Skip to comments.Reality intrudes on hopes for lower pump prices
Posted on 05/10/2011 5:20:16 AM PDT by thackney
A rebound in oil prices and flooding concerns at Mississippi River refineries may foil hopes that gasoline prices were headed for significant declines this week.
After several months shadowing oil on its steady upward climb, gasoline prices showed some signs of weakening over the weekend.
In Houston, the average price for a gallon of regular slipped from $3.876 on Saturday to $3.865 Monday; in Galveston. the price went from $3.88 to $3.877.
For consumers, there was hope those moves would be the first baby steps on a downward trend, perhaps even a sizable drop to match the steep decline in oil prices that came last week.
But crude rallied on Monday, climbing more than $5 to settle at $102.55 in trading on the New York Mercantile Exchange, thanks to a weakening dollar and investors willingness to return to the commodity.
Heavy rains in the Midwest have led to severe Mississippi River flooding, including concerns that refineries and fuel terminals near the river could be shut down as it hit levels in Memphis, Tenn., on Monday not seen in 74 years.
From Memphis to the Gulf of Mexico, nearly a dozen refineries representing almost 14 percent of U.S. fuel output could see high water, meaning if they were to close even temporarily, it could put a strain on supplies and drive prices upward.
Those concerns sent Gulf Coast wholesale gasoline prices up by nearly 20 cents on Monday. Gasoline prices in New York harbor, a key benchmark, were up nearly 5.5 percent on Monday to $3.23 per gallon.
If the run-up of prices from January through April 30 was biblical, then today I suppose was the Epic of Gilgamesh reprised, said Tom Kloza, an analyst with Oil Price Information Service, a New Jersey firm that tracks gasoline prices. Nothing moves the market like a little fear, or outright panic.
Still plugging away Refinery operators, however, were not predicting problems on Monday.
Valero Energy Corp.s 195,000 barrel-per-day refinery in Memphis was still operating on Monday afternoon and did not expect an interruption in output, said Bill Day, spokesman for the San Antonio-based company. Valero was also taking flood precautions at its 250,000-barrel-per-day refinery in St. Charles, La., which is near New Orleans, he said.
Exxon Mobil Corp., with refineries in Baton Rouge and Chalmette, La., was monitoring river conditions very closely, said company spokesman Kevin Allexon. The Irving oil giant was also placing sand bags at the facilities where necessary, moving some equipment to higher ground and staying in close touch with local officials, he said. But plant operations remained normal.
Shipping concerns Shell, which has a chemical complex in Geismar, La, and co-owns a refinery through its Motiva joint venture in Norco, La., said if the U.S. Coast Guard closed waterways it could affect the companys ability to load barges and ships at some of the docks at the two facilities.
We are coordinating efforts to limit the effects this may have on supplying our customers and will be moving as many products by rail and truck as our logistics assets and the railroads schedules allow, the company said in a prepared statement.
Houstons Marathon Oil Corp. was also monitoring the Mississippi for potential impact on its 436,000 barrel-per-day Garyville, La., refinery. But company spokesman Robert Calmus declined to comment on the current status of plant operations.
Elsewhere, ConocoPhillips said its Alliance refinery in Belle Chasse, La., continues to operate normally, though it was making adjustments in case barge traffic is restricted, spokesman Rich Johnson said. The Houston oil giant does not expect any flood-related effect on its Lake Charles, La., refinery.
Over the top? Kloza said its possible market concerns over refinery shutdowns may be exaggerated.
My sense is that gasoline supplies are tight, but huge refining margins provide plenty of motivation so that there will indeed be plenty of motor fuel after some supply and distribution problems, Kloza said.
If the floods turn out to be a non-event, then crude and wholesale gasoline prices should retreat, said Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Conn.
Prices were I live fell a whole penny, which is 0.25%. Thanks President Obama!
All these guys are doing is reacting with a knee jerk. Give it a few days to settle down. In all likelihood it will come back down today.
As far as supply there is no supply issue.
Distributors don’t lower the price to the consumer until their costs go down.
And, yes, they are slow to pass on the savings, once they begin to benefit.
Until the Government gets out of production restrictions and regulations, we will never be able to solve this problem. Bammy wants high energy prices so he can taunt his cause - communism.
Baraq’s plan is working.
His vision of forcing the masses to bicycles and “high speed” rail is unfolding as we watch.
“Baraq’s” plan will kill his election chances and hopefully the Democratic Party for decades.
I'd say that it was at least good for a laugh, but sadly we had people in this forum who swallowed this nonsense hook, line and sinker. It sure is interesting that these hucksters would be keeping such a low profile right now, so it must be that the media is refusing to run articles which mention fuel prices - even indirectly.