Tag Archives: 2009

Gasoline Prices for Summer 2009 – Cheap Diesel

The oil speculators are at it again.  The reported supply of oil is being distorted and the high price of oil will not last very long. As certain hedge funds that get their money from OPEC sources sell crude oil to themselves (since they own the commodity), there has been an artificial increase in the price of crude oil and gasoline. Reliable sources have reported to me that millions of barrels of crude oil are now being “stored” in barges and ships steamin to port as slow and round about routes as possible.  These “in transit” barrels are not included in reported storage.

Here’s the rub. At some point the ships and barges have to be off loaded . . all available “in transit storage” will fill up and the oil will have to be dumped onto the market. Best estimates of experts tell us that sometime before June 30, crude oil prices will drop below $50 bringing gasoline to $2.00 on the NYME. 

The refiners are working it from the other end.  They will force down the price of deisel, to help keep gasoline prices up. Prior to 1985, deisel continuosly sold at a discount to gasoline. In the refining process, crude oil must first have the deisel (No. 2 oil) refined out before producing gasoline.  So diesel is much easier and cheaper to produce.  To refine gasoline, the oil “left over” after the deisel is separated out must go through a “cat cracker”, which is very expensive to operate. Platinum is required to refine gasoline. With the increase in the price of platinum, gasoline cost to refine increases so the price of gasoline will be marginally determined by the price of platinum.

So  here is what the rest of 2009 looks like for the gasoline and deisel market.  To increase volume sales of diesel at a lower refining cost and keep gasoline at $2.00 refiners will control the retail price of these products. Refiners will become more profitable.

Invest in refiners and deisel powered vehicles. Truckers will be more profitable as cross country trucking fuel prices will decrease. In 3 months that will transfer to “deflation” in the price of consumer products as the decrease of transporting products to market continues to decrease. Crude oil will “stablize” to a $40 to $50 trading range.

For speculation you will be best served to sell “out of the money” contract short if over $65/bbl., that would be October 2009 contracts. When in the money contracts on oil drops below $50 just buy the October contract back cheaper. There is 85% certainty on this trade, a 15% chance this won’t happen.

Summary

Last 2 quarters of 2009 gasoline prices will return to $2 and deisel fuel will be cheaper. This will drive down costs to transport products to market. Oil product prices downtrend will offer up investment opportunities and result in deflationary prices in retail and manufactured products.

$2 Gasoline National Average before Inauguration Day

As I informed you 3 weeks ago the gasoline prices are on their way to $2.00 a gallon national average before Obama takes office in January.  November 4 will put us at $3.00/gallon or a little better as a national average. Multinational oil companies have a target of $2.00/ gallon by Jan 2009 inauguration day. As I mentioned earlier they have made trillions and their cash coffers are full.  The only way to keep us hooked is to make gas “cheap” again (in relative terms) which they hope will make us forget about Wind, Solar. and alternative fuels. It worked in the mid 80’s, when government abandoned research in wind, solar, and alternative fuels after asserting the US was going for independence from foreign oil, because gas was below $.89 a gallon. At that time oil companies took their profits and invested in large land holdings, because home and land prices had plummeted . . . . ..sound familiar. Between 1997 and 2006 they sold most of their land holdings for substantial profits . .and the cycle starts again.

My former colleagues in the oil industry assure me the plan is still in tact.  There will be ups and downs on the way, but that’s the only way to not be so obvious in price control through the futures market.

Since a lot of money is made on heating oil in the winter, they plan on making up any “loss” by charging more for heating oil. Listen to the news. They are already setting the northern states up by “leaking” news that home heating prices may be up 15-20% this winter, even though crude oil prices will be substantially lower than last winter.

Big oil got scared when the Democrats in Congress stopped purchasing oil for the Strategic Reserve and that is when the speculators made their last hurrah seeing oil spike one last time before starting the recent decline. The halting of purchases has had the accumulative affect of adding 2 days of inventory to the United States gasoline reserves. By January 1, it will add 4 days of inventory to the national gasoline reserves. At that time we will start to purchase for our national oil reserves again.

The public outcry for alternative sources of energy must be stopped to preserve the U.S. dependency on oil, which is the plan of Big oil. Gasoline could be manipulated to $1.49 to force out independents and keep us dependent by making alternative sources “too expensive”.