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.

Stop the Swine Flu Bug

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/