Chicago To The Moon!

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

Nice While It Lasted…

Good morning!

I would like to first wish everyone a happy Easter Weekend and safe travels!  Well, it was nice while it lasted…  Crude oil prices dropped to pre-invasion of Ukraine levels for one day on Monday.  The continued drop in prices was fueled by the group announcement from IEA countries and the US to release 270M barrels of oil from strategic reserves, China locking down with Covid cases, and the FED raising interest rates with record inflation.  And then on Tuesday, prices whipsawed higher and never returned.  It was nice while it lasted… Since Tuesday, crude oil prices have gained over $10/barrel.  OPEC+ announced that demand will far outstrip supplies and that they have no intention of changing course on production quota increases since the rest of the world wants to try and flood the market with reserve oil.  In addition, China is starting to ease shutdowns a bit.  The US inflation is seeming to peak.  And the EU is planning to official ban all Russian petroleum products.  Wow… what a difference a couple of days makes.  Crude oil prices were FINALLY moving to what I call a manageable level.  We were not out of the woods, but the price levels on Monday would have at least made a difference in the near term.  Instead, WTI crude is now firmly positioned above $100/barrel and nothing seems to be working on keeping prices lower.  I believe there are only two ways out of the mess were are in with high crude prices One is to have peace in Eastern Europe and that seems years away.  And the other is to watch the world economy go into major recession.  Unfortunately, a world economic recession seems more possible now than it did a month ago.  Although inflation might be peaking in the US, that doesn’t mean inflation will go down.  I could see inflation hover at these current levels for quite a long time, even with rising interest rates.  At the end of the day, I don’t see a soft landing out of the world mess we are in.

In local retail news, due to the increases in crude pricing this week, gasoline cost soared over 40 cents/gallon and diesel cost well over 50 cents/gallon.  I expect to see retail prices at the pump go much higher.  Retail gasoline will again be approaching $4/gallon and retail diesel is going to move towards $5/gallon.  President Biden made a “feel good” executive order this week allowing the sale of E15 (gasoline with 15% ethanol) during the summer months, removing the EPA vapor pressure violations.  Biden claims his action will lower the price of gasoline by 10 cents/gallon at the pump saving Americans millions of dollars.  His statement could not be further from the truth.  There are only about 2,500 gas stations in the country that sell E15 out of about 150,000!  In addition, a station just can’t put E15 into any tank and fueling system.  There are strict requirements and limitations on equipment.  And, E15 gets worse gas mileage than E10 or conventional gasoline, so you end up buying more fuel in the long run over the course of a year.  And with corn input costs going through the roof and a decrease in overall corn acres being planted, an increase in ethanol demand will increase ethanol prices!  The situation could possibly cause ethanol price to be higher than gasoline by year end!  So basically, once again, the gas station OWNERS are being blamed for high gas prices while Visa/Mastercard raise their credit card fees to all gas station retailers forcing them to increase their sale price to the consumer.  Gas station owners continue to face increased cost on every portion of their business, yet somehow continue to take the blame for the prices at the pump.  Once again, please go easy on gas station employees.  They are doing their best managing the dizzying cost increases and 50 cent/gallon cost swings on gasoline/diesel weekly.

As you might expect, with crude prices being lower on Monday, propane cost finally dropped a bit.  But, just like gasoline and diesel, as crude prices roared higher throughout the week, propane prices followed in tandem.  I continue to be skeptical of propane prices getting much lower this year.  Just like natural gas, propane is under the microscope.  If the US is going to increase supplies to Europe permanently, we need to keep production strong at home.  I worry that our altruistic actions could lead to very high prices on natural gas permanently and higher than normal prices for propane.  Natural gas prices are higher than propane in relation to BTU’s.  So at least for those on propane, you are getting more “bang for your buck” while heating your home.  We are hoping to have next season’s heating contracts out by end of May.  As a reminder, if you still have contract gallons remaining on the current heating season, please call to receive those gallons.  Our current heating contracts expire at the end of April.

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

Best regards,

Jon Crawford

Too Much, Too Late?

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

Largest Strategic Oil Reserve Release In History

Good morning!

Happy Friday!  I hope this post finds everyone well.  I was gone last week on vacation and so much has happened!  There has been movements on peace in Ukraine, escalations of the conflict, Russia threatening to only accept Rubles for payment on gas, possible poisoning at Russia/Ukraine negotiations, Russia saying they will withdraw troops from central Ukraine but instead moving more troops to the center, Syria sending air support to Russia in return for Russia’s help back in the day, the US and more sending military equipment and aide…. Basically, the war is still going strong and no one knows exactly what is going on.  OPEC+ has decided to keep production increases to a minimum which makes sense after President Biden announced a record 1M barrels/day of crude oil releases from our strategic reserves for 180 days.  Biden did this saying he understands the economic pain we are going through at the pump and this will help.  Well, it’s a start, but it won’t do much.  Demand is still very strong and without a clear and dedicated plan to refill the reserves, OPEC+ will continue to hold their plan steady.  I said a month ago Biden should have released 1M/day.  We are now doing too much too late.  The only way we can really threaten OPEC+ now would be to approve the Keystone Pipeline with direct guidance to use the pipeline as a means to refill our strategic reserves at discounted rates.  If we could pull that off, we would be able to greatly influence the world oil markets.  But right now, OPEC+ can sit back with discipline and let us drain down our reserves.  Even if we get 3-5 months of price relief, the market conditions would have to improve with Russia by then in order to keep prices from whipsawing back higher.  As you know, I have been against the Keystone Pipeline because the US was not benefiting enough from the original agreement.  Well, now we have an incentive and we should leverage that incentive with Canada to get it done.  But if just approve the Keystone under current terms, I don’t see much benefit to the US long-term having the pipeline run through our country.

In other news, the short-term and long-term bond rates continue to invert flashing signs of recession.  Although the labor market seems to be strong, it’s not enough.  We have so many Americans that have left the workforce and with permanent changes to retail that demand more labor, the US just can’t supply the market with enough workers.  Couple the labor issues with record inflation and record high home prices, I see very choppy waters ahead.  Although I would like to see lower oil prices, I would hate to see those lower prices come at the price of economic collapse.  Unfortunately, I am seeing more signs that an economic slowdown and possible recession are on the horizon.  If the war in Ukraine drags on much longer, I’m just not confident we have enough tools in our toolbox worldwide to save ourselves from some major economic problems.

In local news, gasoline retail prices have finally stabilized under $4/gallon and diesel retail is starting to get under $4.75/gal.  There is a major cost discrepancy between gasoline and diesel.  As a consumer, you should watch the price of diesel more so than gasoline.  Diesel supplies are tight across the country and with higher diesel prices come higher cost of all goods.

Propane prices continue to be fairly stable but are at record highs for this time of year.  Demand is strong as winter holds on for another month.  Unless we experience a dramatic change in crude prices, I do not see propane prices getting much cheaper this summer.  The main issue with propane, like last year, will be supply.  We are going into inventory building season with extremely low inventory like last year.  The only event that saved us this winter was the lack of corn drying demand.  If we end up like last year with low inventories going into the fall, but have a high corn drying demand season?…. Look out….  Contracts for next season will be out this summer and I will probably be recommending that everyone lock in their prices for some protection and predictability.

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

Best regards,

Jon Crawford

Risk Is “Back On” For The Crude Trade

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

Crude Oil Trade Finding A Path Forward?

Good morning,

Happy Friday!  Well, we experienced one of the most volatile trading weeks in the crude oil trade since 2008.  Crude oil prices traded in a $25 range for the entire week!  One day this week, WTI crude oil traded as high as $15/barrel on the spot higher, and then dropped as much as $18/barrel!…during the same day!…  The volatility is causing disruptions in locking down future supply price.  The chaos of the trade in turn makes pricing spot products much like throwing darts at a dart board.  The news affecting the crude oil trade this week included many developing stories.  Russia is trying to meddle with the Iran nuclear deal causing panic that the deal will go sour.  Iran is saying that Russia’s desires in the deal are not in Iran’s best interest, but we have yet to see the final draft.  The US also reached out to Venezuela to inquire about lifting crude sanctions on imports to the US.  The US has banned all crude from Venezuela since 2018.  Russia and Ukraine held a peace talk in Hungry that went south causing markets to shoot higher.  But then they announced today that a potential peace deal could be on the table.  The announcement today is quieting the crude market a bit.  The IEA (International Energy Agency) also announced that 60M barrels of strategic crude reserves is not enough and they are prepared to do more.  (I have been saying that for weeks….)  UAE and Saudi Arabia are also testing the market waters by SAYING they MIGHT pump more oil just to see how the market reacts.  The power of their words has much influence on the market.  In the past they will SAY that they are CONSIDERING a crude oil production increase just to see the market reaction.  Then they gauge their future actions based on the market response.  The US continues to be strong on crude production and by the end of the week, WTI crude is carving out around $109/barrel and trading a bit more narrow.  I hope that the crude oil trade is finding a range with the the new world environment.  Although prices are higher, having stability in the trade allows futures pricing to be more predictable, which in turn allows spot pricing of the day be more accurate.  I am still optimistic that fuel prices will be much lower by Memorial Day.

In local news, gas and diesel spot pricing traded at rates I’ve never experienced.  I can tell you that your local gas station is not gouging the public.  One major cost of selling fuel that has not been discussed is credit card fees.  Credit card companies receive a percentage of a total sale and make up over 80% of all fuel purchased at gas stations.  As fuel cost DOUBLED in price, so did credit card fees.  There were some days the past two weeks that the credit card companies were making more than a store owner on the sale of a gallon of gasoline!  And…since Visa/MC abandoned business in Russia, Visa/MC announced an INCREASE to American credit card fees starting next month!  Many believe that higher retail fuel prices equal higher profit margins for gas station owners.  The opposite usual occurs.  Gas station owners earn much less, and sometimes lose money in volatile bull market runs on refined product costs.  Please do not take your anger and frustration out on gas station owners or cashiers.  They are truly doing their best and so many variables are out of their control right now.

Propane prices thankfully have remained quite stable the past week.  Propane hasn’t experienced much of the extreme volatility as crude oil, gasoline, and diesel did last week.  For now, we are recommending all propane customers to use up the remainder of their available contract gallons and wait until summer for hopefully better prices.  Also, if you are a will-call customer, don’t forget to keep an eye on your tank level!  March and April can play tricks with warmer days and cooler nights!  Running out of propane likes to sneak up on will-call customers during March and April.  🙂

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

Best regards,

Jon Crawford

What A Mess…

Good morning,

Happy Friday.  There is SO much going on in the world right now, I’m just going to dive right in.  So be patient.  My post today might jump around a lot.  Prices of crude oil are rocketing higher on fears of oil disruptions from Russia.  The world is betting on embargos of Russian oil and no ability to plug the deficit.  I would like to paint you a different picture.  Russia exports about 5M barrels of oil/day.  Any embargos or sanctions will push all Russian oil sales to China and India.  If China and India purchase more from Russia, the oil that was going to those countries can go somewhere else.  Basically, there will NOT be a 5M barrel/day deficit on Russian oil sanctions.  One MAJOR event that is not being discussed is the execution of the new Iran nuclear deal.  China is pushing hard for the deal to get done.  Why?  Because if the deal gets done, 1-2M barrels/day of oil will flow into the markets by the end of April, alleviating some of the price shock and taking pressure off China to act on Russia.  Also, China does NOT want high oil prices because their economy is leveraged on the world buying goods from them.  And continued inflation of crude oil trickles through every section of a goods-purchasing based economies.  The Iran nuclear deal is looking to be signed by the end of next week.  If that happens, their could be a $10/barrel drop in crude.

OPEC also met this week and decided NOT to increase production quotas beyond 400k barrels/day.  Many were thinking Saudi Arabia would increase 1M barrels/day themselves just to show the world that they are needed and once again the heroes.  But they did not do that.  Saudi Arabia can increase production 1-2M barrels/day easily within two months.  So why did they not do that?  The Iran deal is on the horizon.  Iran and Saudi Arabia do not like each other and continue to fight a proxy war in Yemen.  If Saudi Arabia announced a 1M barrel/day increase this week and shook the market, and then the Iran deal came on next week, the market could overreact and tumble.  Saudi Arabia wants to bring the prices down slowly and steady.  But Saudi Arabia does care about Iran going after their customers.  So Saudi Arabia is waiting.  If Iran signs the deal, the markets will relax.  But then in April, Saudi Arabia will see how much they can increase to counter Iran without throwing the market into a freefall.

I’m sure many of you have read about calls from countries, including the US, to stop buying Russian crude.  I know that sounds very straight forward and makes sense.  Why should we be giving money to the enemy invading a peaceful nation?  But I believe we should not embargo Russian crude oil.  If we stop buying Russian crude, Russia will sell the crude to China or India.  The embargo in the US will do nothing to hurt Russia economically.  If anything, it would HELP Russia make more money and profit on war.  If we enact an embargo, the markets will panic further and crude prices will rise.  Russia will then be able to sell the same amount of oil or even less at HIGHER prices to customers.  We should be looking at all options to LOWER the price of crude oil as quickly as possible, NOT inflate crude oil prices.

This week the world announced a strategic release of 60M barrels of crude oil from reserves.  Some are saying we should be keeping our reserves high because of tight production.  I disagree.  I do not see long-term production problems with crude oil.  I think that the world should be looking at more aggressive long-term strategic releases and not quick floods.  I think a strategy of saying they are prepared to release 15M barrels/month for the next six months would have a much better effect than the approach they are taking.  Plus countries can strike deals to replenish inventories over the coming years.  And, at this strategy, we would not go below 50% of our world reserve capacity.

As far as the US production and reserves go, I got to thinking about the Keystone pipeline.  As you might know, I have been against the Keystone pipeline because the pipeline moves Canadian Tar Sand crude down to the Gulf of Mexico where refineries are unable to use the crude.  The crude will be exported out into the world market.  Basically, the US is a giant lease-holder for the Canadian oil companies.  Canada already has direct pipeline access to Midwest refineries that are tooled for Canadian crude.  The main reason I have been against the pipeline is the lack of financial incentives for the US.  However, I would not be opposed to exploring using the Keystone pipeline as a mechanism for replenishing our Strategic Reserves.  We could work an index deal to purchase crude from Canada and replenish reserves directly when needed.  Then we can release and sell that oil on the open export market.  We do not need to store crude oil that can only be refined in the US alone.  We have more than enough oil and harvesting capacity to take care of ourselves in a major jam.  Then use the strategic reserves as an energy tool like Saudi Arabia does.  We would gain further energy independence and marketability around the world, all while partnering with our neighbor to the north.

That was a lot…  Next week will be a big deal.  Right now our fingers need to be crossed that the Iran nuclear deal gets signed next week and that Ukraine/Russia agree to a ceasefire.  Until then, we will be sheddin’ cash into our fuel tanks, heating bills, and shipping costs.

In local news, gasoline retail prices jumped to over $3.50/gallon and I expect this to go up further.  Diesel retail price jumped to over $4.00/gallon and will start to approach $4.50/gallon really soon.  If we thought trucking and supply chains were issues before, just wait and see what happens if these high fuel costs hold longer than two months!

Propane price has moved higher along with crude.  Although the price has not traded at the same multiple of heating oil.  Right now, propane is still about 10% cheaper than heating oil at retail price based on BTU’s.  The only silver lining on propane is that production looks to be strong at these current crude oil prices.  So hopefully propane producers can rebuild inventories at a good clip this summer and bring lower prices for later in the year.

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

Best regards,

Jon Crawford

Ukraine Invasion And Crude Prices

Good morning,

Well, the unthinkable has happened.  Putin has decided to launch a full-scale invasion on Ukraine.  When rockets starting flying Wednesday night, crude prices soared over $8/barrel.  By the end of the next trading day, crude prices closed LOWER than the high of the week prior!  And then on Friday, crude prices traded lower to prices not seen in two weeks.  As I have been writing for weeks, the US and the world can not continue to recover their economies at these high energy prices.  Biden and many other crude countries announced that strategic petroleum reserves are on the table to keep prices in check.  The announcement caused traders to take pause.  And in other news this week, the US and Iran both believe the finish line to a nuclear deal could be signed next week.  In addition to lifting sanctions on Iranian crude exports, Iran is willing to do a prisoner exchange which has not been done in many years.   The world is preparing to lower oil prices in order to prevent Russia from profiting on their act of war.  If the Iran deal is cut next week, and the world comes together on strategic reserve releases, Saudi Arabia UAE will be forced to increase production in order to compete for market share.  Couple all of this with the FED raising rates, and high oil prices could go into the rearview mirror.  If prices do indeed fall and world producers increase next month, I expect to see sanctions start on Russian energy and SWIFT banking.  Sanctions on Russian energy would cut Russia off at the knees.  The next few months are going to be some of the most historical  months to watch playout in terms of war, energy, and economic recovery.  At least the pandemic seems to be ending which will be one major issue off our backs going into the spring.

In local news, gasoline and diesel retail prices will probably hold at current rates.  The jump in cost did not occur as expected from the Russian invasion but the situation is very dynamic and can change in a minute.

Propane prices have remained stable but supply chains have been choppy at best.  Rail shipment delays coupled with a pipeline shutdown for repair have caused headaches in Wisconsin.  Thankfully the worst of winter is behind us and we should get through this just fine.  Even though the major cold is behind us, snow and ice are still issues for the coming months.  Please make sure to keep your driveway plowed and salted 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

Crude Prices In Check?

Good afternoon,

I hope this message finds you all well.  After throwing in the towel two weeks ago, crude oil prices are now struggling to find direction.  The past week was an absolute head scratcher of price movements.  Prices started the week soaring higher, as expected, with Russian forces building on the border in the Ukraine.  But then Russia pulled a head-fake and said they would pullback some troops and negotiate some more.  Upon the news, crude prices tanked.  Although WTI did not fall below $90/barrel, most of the gains last week were wiped out.  But the next day, the US and NATO claimed that Russia added more troops instead of pulling back, so up the prices went again!  As we prepared for the “March to $100 Crude”, prices then collapsed out of nowhere.  In a surprise announcement, the US and Iran are close to cutting a new Nuclear Deal.  The deal would lift all crude oil exporting sanctions on Iran.  The additional crude oil into the market would fill the deficit that formed due to OPEC’s inability to bring their exports back online as fast as promised.

In addition to geopolitical and crude production problems, data was released showing inflation over 9% and consumer confidence dropping.  By Friday morning, WTI crude prices fell below $90/barrel for the first time in two weeks, even as Russia and Ukraine are on the brink of war.  I have not seen such erratic behavior in the crude market for a long time.  Usually when the market goes this erratic, we are approaching the next leg in movement.  If the Iran deal gets done and Russia doesn’t invade Ukraine, I’m not sure we will see $100 crude oil.  The volume of contracts changing hands right now is incredible.  The panic is showing that banks, traders, and producers, don’t know what to do.  But one thing we know for certain.  Putin does not like the US Oil industry.  And the US has been adding oil rigs back to the market at an incredible rate the past two weeks.  The US also delivered the most LNG and gasoline/diesel exports to Europe over the past two months in our nation’s history.  We are showing Putin that our country can compete on the world oil stage.  Although nationally, crude supplies and refined products showed a small deficit this week, most of the deficit is going to exports.  The demand in the US is starting to flatline a bit as inflation takes hold.  Most consumers are trying to go back to service based spend instead of goods.  But these high energy prices are causing some pause.  The FED is rumored to now raise interest rates an entire 1% to try and put a lid on inflation.  Even with seven or eight rate increases, we will not experience deflation for months.  However, crude prices could fall lower much faster than deflation and really help release a pressure relief valve on the economy.  Wow, that was a lot to unpack, but it’s been a wild week!

In local news, Chicago is VERY long on gasoline coming out of winter.  We should see gasoline retail prices hold at the current rate.  As warmer weather is returning, diesel winter blends are starting to subside which makes the cost lower.  I also expect to see diesel retail prices hold.  If we peak at current retail prices, we have a chance to really ramp up for a strong summer with driving demand.

Propane prices have actually gone up in the past week due to massive exports and increased demand.  In addition, colder weather is predicted for the first two weeks of March.  Although I’m not predicting any major causes for concern, suppliers and producers are using every trick they can to squeeze the last bit of profit from retailers before winter demand ends and summer inventory building season begins.

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

Best regards,

Jon Crawford

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