Avoiding A Summer of Discontent at the Pumps

Gas Prices and Weather: Good News for a Change

“Hey, Tony, when are you going to bring us some rain”? If I had a dollar for every time I heard that line this week, I would have been able to buy 33 gallons of gas (100 people asked me that question so 100 divided by $3.33/gallon this week= 33 gallons) this week! Of course, gas prices are heading lower now, so who knows, that 100 bucks I would have in my pocket will buy me 35 gallons of petrol this weekend!

In fact, I have been saying for more than 3 weeks here at the WSAZ cafeteria,”gas prices are going lower and will slip below $3 per gallon in June and stay there until late July when the first big hurricane forms”. This was much to the chagrin of Bill Murray who now owns a hybrid (that’s Bill cruising the streets at 10 miles per hour these days getting a whopping 55 miles per gallon!) and who I surmise secretly relishes in our misery (just kidding folks, don’t chastise Bill for being a sensible consumer).

Now the $2.99 per gallon prediction is based on the adage that the commodity markets (grain, energy) price in future expectations. That’s a fancy way of saying on Memorial weekend, we paid out the waayzoo for gas based our stated intentions to travel regardless of the price of gas. When we do that, the law of supply and demand goes to work. In effect we “bid” up the price of gas. The more demand for gas, the higher the producer (aka Oil Companies and their downstream purchasers and retailers) can charge.

But surprise, surprise, Americans slowed down on their trips and traveled fewer miles than originally intentioned last weekend. So when the weekly energy data came out this week at the Chicago Mercantile Exchange, a surplus of gasoline showed up in the pumps of oil companies. This fooled the commodity markets and again the law of S and D went to work. Prices were bid down. Too much gas and not enough demand.

At the same time, restlessness in Nigeria (a key oil producer/supplier) settled, and the loud mouth czar from Venezuela, Hugo Chavez, found himself surrounded by dissident students after his attempt to silence the opposing view TV network (RCTV for Radio Caracas TV).

Venezuela is a player in world energy markets as it supplies the USA with 15% of its imported foreign oil and we in the Red White and Blue buy as much as 60% of Venezuela’s oil. This makes a brash Chavez a constant threat to disrupt the world markets. As long as kids are distracting Chavez, he is unlikely to be a factor in our summer gasoline prices. Did I forget to brand Hugo a megalomaniacal dictator?

Add it up and I expect gas prices to stay stable or fall until the next earth shattering rumor roils the market. That event would likely be a Gulf of Mexico hurricane threat.

But this weekend, a weak Tropical Storm named Barry will do more good than harm as he soaks Florida and the Coastal Carolinas with much needed, drought relieving rains. The track of Barry will bisect the Sunshine State with a landfall north of Tampa likely late Saturday.

It’s later this summer when one of Barry’s siblings, say Felix or Gabrielle, enters the Gulf of Mexico with fierce winds and high seas that oil rigs may have to be evacuated. The shutting down of oil drilling and refining would likely cause a scare in the oil patch and result in a spike in prices at the pump.

So before that happens, my advice is to slow down and use less air conditioning while driving to get better gas mileage. If we all did that, we would save money and force gas inventories to be higher in the weeks ahead. And that my fine feathered friends would be better for the environment and our wallets at the expense of Oil companies!

TONY'S GAS PRICE PREDICTION

Memorial Day $3.39/gallon (observed)

Father's Day $3.10/gallon (quiet Atlantic)

July 4th $3.00/gallon (still quiet)

July 25th $2.90/gallon (right before big hurricane forms)

Labor Day $3.75-4.00/gallon (a major hurricane threat)


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