OIL PRICE INCREASE

Here are a few reasons oil jumped $10 in one day last week

1. Hawkish comments out of Israel on Iran
2. Unemployment increased .5% when a .1% increase was expected
3. The European Central Bank made some statement that were interpreted as meaning higher interest rates sooner rather than later. This lead to a weakening of the US$. Oil is priced in US$.
   

These are the key factors that most likely lead to last weeks oil price spike.

What are your thoughts?

OIL PRICES SHOOT UP! June 6, 2008

Markets are jittery today. Previous post on peak fuel prices should have held true. Prices will probably rise at a swift pace if panic overtakes the market.

Will have to analyze factors that are in play and previously were not included in previous post.


VIA - MSNBC

Oil rises more than $10 to record high
Some analysts forecast price could hit $150 a barrel by Fourth of July
NEW YORK - Oil prices shot up more than $11 to a new record above $139 Friday after Morgan Stanley predicted prices would hit $150 by the Fourth of July.


Analysis and posts are forthcoming as new information becomes available regarding this important story.

Also reported today was that US Unemployment rose to 5.5% for May. It was 5.0% in April and it was expected to rise 0.1%. See link for more details.

FUEL PRICES HAVE PEAKED

Monday June 2, 2008 was the last day of peak gas prices. The only fuel station in town had prices at $4.099 for what seemed like a few weeks. That was the highest price reached. The next day prices fell to $4.059 and this morning [6/5] they were $3.999. The national average price should begin to fall within the next few weeks. The slide will probably be gradual and where prices stabilize is any ones guess.

Lets hope for $3.50 soon then $3.00 by September and hopefully lower as the year progresses [If and when the US $ gains some strength, oil and fuel prices will fall further still].

What are your thoughts?

HIGH OIL PRICES: OPPORTUNITY?

High Oil Prices: Analysis, Thoughts and Ideas

• Any price > $100 a barrel is a high price
  
• Price was $131.28 at press time. An updated price can be found here.
• High prices encourage people to conserve
  
• Drive less
• Less leisure driving
• Combine trips. Wal-Mart and Target may be winners from this consumer behavior
• Consumers may walk or bike more. It has been overheard that bicycle sales are up so far this year.
• More exercise leads to better fitness
• Resource productivity increases
• People have an incentive to maximize output when input costs are increasing
• This may create cost differentiation among producers. Those who effectively increase resource productivity make more profits per dollar of sales.
• Alternative strategies become relevant. When gas was $1.509 people kept buying trucks and SUV's because the cost per mile was so low as to not matter. Now that Gas is >$4.009 in some location people want alternatives.
• Toyota utilizes hybrid technology that provides excellent fuel economy
• Honda is well know for efficient and reliable engines.
  
• GM has a vehicle called the Chevy Volt. This vehicle will be capable of 40 mile round trips WITHOUT using a drop of fuel. When not in use this vehicle is plugged into the wall. This is the future. This vehicle is the most exciting vehicle from the General in decades [pick your favorite car introduction].
• As this technology proves itself, reliance on fuel will be lessened. Consumers driving patterns will change to take advantage of the strengths of plug in cars etc.
  
• Power firms and suppliers may be the big winners from high oil prices.
• Plus the firms that patent effective battery technologies
  

What are your thoughts and idea on oil prices as well as the costs and benefits?

Business Week: Exxon: Profit Pirate or Tax Victim?

The oil giant paid $9.3 billion, or 49% of its first-quarter gross income, in income taxes. Is that enough? Depends on who you talk to

NOTES:

• Taxes make up a big percentage of profits
• That $9.3 billion in taxes does not include taxes paid by consumers at the pump
• Michigan: The gasoline tax is reported as 54.4 cents per gallon
• What is the rate in your state?
  
• "...Russia and Libya charge companies up to 90% of the revenues they collect for extracting oil..."
• Nice to see MJ Perry get some recognition
• His website is HERE

What are your thoughts on Exxon, Fuel Prices, or CAFE Standards?

WSJ: "McCain Says Oil Prices Too High to Buy for SPR"

The Wall Street Journal
"McCain Says Oil Prices Too High to Buy for SPR"

Here is the article

My response is below.


The United States produces around 8 million barrels [2006 data] of oil per day. As such, that makes the United States the third largest producer of oil in the world.
The SPR capacity is 727 million barrels.
Current holdings are 698.7 million barrels.
The amount required to bring the SPR to full capacity is 28.3 million barrels. This is just under 4% of capacity. The SPR is 96% full!
This 4% is about 3 days of imports. So if all US imports of oil were stopped the SPR would have 3 extra days of capacity.
Is it really in the best interest of the United States to buy the last 4% [28,300,000 barrels] at $110.47 [Bloomberg.com Nymex Crude Future 10:53am 4/10/08]?
Seems prudent to hold off on purchases until the price drops a bit.
Does this 4% gap/shortfall in holdings vs capacity represent a threat to the United States?
This does not appear to be an issue.
What do you think?

FUEL COSTS

3-31-2008

What it costs in fuel to drive one mile.
87 Unleaded $3.359 per gallon.
The only gas station in town.
There are two others just one mile west.

15 Miles Per Gallon = 22.39 Cents Per Mile
20 Miles Per Gallon = 16.80 Cents Per Mile
25 Miles Per Gallon = 13.44 Cents Per Mile
30 Miles Per Gallon = 11.20 Cents Per Mile
35 Miles Per Gallon = 9.60 Cents Per Mile

Commodity Prices

Hard Assets an Easy Call?
By ANN DAVIS and NEIL KING
March 4, 2008; Page C1

Great article in today's Wall Street Journal. Take a minute to read it.

http://online.wsj.com/article/SB120455064859607543.html?mod=djemITP