Ending Where We Started
Good morning!
Happy Friday! Well, crude oil prices ended the week where they started on Monday. The markets are trading all over the place and trying to make sense of all the chaos. From the Ukraine conflict, to potential tight crude oil supplies, to OPEC trying to ramp up production, to figuring out what the FED is going to do, to inflation running wild… things are just a mess… At least for now, WTI crude price seems to have found a footing around $90/barrel. I hope that we can hold around this price because any further upward movement is really going to hurt the economy and demand. I did some math this week on how crude prices are affecting the American economy. Based on current gasoline and diesel consumption in the US, every time the national average retail price at the pump goes up 1 penny, $5M/day of consumer cash is sucked out of our spending economy. Since Jan 1st of this year, combined prices now average 20 cents higher into February. That’s $100M/day more than last month! If we keep up at this rate, our economy will pullback. Our consumer based goods economy for the past two years is JUST starting to transition back to service based. And these higher energy prices from gasoline to natural gas are putting an absolute heavy cloud on the service based economy returning. The next few months will be vital for how we recover coming out of full pandemic. I believe that energy cost is in the top three of most important issues affecting Americans right now. Our American economy can not recover or continue at these current energy prices.
In local news, gasoline prices jumped over $3.20/gallon and don’t look to be going down. Diesel retail prices are moving past $3.50/gal and I don’t see any downward pressure on the horizon. For now, your wallet will be much lighter every time you pull into a gas station.
Propane prices have stabilized going into the end of winter. Supply chain logistics are improving, especially with the remainder of winter prediction looking warmer than normal. We will probably have a few colder snaps here and there, but it’s looking like the worst of winter could be behind us. But don’t relax too much, because winter has been extending into April for most recent years. The temps might not be super cold, but I don’t count out snow in mid-March or even beginning of April! For now, please make sure your driveway is plowed and there is a clear path to your propane tank to ensure a safe and efficient delivery during these busy times.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford
Throwing In The Towel
Good morning,
Happy Friday. Well, I have decided to throw in the towel. The market is convinced that $100 crude has to happen based on a multitude of “what-if’s”. Traders were able to finally break the resistance level of $90/barrel WTI crude this week. The momentum and euphoria of seeing $100 has gripped most traders. I believe now that there is nothing to stop the inevitable. I am throwing in the towel and accepting a reality that is not based on complete truth. Because as we know, the markets are irrational and emotional. And right now, we are seeing irrationality and hubris on full display. I do not deny the risk factors of a Russian invasion on Ukraine or Middle East tensions. But the amount of risk premium put into the market is at a level I have not seen since 2014. If we really want to see the economy slow down, run triple-digit crude prices for a month or so. And just like in 2014 and 2008 when crude prices soared above $100/barrel, the fall from crude oil highs was fast and dramatic. We hope now that the FED acts quickly and swiftly to put a stop to the runaway inflation. And, we are also hoping that OPEC+ takes the gloves off of production quotas next month. For now, we need to accept that the path is now carved forward and out of our hands. Pain will come to our pocket books at just the wrong time. Everyone was so looking forward to a reprieve after the current Omicron surge, but unfortunately we will be faced with extremely high energy costs sucking millions of dollars per day from the free-spending economy. Eventually, the build up in savings from last year will start to diminish, and potentially severe economic problems will start to surface.
In local retail news, I expect to see diesel retail prices soar over $3.50/gallon and gasoline retail prices break $3.20/gallon. The situation is not fun so please be kind to cashiers at gas stations. The high prices are not their fault. Everyone is trying to do their best. 🙂
Propane prices have bounced much higher due to disruptions on rail deliveries to the United States as well as some pipeline issues. There are no major supply issues, just logistics. There are train cars sitting in rail yards all over the state, and suppliers are at the mercy of the railroad to prioritize the delivery of the propane cars. The situation is very tricky and we continue to work with the state to try and develop a way to better place necessary priority on propane rail car deliveries. The pipeline issue is based on potential damage that is being repaired. Our main storage cavern in Conway, KS is sitting on excellent inventories based on the five-year average. I expect propane prices to remain higher in the month of February due to lingering logistical issues as well as soaring crude oil prices. As a reminder, please remember to keep your driveway plowed and a clear path to your propane tank to ensure a safe and efficient delivery.
As always, if you have any questions, comments, or concerns, please feel free to give us a call.
Best regards,
Jon Crawford