Posted on 12/14/2002 12:36:44 AM PST by Cincinatus' Wife
The strikes in Venezuela, which have reduced the country's exports of crude oil and gasoline to the United States to a trickle, are threatening to thwart a downward trend in local pump prices.
Largely because of the threat that some U.S. refineries may have to throttle back, the Gulf Coast spot market price for wholesale gasoline has jumped about 15 cents per gallon since last week.
Similarly, the New York futures price for January contracts gained 3.24 cents to settle Friday at 83.95 cents. The spot price went from 65 cents to about 80 cents during the week.
Meanwhile, pump prices of gasoline in Houston and Dallas have declined about 2 cents per gallon, and the state average is off about 1 cent. Yet that's still 27 cents higher than a year ago, according to the AAA.
There were stations in Houston where regular gasoline could be bought for as little as $1.21 on Friday. The national average as of Friday was 8.6 cents lower than it was in mid-November.
Because this is a period of slack demand, "barring a U.S. assault on Iraq, motorists may see more decreases in the price of gasoline," said AAA Texas spokeswoman Rose Rougeau of Houston.
With Venezuela being one of the top four suppliers to the United States, refiners who use this crude for a portion of their supplies are scouting other supplies.
The federal government took a step toward easing potential supply problems on Friday by allowing all companies that owe oil to the Strategic Petroleum Reserve to negotiate delaying those deliveries until later in fiscal 2003, which ends Sept. 30.
This differs from Thursday's stance by the Department of Energy that only companies that have been getting oil from Venezuela could negotiate delays.
"By doing so, the DOE will help ensure that the deliveries will not negatively affect the oil market, while still providing for the energy security of the United States," Energy Secretary Spencer Abraham said in a written statement.
On the other hand, there are no discussions about refiners borrowing oil from the reserve despite published reports, DOE spokesman Drew Malcomb said.
The only refinery to predict any reduction in the output thus far is a joint venture in St. Croix, owned by Amerada Hess and Petroleos de Venezuela, the state oil company. But the Hovensa refinery is a large one, producing 490,000 barrels per day.
The other refiners with exposure to Venezuelan crude were saying little.
Refineries typically keep a couple of weeks' worth of crude on hand, which means the supply could start tightening next week, said Jacques Rosseau, an analyst for Friedman Billings Ramsey. They can look for alternate sources but are likely to pay more, he said.
"We could probably make do without Venezuela another week," said Tom Kloza, oil analyst for the Oil Price Information Service in Lakewood, N.J.
The nation's gasoline inventories are down from a year ago, but the inventoried volumes increased during the most recent week and are pretty much in line with the five-year average.
Refineries are making a half-million barrels per day more gasoline than they were last year, supplemented by plentiful imports.
"The market is well-supplied," Kloza said.
Sustaining a price rally at the pump this time of year would be difficult, unlike during March or April when a Venezuelan strike would be cause for alarm.
The wholesale markets were reacting not only to Venezuela's woes but to news that Saudi Arabia will cut back on January crude output, to reports of a problem with a catalytic cracker in Valero's Texas City refinery, and the typical pre-weekend jitters when the war drums are beating, he said.
Companies with significant exposure to Venezuelan crude reductions include the Lyondell-Citgo refining joint venture in Houston, Murphy Oil, Exxon Mobil, Valero, ChevronTexaco and ConocoPhillips, according to Tyler Dann, analyst for Banc of America Securities.
Tulsa, Okla.-based Citgo, owned by the Venezuelans, is one of the nation's biggest gasoline marketers. The situation in Venezuela is so serious that Dann wouldn't be surprised to see the United States shipping gasoline there.
Typically gasoline from Venezuela comes in at Houston and is fed into the pipeline network that originates here.
ConocoPhillips, the nation's largest refiner, said only that its Petrozuata joint venture in Venezuela was operating at less than full capacity because Petroleos de Venezuela, the state oil company, wasn't able to supply it with enough hydrogen.
Petrozuata takes oil that is so heavy it is almost like tar and upgrades it into a synthetic crude.
Crude supplies are adequate at present, ConocoPhillips spokeswoman Kristi DesJarlais said, but it is making contingency plans. These were not disclosed.
Lyondell-Chemical did not return calls about its crude supply situation with Venezuela, nor did Murphy Oil, which has a refinery in Louisiana that uses Venezuelan crude.
San Antonio-based Valero Energy, the largest independent refiner, said it was to get a few shipments from Venezuela in December but was able to cover those, without an increase in feedstock cost.
The situation has both negatives and positives for the refining industry, said Rosseau, the analyst.
The positive is that lowering industrywide output will take down inventories of product. The negative is that it will cause crude prices to go up, he said. The sour crudes of the type that Venezuela supplies are in particular rising, Dann said.
In other New York trading Friday, light, sweet crude for January delivery rose 43 cents to settle at $28.44 a barrel. January heating oil moved 2.31 cents higher, settling at 81.56 cents per gallon. In London, January Brent gained 31 cents, settling at $27.18.
The Soviet Union fell in large part to the price of oil. Looks like the Bush administation is prepared for the Venezuelan shortfall.
Oil crisis is fueling criticism - Strike puts Chavez on slippery slope*** On Friday, though, administration officials moved closer to the opposition's viewpoint. "The United States is convinced that the only peaceful and politically viable path to moving out of the crisis is through the holding of early elections," the White House said in a written statement.
Chavez has anchored his political support, now at 30 percent, largely on accusations that the old political bosses had squandered or stolen the country's oil wealth to the detriment of its poor majority. Now, as the crisis plays out, the embattled president may be driven from office by losing control of oil.***
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