Recovery Killer? Gas Prices Barrel Toward $4 a Gallon

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    Senior Member Mango Man's Avatar
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    Recovery Killer? Gas Prices Barrel Toward $4 a Gallon

    Recovery Killer? Gas Prices Barrel Toward $4 a Gallon

    The U.S. economic recovery, already winded by higher payroll taxes and potential budget cuts, has a new challenge - higher prices at the gas pump.


    After a brief respite in the wake of superstorm Sandy - when the average price for a gallon of regular gasoline suffered its steepest fall since 2008 - retail gas prices are back on the rise. Regular gas has risen 13 percent since last month to a national average of nearly $3.75 per gallon, according to the Automobile Association of America.
    Gas prices have climbed steadily for 32 consecutive days, the AAA noted, supported by refinery closures that undermine supply. At the same time, the price of oil hit its highest level in nearly a year. On February 8, Brent crude hit a nine-month peak of $119.17.

    Geopolitical tensions in oil producing hotbeds like Iran, as well as natural disasters in key parts of the country, are creating supply shortages that are pushing up the price of oil and further supporting gasoline prices.
    Five dollar a gallon gas "is a real possibility" said John Kilduff, partner at Again Capital in New York. "This is partly being driven by the lost refinery capacity of about one million barrels per day...that's a lot."

    Kilduff cited Hess's (HES) closure of a key refinery hub in Port Reading, New Jersey in January as a major factor that has sent gas on a tear. "Prices haven't looked back since," he said.
    "It's one of about eight refineries that have announced closure. Now the East Coast is heavily reliant on [gas] imports when it used to be self-sufficient," Kilduff stated.

    Although major stock benchmarks are on the rise, the 11 percent surge in gas prices couldn't come at a worse time for the economy.
    Last month, core retail sales - which strip out automobile, gas and building materials - ticked higher by a meager 0.1 percent, as the payroll tax holiday expiration began to take its toll on spending. Meanwhile, markets were unpleasantly surprised by news that the economy contracted last quarter, even as U.S. labor markets continue a grudging recovery.
    "The general expectation is that a global recovery is beginning to take hold," said Chris Varvares, senior managing director of Macroeconomic
    Varvares is skeptical that gas could hit $5, given a lack of fundamental drivers. Still, "whatever the futures market is telling us, the current rise in gas and potential for more [price gains] are worrisome for the economy, given the tentative nature of the recovery we're enjoying," he said.
    "It certainly bears watching if gas prices head toward $4," he added.
    With energy prices climbing, the sequestration set to take effect next month could tip the world's largest economy into recession. Should gas prices threaten the $5 threshold, market watchers say that the White House could come under pressure to release petroleum reserves to combat price surge.
    While higher gas prices have corresponded with a rise in crude prices, Brent has fallen back recently as investors grow wary about global demand for oil in a tame recovery. Based on the link between Brent and gas prices, some analysts say the recent dip in Brent's market price could help gas prices to level off.
    Although voracious demand from China has been supportive of energy markets, the International Energy Agency last week trimmed its forecasts for worldwide oil demand, citing constraints on growth conspiring to keep a lid on fuel consumption.
    "Despite signs of improvement in China and the U.S., weak macroeconomic conditions are forecast to keep global oil demand growth capped," the IEA cited in its report.

    http://finance.yahoo.com/news/recove...144215109.html

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    Senior Member Cyclist's Avatar
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    The main reason for the current rise in gas prices is that two huge refineries are closed for PM and to switch to summer blend. The BP refinery in the midwest should have been back on line now, but its now expected to be offline until May/June. A large Hess refinery is the other one, its in NJ.

    The experts I heard talking about it on CNBC said the price should not go much higher, but they don't expect the price to fall much once the refineries get back online.

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    Senior Member CaptTater's Avatar
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    stock prices are going up so it's a break even. Frank says.
    I did not read the story but if you take tax payers money maybe you should be held to some standards.-Cyclist
    when we say the same thing about welfare recipients, you cry like a wounded buffalo Sopchoppy
    It's their money, they spend it how they like. Truth and honesty have nothing to do with it. - Mr Jr
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    Closer to $5 down here. Fry the Obama voters. I'm lovin it.

    And it is not a capacity issue when we export boat loads of gasoline.

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    I read where it's due to the refineries switching to something called "Summer Blend". Which is different from their "Winter Rye" and "Autumn Stout".

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    Senior Member CaptTater's Avatar
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    Quote Originally Posted by Calusa View Post
    I read where it's due to the refineries switching to something called "Summer Blend". Which is different from their "Winter Rye" and "Autumn Stout".
    maintenance period. Hurts when they can't build other refineries.
    I did not read the story but if you take tax payers money maybe you should be held to some standards.-Cyclist
    when we say the same thing about welfare recipients, you cry like a wounded buffalo Sopchoppy
    It's their money, they spend it how they like. Truth and honesty have nothing to do with it. - Mr Jr
    "A radical is one who advocates sweeping changes in the existing laws and methods of government. "

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    Quote Originally Posted by Cyclist View Post
    interesting how average mpg was higher in the mid 80's than mid 2000's (if im reading this right anyway) Is this due to soccer moms with suvs?

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    What is this "recovery" they are referring to?

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    Senior Member frank's Avatar
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    Quote Originally Posted by CaptTater View Post
    maintenance period. Hurts when they can't build other refineries.

    not too much:

    The simple truth (which may be hard to believe given that oil companies are generally looked down on), is that oil companies have been busy adding new capacity in the last decade—expansions of all sizes are underway or have recently been completed. The size of some of these expansions adds more than double the capacity of an average refinery.


    Let's take, for example, Motiva's Port Arthur, Texas expansion project. Already underway since 2006, this expansion project would add 275,000 barrels of capacity per day to this facility. For reference, the current average size of a U.S. refinery stands at nearly 129,500 barrels per day. The expansion project in Port Arthur would be like adding more than two refineries in this country! The project is slated to be complete and operational in 2012.

    While the number of operating refineries has fallen from 254 in 1982 to 137 in 2011, the operating capacity of today's 137 facilities is over 830,000 barrels per day more than it was in 1982. Basically, while we've watched 117 refineries close, capacity has risen. (The Energy Information Administration's earliest records date to 1982.)

    http://www.usnews.com/opinion/blogs/...city-has-grown

    Quote Originally Posted by abovebored View Post
    interesting how average mpg was higher in the mid 80's than mid 2000's (if im reading this right anyway) Is this due to soccer moms with suvs?
    i'm thinking that when gas prices rose high after the two wars in the middle east (takes a lot of fuel to pull that off) fleets went to more efficient vehicles aided by federal tax credits

    the high gas prices suck, and i don't think we'll see them below $3 ever again
    odd, besides tiger woods the other folks hitting the greens with the president were all oil and gas heavy hitters, wonder if they gave him the marching orders

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