Gasoline prices recently hit a record high by one measure, even though crude oil prices are well below the highs hit in the aftermath of Hurricane Katrina in the August-September 2005 period.
Part of the force behind rising gasoline prices is a spate of planned and unplanned closures at U.S. refineries – as well some in other countries. On an inflation-adjusted basis, prices are still below their peak of a couple decades ago. The all-time record was in March 1981 when the pump price hit $1.42 -- that’s $3.22 in today’s dollars. Still, demand is up 2% year-to-date in the U.S., versus the year-ago period.
On the crude oil front, inventories have slipped in 12 of the past 13 weeks going into the Energy Dept.’s May 16 report.
Nevertheless, energy oil prices are higher than many predicted months ago. Near the end of 2006, crude oil hovered around $50 a barrel and gasoline was at $2 a gallon. And given the slowing economy, there’s growing concern about the energy spike.
Given all that “Morning Call” is at the NYMEX to put energy in focus and answer some basic questions about the supply-and-demand equation. Such as why are there so many refinery closures given global demand and is $4-a-gallon gasoline good for America.
Supply and Demand
"Morning Call's" Liz Claman speaks to energy analyst James Halloran of National City Private Client Group on the factors inflating U.S. gasoline prices. Halloran says Americans rely so heavily on their vehicles that they will pay the higher prices until they're forced to change their driving habits. Halloran also says a shortage of U.S. refineries, the weak U.S. dollar and political unrest in oil rich suppliers such as Nigeria are contributing to the problem.
Good for America?
Could $4-a-gallon gas be good for Americans? If energy conservation is the ultimate goal, will higher gasoline prices force Detroit to manufacture more fuel-efficient vehicles? And as gasoline prices increase, will Americans drive less to avoid the extra expense? Macroeconomic Advisers President Chris Varvares and San Francisco Chronicle Business Columnist David Lazarus weigh in with Michelle Caruso-Cabrera on the issue.
New Age Refineries
The last oil refinery built in the U.S., the Marathon Refinery in Garyville, Louisiana, was completed in 1976. Thirty years later, the need for more capacity couldn't be more evident -- but getting a refinery built has eluded many. Glenn McGinnis, CEO of Arizona Clean Fuels, is the latest to try. He spoke to Liz Claman on his plans to start construction on a $3 billion technologically advanced facility in early 2008.