Gasoline Surges on Low Supply, Refinery Outages; Crude Tops $31

Gasoline Surges on Low Supply, Refinery Outages; Crude Tops $31

New York, March 1 (Bloomberg) -- Gasoline rose almost 6 percent, pulling crude oil above $31 a barrel for the first time in nine years, on expectations that the motor fuel will be in short supply when demand picks up during the warm-weather months. Inventories already are 15 percent below year-earlier levels, the American Petroleum Institute said, as refiners restrict output because of high crude oil prices. Gasoline also rose after unexpected refinery disruptions, including one at the Western Hemisphere's second-largest refinery.

``People are so nervous about having enough inventory, they are afraid to sell it and keep buying it,'' said Ric Navy, a broker at Paribas Futures Inc. in New York.

Gasoline for April delivery rose 5.38 cents, or 5.7 percent, to 99.38 cents a gallon on the New York Mercantile Exchange, the highest closing price since October 1990. Prices have been at or close to nine-year highs since late November.

Crude oil for April delivery rose $1.34, or 4.4 percent, to $31.77 a barrel on the Nymex. In London, Brent crude oil for April settlement rose 97 cents, or 3.5 percent, to $29.06 a barrel on the International Petroleum Exchange, also a nine-year closing high.

High wholesale prices, as measured by gasoline futures, have already filtered through to consumers at the pump. Average U.S. retail prices for regular gasoline are at an all-time record $1.421 a gallon, the Department of Energy said Monday. Refinery Problems

Amerada Hess Corp. said it shut a 140,000-barrel-a-day gasoline-making unit, known as a catalytic cracker, at its St. Croix refinery in the U.S. Virgin Islands for emergency repair.

The 525,000-barrel-a-day refinery is jointly owned with Venezuela's state oil company.

Also, BP Amoco Plc extinguished a fire at a gasoline unit at its 410,000-barrel-a-day refinery in Whiting, Indiana, traders said. Further details and company confirmation was not available. Boosting gasoline supplies later in the year, when refineries usually run at maximum capacity, ``will be very difficult,'' said Victor Yu, an analyst at Refco Inc. in New York.

Prices for crude oil, the raw material from which gasoline is made, have tripled in the past 14 months because of restrictions in world output orchestrated by the Organization of Petroleum Exporting Countries.

The rally has intensified political pressure from consuming countries for OPEC to boost output and avoid a possible slowing of world economic growth.

The producer group will increase oil output by at least 1 million barrels a day starting in April, an OPEC delegate said, on condition of anonymity. Oil ministers from Saudi Arabia, the world's biggest producer, Venezuela and non-OPEC ally Mexico are due to meet in London tomorrow to discuss an increase. OPEC members are expected to ratify higher output levels at a March 27 meeting, the delegate said. Venezuelan Denial

Still, a million more barrels won't be enough to stem the drain in inventories, said U.S. Energy Secretary Bill Richardson. ``Each day, the world is consuming around 2 million barrels more than it is producing,'' Richardson told Congress today. ``We cannot sustain this imbalance between supply and demand without risking serious repercussions for the world economy.''

Heating oil for April delivery on the Nymex rose 3.22 cents, or 4.2 percent, to 79.67 cents a gallon, well below the fuel's nine-year high of $1 a gallon at the end of January.

Traders said they were also monitoring possible supply disruptions in Venezuela, after the country's three oil unions said they might go on strike because state oil company Petroleos de Venezuela SA has refused to resume stalled contract talks. Still, a strike is by no means a certainty. The nation's largest oil worker union, Fedepetrol, threatened to strike eight times last year, carrying out only two 24-hour work stoppages, without jeopardizing exports.

http://quote.bloomberg.com/news2.cgi?T=energy_refout.ht&s=78554644

-- Carl Jenkins (Somewherepress@aol.com), March 01, 2000

Answers

``Each day, the world is consuming around 2 million barrels more than it is producing,'' Richardson told Congress today. ``We cannot sustain this imbalance between supply and demand without risking serious repercussions for the world economy.'' HOW LONG HAS THIS BEEN GOING ON? Since Last Spring(when the production cutbacks took place)? HOW LONG HAS BILL RICHARDSON KNOWN ABOUT THIS PROBLEM? (sorry for the shouting)

-- Possible Impact (posim@hotmail.com), March 01, 2000.

Good post. I wasn't aware of the possible strike in Venezuela...

Got bicycles?

-- Mad Monk (madmonk@hawaiian.net), March 01, 2000.

There is PLENTY of oil, even at todays production levels.

It just requires a higher PRICE to squeeze demand a bit down. (and we know what that means... eh? ;

-- Hunchback (quasimodo@belltwor.com), March 01, 2000.

H-

I have to drive 30 miles round trip to get our mail. If push comes to shove I can write it off as a business expense. I can also build a wood gas generator. I have solar for power if I have to cut costs.

Unfortunately, most pople don't have these options. Way back Jim Eddy on Time Bomb 2000, I think, asked whether power usage was elastic. We know that gas is inelastic to a certain extent but the reality is that higher gas prices will not reduce a lot of usage.

Todd

-- Todd Detzel (detzel@jps.net), March 01, 2000.

The world is not producing a bit less petroleum than it is producing.

The petroleum was largely "produced" long before the rise of primates.

World industry merely EXTRACTS (mines?) petroleum, it does not produce any of it.

See www.hubbertpeak.com and www.dieoff.org for excellent, scholarly references on the estimates for how much petroleum remains (and the climatic consequences of burning it all in our planet's thin coating of gas we call atmosphere)

There will come a point for each oil well where the PRICE of oil no longer matters. As oil wells run dry, it will take more energy to extract and process the oil than that oil contains. When this threshold is crossed for a high percentage of the planet's oil wells, the petroleum era will be over, even if gasoline is a thousand dollars a gallon (which, given its non-renewable nature, probably should be priced that high, at least after the solar hydrogen economy is phased in).

-- mark (wind@solar.com), March 02, 2000.