What is in this article?:
- Commentary: News of lower summer fuel prices could be false flag
- From good reports to bad
- Lower fuel prices could be a distant dream.
- Last month USA Today reported U.S. pump prices on average were down 18 cents over the preceding four weeks and were expected to fall another 20 cents a gallon by June.
- Sound reasoning for lower prices.
TRACTOR FUEL prices might fall by august, if the right conditions occur between now and then.
From good reports to bad
So much for the idea that this report would be a positive one for the agricultural industry.
So what happened?
According to analyst Tom Kloza at Gasbuddy.com, an unexpected "perfect storm" of events erased optimism for stable fuel prices and caused an estimated 16 percent rise in pump prices in the Midwest, just since late last week.
Kloza blames the unexpected turn around not on oil production or even on escalating demand, but on refinery operations. While crude production has reached it highest level in the U.S. since the early 1990s, the amount processed this year has dropped to 1990 levels. The long and short of it, according to Kloza, is that many refineries had to retool refinery operations to more effectively process free-flowing Canadian crude and some oil derived from other sources of shale rock and sand.
On top of that, a few major refineries, including units in Wyoming, Illinois and Indiana, experienced unexpected mechanical or technical shut downs, resulting in decreased fuel production. That combination, he speculates, created supplier panic and an uptick in wholesale and retail pump prices.
In addition, fear levels naturally jump every year as the annual hurricane season approaches, set to begin June 1. Extreme tropical weather can easily cause a drop in offshore oil production and a strong hurricane can damage coastal refineries.
If a silver lining exists in this “bad story-that-started-out-as-a-good-story” it could be this: Energy economists agree that as retooling of refineries are completed in the days and weeks ahead and if tropical storms and hurricanes are not troublesome early in the storm season, pump prices could once again stabilize by early July and could fall slowly through the harvest season if production remains high.
In fact, for the first time in more years than many can remember, a return to gas price wars was experienced last month along the Texas coast as a major grocery chain that sells gas and a Wal-Mart store next door (in Corpus Christi, Texas) engaged in a gas war that saw the price for a gallon of regular unleaded fall to $2.77. Even this week the two warring retailers are selling unleaded fuel below $3 a gallon. While that won't last long with gas prices jumping this week nationwide, it could be promise of things to come if production remains high, storms fail to threaten, and escalating prices give way to falling prices again.
It wouldn't hurt to keep our fingers crossed either.