the unemployment rate, a measure of the excess supply of labor. A higher rate is an indicator of increased job opportunities for seekers. This supply/demand rate includes those working more than one job and commuting from out of state. Calculations for the U.S. job openings rate use data from the JOLTS. Due to timing issues, supplemental data used to calculate this rate typically lag one month, therefore the most recent published rate will lag one month in the latest published report. The U.S. data typically lag two months. ACTIVE RESUMES PER JOB OPENING. Active resumes per job opening is a supply/demand rate that uses active online resumes as the supply input and is the most timely of the supply/demand rates. For this measure, only local active online resumes (i.e. resumes tied to an in-state North Dakota address) were used in the calculation in order to get a more accurate measure of the local supply situation. Out-of-state resumes are excluded from this calculation. A result less than 1 indicates more job openings than local active resumes, while a result greater than 1 indicates more local active resumes than job openings. Also, this is the only supply/demand rate that generates results at the occupational group level. UNEMPLOYED PER JOB OPENING. Unemployed per job opening is a supply/demand rate calculated by taking the number of unemployed persons from the LAUS program and dividing by job openings. A result less than 1 indicates more job openings than potential resident labor supply, while a result greater than 1 indicates more potential resident labor supply than job openings. Calculations for the U.S. rate of unemployed per job opening are based on data from the JOLTS and the Current Population Survey (CPS) from the BLS. Due to timing issues, supplemental data used to calculate this rate typically lag one month, therefore the most recent published rate will lag one month in the latest published report. The U.S. data typically lag two months. OCCUPATIONAL DATA. Occupational groups are based on the 2000 SOC coding system. It should be noted that are no changes at the major occupational group level in the 2010 SOC revision, though the detailed composition of the groups may have changed but not enough to be significant at the group level. Openings and resumes are coded to the 6-digit SOC level and 8-digit O*NET level whenever possible. Data are aggregated to the major occupational group level. UNEMPLOYMENT DATA. The unemployment data used in this report come from the CPS and the LAUS programs. Both programs provide timely and accurate data on the unemployed and are used to calculate supply/demand rates of unemployed per job opening. The unemployed are defined as those 16 years of age and older who were unemployed but actively seeking and available for work within the last month. REGIONAL DATA. The eight North Dakota regions were established in 1968 are made up of groupings of counties around a regional city center providing a majority of the services and exhibiting the greatest economic influence. Openings data are coded based on worksite location. Resumes data are coded based on the current residential address of the job seeker. While the regional reports are not as comprehensive as the statewide report, they do provide some local detail and comparisons not otherwise available. WAGE DATA. The average hourly wage data are the latest available from the Occupational Employment Statistics (OES) program. OES wage data provide an accurate, comprehensive, point-in-time snapshot of wage levels of currently employed workers across all 800 SOC occupations. These wage data should not be interpreted as an advertised wage for openings in that occupational group. Occupational wage data specific to the OJOR regions are not available, instead, state-level North Dakota occupational wages are provided as a general guide. DATA INTERPRETATION The OJOR contains a lot of data and information. For many, the issue becomes how to interpret it. While the top-line numbers get the most attention, the emphasis in interpreting the data should focus on the trend over time. Since the time series is not seasonally adjusted, the most appropriate comparison for any month should be the same month one year earlier. Job openings data reflect a relative demand for labor. Job openings include all open and available online openings. It should not be assumed that the published job openings number is the entirety of the job openings market. There is a segment of the job openings market that relies solely on means other than online to recruit workers. Those openings aren’t captured in the OJOR. Active resumes data reflect a relative supply of labor. Active resumes include all online resumes that have been created or otherwise modified by job seekers with a desire to work in North Dakota. Therefore, a segment of active resumes belong to out-of- state candidates. Candidates may post multiple online resumes so active resumes should not be interpreted as an individual candidate count. Active resumes are not necessarily an indicator of unemployment since candidates posting resumes may or may not be unemployed. It should not be assumed that the published active resumes number is the entirety of the potential labor supply market. For example, those unemployed who haven’t created an online resume are not counted in the active resume total. Similarly, “casual” job seekers who may peruse job openings but not create an online resume are not included in the count. Supply/demand rates are a calculation used to reconcile the relationship between labor market demand (e.g. job openings) and labor market supply (e.g. active resumes, unemployed). The resulting ratios highlight the relative slack of the labor market for occupational groups and select geographies. Generally, supply/demand rates (e.g. active resumes per job opening, unemployed per job opening) below 1 indicate a greater need for workers in an occupational group or area. In other words, there’s not enough supply (workers) to keep up with demand (job openings). Generally, the opposite is true when supply/demand rates exceed 1. Of course, such an analysis only provides a general idea of where excess demand exists; it does not necessarily indicate a match if a candidate doesn’t have the individual education, skills, or experience to get hired. Caution should be exercised when interpreting supply/demand rates. Occupational groups and geographies with a small number of openings exhibit much more volatility and may skew a user’s interpretation of an area’s labor market situation. It’s important to reference the number of openings for an occupational group or geography in order to add context to any supply/demand analysis (high/low rates may mask a relatively small labor market demand and/or supply).This is especially true for geographies with small populations and labor forces. Career planning and exploration is an integral component to a successful work life. Students are increasingly being introduced to career planning and exploration activities early on in their academic life. In conjunction with other pieces of labor market information (e.g. projections, wages, skill requirements, etc.), the supply/demand data can alert students, educators, and counselors to excess supply or higher demand in certain occupational groups or geographies. For job seekers, the OJOR data can help focus job searches and highlight occupational groups and/or geographic areas with the greatest opportunities or toughest competition. The business community, economic developers, and policy makers use supply/demand data to track trends in the labor market. OJOR data can potentially highlight labor imbalances. This can be especially helpful if a business is looking to expand or relocate, therefore needing a supply of available workers. Economic developers and policy makers use the data to gauge the general health of the economy and look for opportunities to maximize labor supply and demand.

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

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

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.

Prepare for a drop in diesel and gasoline prices

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.

What can be done about diesel fuel prices?

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

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.

The insider’s secret on how gasoline is priced

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.

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

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?

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.

Crude Oil and Gasoline Prices Undergoing Stress Test

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

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.