$3 + Unleaded Fuel this summer
Hold on to your wallet folks--this could get quite ugly. I've previously discussed oil supply concerns regarding Iran, Venezuela and Nigeria, but that doesn't seem to be the worst of it.
According to the latest reports (and my empty wallet) Gas prices have risen 16 cents in the last 10 days alone and we are far from the peak driving season:
The federal Energy Information Administration said a similar jump in the nationwide average during the past week was the third-biggest increase recorded since 1990. "We're seeing large increases all across the country," said Jason Toews, co-founder of GasBuddy.com, a Web site that tracks the lowest fuel prices.
Why are prices higher? There's a new wrinkle in the mix. Environmental concerns about MTBE, a gasoline additive, and resulting state bans on it have forced refineries to begin adding ethanol to fuel instead. But Toews said ethanol is in short supply in the U.S., forcing up wholesale prices of the corn-based blend because a lot of it has to be imported.
With that info now digested, here is another chunk to swallow: Several major refineries will soon shut down for routine maintenance at the peak of driving season--more bad news for prices at the pump.
Traders also appeared to be shifting focus to expected lower refinery production in the U.S., the world‘s largest gas guzzler, due to planned maintenance and unplanned outages.
Oil prices are sensitive to any disruption to gasoline supplies from U.S. plants ahead of summer, when demand usually peaks for the motor fuel.
Exxon Mobil Corp. will close for routine work in May a gasoline-producing unit at the largest refinery in the mainland U.S, according to traders. The one-month shutdown of the unit at the 564,000-bpd refinery in Baytown, Texas, is for planned work.
On Wednesday, Exxon shut down a crude unit and a coker at its refinery in Baton Rouge, Louisiana for 32 days, the company confirmed.
Another article reports the situation a little differently:
There has been no shortage of media reports detailing surging gasoline prices in the past two years, but this time most analysts say gasoline costs are being heated up by a lack of refinery capacity, not crude-oil shortages.
U.S. refineries typically shut down for two to three weeks every spring for maintenance and to prepare to create cleaner-burning gasoline, which some states require in the summer. The market does not always react to these shutdowns, but the pipes have little excess capacity this year, according to Noel Casey, a Charleston-based consultant and former president of the National Association of Petroleum Investment Analysts.
"There is no margin for error here," Casey said. "The whole gasoline supply picture around the world is tight."
There are about 150 refineries in the United States, about half as many as there were in 1980, according to the South Carolina Petroleum Marketers Association.
Other analysts blame the higher prices on refineries switching gasoline additives, from methyl tertiary-butyl ether, also known as MTBE, to ethanol, a petrochemical derived from corn. MTBE, a carcinogen, has been found to contaminate drinking water and is the focus of several lawsuits.
One more issue I would like to point out: We're nearing Hurricane season again... If another major storm passes through the gulf and disrupts pumping or refinery operations, it could spell disaster for US oil/gas.
Bottom Line: I honestly believe gas prices will get much worse this summer.
With all this said, I'm looking for some sound advice, as I'm considering a 120-day Bull Call Spread on unleaded futures through Tiger Financial.
Has anyone here ever dealt w/ Tiger? If so, please provide your positive or negative feedback. Also, is my logic (as presented above) sound--am I on the right track?
Thanks in advance for any feedback...