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W
orld crude oil prices reported
by EIA as of March 12, 1999: Saudi Arabian Lt (34 API) - $11.00, Nigerian Bonny Light
(37 API) - $11.25, Indonesia Minas (34 API) $11., 25UK Brent (38 API) - $12.06, Venezuela
Tia Juana Light (31) $11.46, Mexico Maya
(22 API) - $9.23, Mexico isthmus (33) $11.31, China, Daqing (33) $11.00, and
Russia Urals (32 API) $11.36.
Posted prices for crude oil as of March 21, 1999
were: Scurlock, West Texas Intermediate (WTI) $12.50; Louisiana Lt. Sweet Onshore $11.25,
Oklahoma Sweet $12.50.
Refiner posted prices on March 21 were: WTI (36 API) $14.50, Louisiana Lt. Sweet
Onshore $14.00.
West Coast Refinery posted prices as of March 21: Kern River (13 API) $9.00;
Alaska North Slope (27 API) $6.67 (based on Mar 5 O&G Journal);
Kettleman Hill (34 API) $12.05 and Wilmington (17 API) $9.25.
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East Coast Gasoline and Heating Oil
East of the Rockies - Input of crude oil to crude stills decreased in PADDS I, II and were flat in
PADD III. However, gross inputs increased, indicating that refiners were able to reprocess some
residual oil on hand. Production of gasoline and distillate increased in PADD III.
Gasoline and distillate are plentiful in these regions. In fact, refiners in PADD I continue to
draw down distillate inventories which allows them more flexibility in operating their refineries.
By March 12, 1999 gasoline prices had increased as follows: PADD I - $.93, PADD II - $.98,
and $.91 in PADD III.
Diesel prices on March 12, 1999 were up:
PADD I - $1.00, PADD II - $.97, and PADD III - $.97
Heating oil prices on March 15, 1999 were: wholesale 42.2 cents per gallon, and retail 85.8 cents
per gallon.
FORECAST: Gasoline and diesel prices will continue to climb. With rapidly increasing
prices across the board, there will be opportunities for shifts in market shares as refiners
and retailers reestablish their pricing relative to competitors. Consumers will be shopping
for lower prices so there will be shifts in the market. This competition will tend to keep the
price increases under control, although it is not likely that prices will decrease as rapidly
as they increased since we are going into the period of Spring demand.
Rocky Mountain Gasoline and Diesel
Rocky Mountain supplies of gasoline and distillate are still high and there is
no reason to believe there will be any serious problems in the upcoming months.
The price of regular gasoline increased to
$1.00 per gallon and the price of diesel increased to about $1.02 per gallon.
Rocky Mountain prices increased with the price of crude oil, despite the plentiful supplies.
West Coast Gasoline and Diesel Forecast
West Coast - The West Coast is in trouble. Refining rates dropped
10.5%. In addition to the shut down of the
TOSCO refinery due to a fire and local arguments over restarting it, the EXXON refinery did not
go back on line as planned. As a result, inventory levels of gasoline have been drawn down to seriously
low levels, especially going into Spring. Exxon stated that it would be bringing in gasoline
from the Gulf Coast, but that will take some time. The gasoline has to come by tanker. There are no product pipelines from the Eastern U.S. to the West, which is
why the western states are an isolated market.
To complicate matters, California has special
requirements for gasoline, which limit the options for imports. Further complicating the situation
is that each major refiner is producing its own reformulated fuel. The unknown formulas make exchanges
between refiners to cover markets very tricky. The end result is that California is headed for
a shortage of gasoline this Spring.
Relief could come from the restart of the TOSCO and EXXON refineries,
imports, and temporarily relaxed gasoline quality requirements by California. There was an
increase in imports on the West Coast, a key indicator that refiners are bringing in high gravity
crude oil to make a higher percentage of gasoline from each barrel of oil refined. The quantity
of additional crude oil (130 thousand bpd), however, is not significant in the world crude oil picture.
The price of diesel is increasing and will follow the increases in the price of gasoline due to
the shortage of gasoline. The logic here is that the diesel could be upgraded in the refinery to
gasoline. Plus, the diesel on hand was made from crude oil priced lower than crude on the current
market, therefore it is the cheapest
feedstock to make gasoline in the current situation.
By March 12 the average price of (reg-mid-premium)
gasoline in PADD V increased 3 cents to $1.19 per gallon.
The price of Regular remained at $1.15 per gallon.
The average price of diesel in PADD V jumped up from 1.07 to $1.15 and Californian's are now paying
$1.26 per gallon. This price really is outrageous.
FORECAST: The prices of gasoline and diesel are going up. The top end is entirely at the
discretion of the refiners and distributors, since the elasticity in demand will probably not
create enough resistance to counter the shortage in supplies. Consumers will probably start to
complain at around $1.30 per gallon for regular.
There is an outside chance that some competition among the refiners may arise.
With two refineries out of service,
there are some market shares up for grabs. In addition, with the rapid price
increases, it is likely that consumers will shift to the lower priced products. Thus the refiner making
the lowest priced products is likely to pick up market shares during the Spring run. Competition
for market shares could keep prices from getting completely out of control.
For a good graph of gasoline and diesel prices since 1997, take a look at the EIA graph.
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