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

Good morning!

Happy Friday!  Another wild week in the energy markets.  Crude prices continue to rebound higher as traders shake off demand headwinds from China and their lockdowns.  The hot potato is still the Ukraine/Russian war.  Germany is warming up to cutting off Russian crude imports.  As the oil market continues to try and balance with a disciplined OPEC+, supply disruptions from Libya and others, and the US not able to ramp up as quickly as our government wants, higher prices for crude will continue to be supported in the near term.  Russia is also demanding payment in rubles and shutting of natural gas supplies for those who don’t pay.  Some are worried the payment in rubles could spread over to crude as well.  The instability of Russia’s action with payments is increasing volatility on all commodities.  The good news is that OPEC+ is staying true to production increases the best they are able and the US is plowing ahead with adding more oil rigs.  Germany is also opening back up the North Sea for crude harvesting.  In addition, refining capacity across the globe is also expanding.  So although we are in for a nasty ride of volatility and high crude prices for 2022, I see much lower prices going into 2023 and beyond.  Even though supply is quite bullish now, we are facing some bearish sentiments on the horizon.  The value of the US Dollar is shooting higher which usually lowers energy prices because crude settled in dollars.  And some economic headwinds are forming in the US with inflation on all goods and services, potential housing crisis looming, and a labor supply problem that is not getting better.  If a recession hits the US at some point this year, crude prices will most certainly drop.

In local news, the refinery issue in Chicago came from Bp Whiting, the largest refinery east of the Rockies.  The production shutdown caused a massive spike in Chicago sport price.  Unfortunately, the Group had been struggling with supply, so a shifting of barrels was not as easy as usual.  Then, a short squeeze developed on diesel barrels as an arbitrage for the May to June contract shift developed.  The east coast diesel cost is almost $1/gallon higher than Chicago market!  Pricing diesel spot price right now is like throwing darts at a chalkboard.  And as I have been saying, if you care about the state of the economy, watch diesel prices, not gasoline.  There is still enough money in the system yet for consumers to afford these gas prices for a while.  But if diesel prices continue to climb at these current rates, prices of everything will continue to go up.  Diesel literally fuels our economy.  So until the May contract closes out and June opens next week, we are in some choppy trading waters.  I would not be surprised to see diesel retail prices in our market eclipse $5/gallon next week and gasoline retail eclipse $4/gallon.  If the arbitrage calms down on the spot market, we could see prices ease and not break through my predicted ceiling.  Once again, I hope I am wrong!  🙂

Propane prices jumped last week as the winter weather continues to drag on.  Although national supplies are starting to rebuild, the issues with the EU needing so much LNG is putting pressure on potentially increasing propane exports as well.  I get worried that the US will over-promise and deplete our much needed reserves at home.  But we still have plenty of time.  For now, I don’t expect propane to move much lower in price.  Next season’s contract pricing will probably come out in June this year.  So stay tuned for more info!  If you are a will-call customer, remember to check your tank!  This cold weather is surprising a lot of customers and causing runouts!  🙂

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

Best regards,

Jon Crawford

Good morning!

Happy Friday!  WTI crude prices continue to remain above $100/barrel as the war in Ukraine rages on.  Crude prices soared on OPEC+’s commitment to their production strategy and the EU ending Russian imports by year end.  Libya also lost control of a major production facility to political insurgents.  The loss of Libya production coupled with draws in US inventories being exported pushed WTI closer towards $110/barrel.  But then Germany threw some cold water on the party saying that they are reopening a ton of oil wells in the Black Sea that will replace Russian imports by years end.  Then the FED said that 50 basis point rate hikes are on the table for the out of control inflation plaguing our country’s economy.  And China’s economic “reopening” is not going well at all.  There are now four times as many ships sitting outside China waiting to unload and load as there were in 2020 when the the world shut down.  If we thought supply chains were a mess before, hold on to your hats!  I believe our supply chain issues could see the hardest times yet this summer!  The end of week news pushed WTI crude back down towards $100/barrel.  Although the prices for crude dropped nicely, the prices for refined products in certain spot markets did not follow accordingly.

In Chicago, a refinery maintenance issue coupled with upcoming summer demand has caused cash basis spot pricing on gasoline and diesel to skyrocket.  The cost of gasoline is now almost 30 cents per gallon higher than it was a week ago, and diesel cost is now over 40 cents higher.  Our market in Wisconsin, is mostly based on Chicago spot pricing along with the Group to the west.  The Group was already struggling to keep supply steady, while Chicago was offering steep discounts to help move supplies.  Now, the tables have flipped.  Chicago spot market is now HIGHER in cost compared the Group.  The flip in economics means that the retail price of gasoline and diesel is going to be much higher next week.  I expect to see gasoline retail price hit or exceed $4/gallon and diesel retail prices to hit or exceed $5/gallon.  Unfortunately, we have a LONG way to go before gasoline and diesel prices settle down.  I am now predicting that gasoline retail will be between $3-4/gallon and diesel retail $4-5/gallon for the remainder of the year.  It’s the one prediction that I hope I am wrong!  🙂

Propane prices are holding very firm on skyrocketing natural gas costs.  As natural gas prices rise, companies look to propane as an alternative fuel for production.  And since Canadian inventories are very low, as well as America’s inventory, the markets are going to price propane accordingly to try and keep as much on hand to help avoid a supply crisis next winter.  The late season cold weather is keeping propane inventories from building into next heating season.  The longer lasting cold is also pushing off the planting season for farmers which raises the probability of a later harvest.  And usually a later harvest means more crop drying demand because farmers lose a month of natural drying weather during optimum crop growth maturity.  For now, I do not expect to see propane prices move much lower.

As always, if you have any questions, comments, or concerns, please feel free to contact us!

Best regards,

Jon Crawford

Good morning!

I hope this message finds you all well on this snowy and cold morning in Wisconsin.  WTI crude prices are closing below $100/barrel for the week after hitting highs just weeks ago.  The big news this week was an announcement by the IEA to release an additional 160M barrels of oil from the world strategic reserves.  At first, the market sold off on the news but recovered within a day.  I believe the reason is because all the actions being taken to curtail rising energy costs are too much, too late.  I know that sounds a bit counterintuitive, but the market is starting to understand the bigger picture that OPEC+ is behaving within their production quotas.  And OPEC+ seems to remember what happened in 2014.  They are NOT going to be stuck holding the bag.  The more the world pushes the reserve releases, the firmer they are holding to their quotas.  And the world will run out of reserves before OPEC+ runs out of oil.  So we are in this game of “catch-up” and “reaction” that is not working as expected.  Even rising interest rates and discussion of possible recession are not affecting crude prices as they have in the past.  I really believe that until there is a steady, predictable increase to world crude production, the world will be stuck with higher oil prices.  If we do go into a full-blown recession and interest rates jump 3%, we could then start to see some downward pressure.  However, if OPEC+ responds with production cuts to these events, possibly prices could be buoyed at higher rates.  Even China continuing to shutdown the largest city in the world didn’t lower crude prices that much!  Now, although crude prices are much lower, some have stated that retail prices have not fallen as much.  The reason is that cost for gasoline and diesel is at a positive arbitrage to crude prices.  We continue to export refined products dealing with worldwide supply issues surrounding the war and bans on Russian products.  The United States is at 92% refining utilization which is very healthy, but our exports are offsetting the builds in diesel reserves that we desperately need.  The US is at the lowest levels of diesel fuel inventory in many, many years.  And we are now in an economy that is more dependent on diesel due to our spending patterns.  As inflation continues to skyrocket, consumers are already stating that they are going to cut back on “going out” which means they will just buy more stuff at home.  The behavior puts more pressure on mid-stream logistics which is mostly fueled by diesel.  Whereas the “going out” consumer behaviors are fueled more with gasoline.  Regardless, I believe the West is reacting too much, too late to make a big difference in the near term.

Gasoline and diesel retail prices have eased a little bit at the pump.  Gasoline retail prices are pushing closer to $3.49/gallon and diesel is pushing down towards $4.49/gallon.  The spread between gasoline and diesel is almost $1.00/gallon at the pump!  The reason is due to the very low national inventories of diesel.  As I have been writing, consumers need to watch the price of diesel.  If diesel stays high as it is, inflation will remain red-hot because diesel prices are connected to everything we do.  In my opinion, for what it matters, we need diesel prices to drop $1/gallon in order to have a shot at a soft landing coming down from high inflation with rising interest rates.

Propane prices are also slowly easing with the recent drop in crude prices.  Although propane cost is not dropping as much as expected due to very low national inventories and a winter that never seems to end.  The good news is that I see a better chance of having propane contracts for next season at lower prices than I anticipated a month ago.  We will be sending out information on our contracts for next season probably near the end of May or the first part of June.   Please stay tuned for more info.  In the meantime, if you contracted with us for the current heating season, please make sure to call us if you have remaining contract gallons.  Your current contracted gallons expire at the end of April which is fast approaching!

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!  I have been under the weather most of the week so my summary will not be as thorough.  I’ve been doing my best keeping up with the slew of info coming in everyday.  The week started out with WTI crude prices falling on news of shutdowns in China.  Factories for Apple and other tech companies closed with Omicron surging out of control in China.  The slowdown in China sent fear through the market and crude prices dropped to levels we experienced at the start of the Ukraine invasion.  In addition, crude production seemed to pick up pace in the US and the FED raised rates for the first time since 2018.  The invasion in Ukraine seemed to be slowing by mid-week without any more major surges.  Overall, market conditions were seeming to stabilize.  Then, on Thursday, crude prices ripped higher on news from the IEA that crude supplies were going to be tighter than normal, hiring was strong in the US despite record inflation, and Putin sent out messages that he’s going to try and work with China to fight to the bitter end.  Crude spot prices soared over $8.00 higher to close back above $100/barrel.  For now, crude prices are remaining higher with optimism of a Ukraine peace deal and China withholding support.  I know that many would think that this news would lower crude prices.  But, the markets are taking the stance that a ceasefire or peace deal would keep the world economies going strong with Russia still on an island.  Therefore, tighter crude supplies will remain throughout the year.  Without a world recession, the markets are betting on tight crude supplies regardless of what happens with Ukraine and Russia.

In local retail news, President Biden claimed this week that since crude prices dropped, the gas stations are not lowering retail prices fast enough.  What the President doesn’t understand is that store owners are working off of inventories bought at many different volatile prices points.  In fact, the day he said that stations should lower prices faster, gasoline cost went up 20 cents/gallon and diesel cost went up over 35 cents/gallon!  As I have been writing about, gas stations are doing the best they can.  Wisconsin gasoline and diesel retail prices are UNDER the national average.  And consumers need to remember that Visa/Mastercard are making almost 12-15 cents/gallon at these prices, and they are RAISING rates in April!  So if I was a consumer, I would be yelling at Visa/Mastercard!  Visa/Mastercard are charging almost as much as the Federal Gas Tax on a transaction!  Once again, please take it easy on your local gas station employees.  The owners are doing their best.  These price fluctuations are a nightmare and buying on the wrong day can ruin your margin for a week.

Propane prices have fallen from their highs during the first week in March.  But propane prices are starting to find support due to record low inventories just like last year.  The propane trade is starting to look a lot like last year.  Prices might bottom out around now and then slowly increase through the entire summer, regardless of what happens to crude prices.  With Europe looking to import more LNG, we could see propane inventories struggle to build this year, which in turn keeps prices high.  The saving grace last winter was the lackluster crop drying season.  Inventories are so low right now, I am already hoping for another lackluster crop drying season in 2022.  I hope that production can surpass exports and the supply situation improves.  But for now, I am skeptical on seeing low propane prices this summer.  I highly recommend contacting our office and making sure that you take delivery of all your contracted gallons by end of April.  That will be your best cost savings strategy for the year.

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

Best regards,

Jon Crawford