Good morning!

Although crude oil prices continue to trade in a narrow range, refined products are just a mess across the United States.  The United States continues to export refined products and crude oil to help alleviate the supply disruption from Russian sanctions.  But we cannot put enough products into the market fast enough.  We did experience a slight reduction in crude prices this week when the United States announced that they would allow a variance in sanctions on Venezuela to allow Chevron to negotiate crude purchases for American refineries.  But the relief was short lived due to China announcing plans to reopen the economy.  As I have been writing for a while now, we don’t necessarily have a crude oil problem.  We have a refining and logistics problem.  We don’t have the world capacity to refine product fast enough or move those products to places of need efficiently.  And because refiners maxed out refining capacity to make diesel, gasoline is in shorter supply going into a driving season that does not seem to be slowing down.  Many believed consumers would change spending habits at these prices.  THey are not.  Gasoline prices jumped much higher this week on anticipated supply issues.  Couple our refined product shortages with the driver shortages, and you will see gas stations running out of fuel this summer.  In fact, I would expect all gas stations to run out of fuel at least once this summer if demand stays strong.  So if you get to a station while traveling this summer and they are out of gas, go easy on the staff.  🙂  It’s a mess out there folks!

In local news, diesel supplies seem to be finally balancing out from planting season demand push.  But gasoline prices out of the Chicago market have rocketed higher.  Gasoline retail prices could easily approach $5/gallon in the coming months.  So as diesel retail prices come down to earth, gasoline retail prices could shoot to the moon.

Propane prices are now at the lowest price in months.  I am starting to suggest customers taking delivery in the coming month or so, or at least 200 gallons if possible.  A strategy of “cost average” is the best for the coming year.  Do not try and time the market.  The volatility is still too extreme to place big bets.  Contracts for next heating season will start to come out in June.  Stay tuned for more info!

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Good morning,

Unfortunately I do not have any good news to report this morning.  Back in 2020, the IMO (International Maritime Organization) lowered the allowable sulfur content in diesel fuel for international shipping.  At the time, the change was going to disrupt the world diesel production and cause massive pain points in world diesel supply.  Well, Covid hit and the fears of the IMO Standard came and went due to decreased shipping demand.  The refiners of the world were able to slowly retool to capture the market change.  Everything was scaling out properly until the war in Ukraine started.  Now the world is trying to reorganize the entire diesel supply chain while shipping is coming back to full strength.  What we thought could happen in 2020 is happening right now.  World diesel supply is an absolute disaster right now that will not get better until maybe next year.  There is not enough refining capacity to meet world diesel demand due to shuttering the Russian supply.  There is spare refining capacity coming onboard across the globe in the coming year, but until then, I don’t see much relief for diesel.  And unfortunately, if diesel prices stay high, all goods and services will remain high in price regardless of raising interest rates or dropping tariffs on Chinese imports.  Inflation has not peaked and until diesel prices ease, we are in trouble.  Congress is trying to pass a law punishing oil companies and retailers saying we are price gauging and taking advantage of customers.  Biden wants to drop import tariffs on China.  The FED wants to keep raising interest rates.  All of the these scenarios would usually lower oil prices which lowers inflation.  The problem is physical supply, not a weak dollar.  OPEC is struggling to keep up with oil production and exports.  The US is shipping out our reserve oil to Europe.  This week the IEA released their disappointment with Biden releasing such a massive amount of reserve oil without asking the IEA.  The IEA believes the move plays into the hands of OPEC because OPEC can ride it out.  I wrote about that scenario a few weeks ago with “Too Much Too Late”.  Although our dollar is trading at incredible strength, demand is eroding in China, and the stock market is in correction, inflation will be with us in the United States with no relief in sight.  I have been writing for a month now to watch the price of diesel, not the price of gas.  I hope everyone has a good job and plenty of savings, because at this rate Christmas could be cancelled by the Fourth of July….

After dropping in price to start the week, gasoline and diesel prices ripped back higher.  Gasoline retail will be holding well above $4/gallon and diesel retail near $5/gallon for possibly the next few months.  I just don’t see much relief in sight.

Propane prices continue to trade in a narrow range as the national inventories start to rebuild.  So far, inventories are rebuilding at a decent rate.  We are not out of the woods into the “comfort zone” by any means, but I’m cautiously optimistic.  I still do not see much relief in prices for summer filling.  With crude prices remaining strong, propane price just doesn’t have the room to fall.  Stay tuned for next season’s contract prices.  We hope to have something out in the coming weeks.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Good morning,

Happy Friday.  As I have been writing, we need to watch the price of diesel as a predictor of our economic future.  This week diesel prices continued their surge with the East Coast toping over $6/gallon at retail.  In our local markets, diesel retail is now over $5/gallon!  Crude prices have surged higher again with the EU coming ever closer to an embargo on Russian crude.  OPEC+ has voted to continue their “trickle level” of increase in monthly crude production.  Even though the FED enacted the largest rate increase in decades, crude prices continue to surge.  With the war in Ukraine not letting up, I fear we are in for a long-haul with these energy markets.  Natural gas has officially hit the highest price since 2008 and shows no signs up letting up.  Utilities will be forced to increase rates into next season, so heating costs will be much higher for consumers next winter.  The energy markets remind me of the crisis in 2014.  Although the skies are very dark right now, the coming years are looking much better.  The amount of crude oil production and refining capacity coming online in the coming 12-24 months is very robust and should not only stabilize the world market but build to surplus.  I believe we are reaching the boiling point in consumer based demand at the current retail price of energy.  If these retail prices hold for a few more months, a decrease in demand will occur and prices should start to relax.  But a true collapse in energy prices will not occur until world supply is more stable.  Hopefully we will start to see the sun poke through these storm clouds by the end of the year.

In local news, diesel retail prices shot over $5/gallon.  Gasoline retail is about to shoot over $4/gallon going into summer driving season.  If these prices hold for a significant amount of time, consumers will start to change behaviors.  And unfortunately, I’m just not sure there is anything the US can do anymore to stop these prices from surging.

Propane prices are continuing to trade in a narrow range compared to other commodities.  Production of propane is very strong and inventories are building nicely going into summer.  The big unknown is going to be corn drying demand.  With crops getting such a late start in the season, the potential for increased dryer demand is on the table.  The good news, although propane prices are higher than average right now, the cost of propane to heat is cheaper than natural gas right now.  We will be sending out contract information for next heating season in the coming months.  I’m not sure retail prices will go much lower for summer, but we should know more by the start of June.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford