No Letup in Sight as Oil -- and Gas -- Prices Soar
Expect more gas pains.
Worries over lagging supplies sent crude oil and heating oil futures to new peaks Thursday, sparking predictions of higher gasoline prices in the coming weeks.
As it was, the average in California reached a record $2.378 for a gallon of self-serve regular Thursday, according to the Auto Club. Fresh highs were set in nearly two-thirds of the communities in a survey by the club, with the Santa Barbara region topping all others at an average of $2.499 a gallon.
“If the price of oil stays at these levels, I don’t see where the down side comes,” said Jeffrey Spring of the Automobile Club of Southern California. “It certainly is new territory.”
Thursday’s wholesale rally was driven by a closely watched weekly petroleum supply report from the U.S. Department of Energy, which showed that commercial stocks of heating oil, used heavily in the Northeast, fell by 1.2 million barrels for the week that ended Oct. 8, leaving supplies for the coming winter more than 7% below year-ago levels. The decline exacerbated fears that recent hurricane-related production troubles would leave heating oil inventories at dangerously low levels.
“You have winter approaching, stocks are low and obviously prices are already high,” said Thomas Bentz, senior energy analyst at BNP Paribas Commodity Futures Inc. “It’s not looking good. We can expect prices to continue to stay high and probably move higher.”
Heating oil futures on the New York Mercantile Exchange rose 5 cents to $1.549 a gallon, a record. Light sweet crude oil for November delivery rose in sympathy, jumping $1.12 to $54.76 a barrel -- another record-high close -- despite figures showing oil inventories had strengthened. The benchmark crude traded as high as $54.88 a barrel. As for gasoline futures, they climbed 1.13 cents to $1.419 a gallon.
“We had another day of piling on here,” said Marshall Steeves, energy analyst at Refco Ltd. in New York. “People sort of went crazy.... Heating oil really took off, and that spilled over into crude.”
Bigger-than-expected inventory gains in crude oil for the week were largely dismissed by traders, many of whom attributed the rise to restocking along the Gulf Coast and West Coast after oil deliveries were disrupted by Hurricane Ivan and maintenance in Alaska, according to Steeves. In addition, several California refineries were using less oil because of planned seasonal maintenance, which in turn trimmed fuel production in the state.
Most believe the ongoing troubles will translate into even higher gasoline prices in California and elsewhere.
“It’s not a pretty picture,” Bentz said.
Bentz and others don’t expect the statewide average cost in California to hit $3 a gallon, except perhaps for premium grade fuel. But that assumes there are no unexpected production problems at the state’s 13 fuel-producing refineries.
On Thursday, West Coast traders shrugged off an early morning fire at Tesoro Petroleum Corp.’s refinery in Martinez, Calif., where flames roared for three hours before being extinguished at 5:35 a.m. There were no injuries, no damage to key units and gasoline production continued at its normal pace, according to Jon Ballesteros, spokesman for San Antonio-based Tesoro.
Experts continued to warn, however, that inventory levels for all petroleum products remained uncomfortably low, providing only a slim cushion against disruptions at refineries nationwide. That cushion will continue to be a concern as long as prices remain high, according to Drew Laughlin, an industry consultant in Houston.
“The refiners and traders do not want to hold inventory at this [price] level ... it’s driving inventories down lower and leaves us more vulnerable,” he said. “We’re setting ourselves up again for probably some serious price spikes in the spring.”
