California crisis means $4 gas for a while
Refinery problems and speculative bets keep pressure on pumps nationwide.
Gas prices in California rose as much as 20 cents per gallon between Thursday night and Friday morning, and the state's fuel shortage is just one reason U.S. gas prices will flirt with $4 for a while.
The average price of a gallon of regular gasoline in California is nearly $4.49, according to the AAA Daily Fuel Gauge Report. That's the highest in the country and far exceeds the roughly $3.89-a-gallon national average reported by the Energy Information Administration -- still a record for this time of year.
If you own an Exxon-Mobil (XOM) station near San Francisco, your prices are likely closer to $4.60. Even high-volume Costco (COST) gas stations can't offer any relief, as the Los Angeles Times reported that the big-box retailer had to shut down some of its pumps.
"We do not know when we will be resupplied," read a sign at one Southern California Costco, according to the Times.
In some areas of the car-happy state, prices have jumped 40 cents in a week as refinery problems have created shortages and helped send wholesale prices soaring. Among the recent disruptions, an Aug. 6 fire at a Chevron (CVX) refinery in Richmond has one of the region's largest refineries producing at reduced capacity. A power failure in Southern California has affected an Exxon Mobil refinery, and a Chevron pipeline that moves crude to Northern California also was shut down.
While all of the above is putting pressure on California pumps, other forces far beyond the state's borders are fueling price increases and a sticky nationwide slide from $4 a gallon. There hasn't been a refinery built in the U.S. since 1976, which means each time one goes offline for a bit or shuts down, the gap between crude oil and gasoline supplies widens. Commodities brokers know this all too well and are starting to place huge bets on commodities futures as peak winter heating demand nears.
As noted by Fortune, a recently released United Nations report explicitly states that the "financialization" of commodities markets -- "hundreds of billions of dollars of bets placed on expectations of temporarily rising prices" for energy, food and other goods -- is the "root cause" of elevated prices. That's right, a bunch of folks sitting at home barking orders to traders as if it were a scene from "Trading Places" helped boost gasoline prices, which in turn pushed this summer's global oil prices 65% higher than the averages reached during the commodity price boom of 2003 to 2008.
"Investors treat commodities as an asset class, which means that they are betting on a certain price trend during the period they are invested in commodity assets," the UN said. "They do not trade systematically on the basis of fundamental supply and demand relationships in single markets, even if shocks in those markets may influence their behavior temporarily."
In a fuel market in which drivers already think prices are headed toward $5 a gallon, commodities brokers and investors aren't just potentially funneling populist anger away from fuel companies and toward Wall Street. They're building that anger a pipeline.
Oil, Politics and the Market ~
It is not theis president's, or any president's fault. The global market establishes benchmark prices for crude oil at the wellhead, upon transport, upon delivery to the refining facilities and finally to the retail gas pump. The fact is oil is a commodity and oil speculators the world over hedge their bets on the upward or downward trend of the barrel price based upon current contracts for available supplies and future contracts for delivery of supplies months from now. These 'middlemen' are part of the process but are also a major part of the problem in the run up of prices, Middle East turmoil is another major component to the threat of future oil supply interruptions.
Additionally, there is no such solution as 'drill baby drill.' The intended Keystone pipeline from the Canadian Tar Sands (Shield) to pump crudestuffs to the Gulf Coast does not fully translate into higher supplies of oil and lower gas prices domestically. Much of the Canadian crude would still be sold on the international spot market where the oil would go to the highest bidder.
An example is the Alaskan Pipeline from Prudhoe bay to the gulf of Valdez. In the 70s a consortium of 5 oil companies and the federal government underwrote the approximately 20 billion dollar 5-year project. Since 1979 about 660,000 barrels of crude have moved down the pipeline to the port on a daily basis. On average, 54% to 63% of all of that oil for all of those years has never been refined on the West coast or produced gasoline for domestic consumption. The big oil companies have routinely sold on the international spot market to the highest bidders ... Asian countries like Japan, South Korea, China, the Phillipines, and Australia. The Canadian pipeline and the intended East coast offshore drilling would amount to the same scenario, much of the oil goes to the highest international bidder and the domestic supply is purposely kept tight to prop prices and profits. 'Big Oil' learned all of the rules well, as this game was literally invented in the days of The Standard Oil Co. Lest we forget, the world's very first Billionaire was John D Rockefeller in 1892 ....and he did not get to that lofty realm because he was a nice guy.
Peace to all ~
I had to take a job where I drive 85 miles round trip everyday and this is killing me. It was bad enough that I had to take a huge paycut after being unemployed for a long time and not able to find work closer to home then gas prices go thru the ceiling. Two mornings ago I paid $4.49/gal for premium, have to use that grade in my Jetta, then in one day it went up to $4.73, ridiculous! So am making $15.50/hour and pay about $400/month for gas just for work. That isn't counting if I go out, which I've seriously cut down on.
Now, is it our fault that a fire broke out at the refinery in WA because there was not enough protection to prevent it? Is it our fault there was a power outage at the refinery in SoCal and that they didn't have preventative measures in place for back up power? I don't know what's behind the closure of the crude pipeline to NoCal so wont' comment on that. Now we know that Exxon-Mobil is going to file claims w/their insurance carriers so they're covered for their losses, who do we go to to recover our losses from these BS high prices??
As I've said for many years, this country is RIPE FOR A REVOLUTION!
That's all I got to say.
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