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Low Retail Gas Prices Encourage Consumers to Travel this Summer
Around about Memorial Day weekend, gas prices began to steadily climb, increasing by 22 cents in just three weeks, but industry analysts suggest that the commodity has most likely peaked for the year. Retail prices often drop right around June as refineries finish up seasonal maintenance and switch to summer fuel grades, with prices declining by an average of 12 cents per gallon at this time over the last five years. The Energy Information Administration predicted the week of Memorial Day experienced the highest demand for gas since August 2007, and the lowered fuel prices are demonstrating the consumer’s desire to take more road trips during this season.
Other than refinery maintenance in June, the price of crude oil also plays a role in determining gasoline’s market performance. Production appears to be rallying in America as well as OPEC’s largest crude oil producing countries, including Iraq which has been receiving attention from engineering firms so that they can increase efficiency in Iraqi energy operations. Crude oil, being the key ingredient to gasoline, has evidently been stabilizing over the past few weeks which is leading industry experts to the conclusion that summer gas prices will be at their lowest since 2009.
Cheap gas has made smaller dents in consumers’ wallets, allowing them to take advantage of the $2.75 per gallon value and drive across the country for the summer vacation. Some have reported that it now only takes $40 to fill up their family cars, a stark contrast between their expenditure around this time last year when they had to pay $55. But not all consumers seem to be too happy with low gasoline prices. Tyler Morning Telegraph interviewed Ronald and Vivian Deshotels who were fueling up at a station along Interstate 20. Vivian expressed her concern for all the layoffs while Ronald added on why we need the higher prices, saying, “I like the high prices. It puts more rigs out there.”
Although history indicates that fuel prices will decline soon, gas can be just as unpredictable as oil. Prices could certainly rise this season due to factors such as prolonged fighting in the Middle East, hurricanes in the Atlantic, and unexpected interruptions in major gas refineries.
Published in CSP Daily News By-Samantha Oller, Senior Editor/Special Projects Coordinator
KANSAS CITY, Kan. — As a Kansas federal judge prepares to evaluate proposed settlements from long-running litigation involving “hot fuel” this summer, many of the industry’s largest fuel retailers— QuikTrip, Circle K, Kum & Go, Sheetz, Wawa and 7-Eleven, among them—have filed an objection over the terms.
In a class-action lawsuit dating back seven years, plaintiffs had charged that more than two dozen fuel retailers were shortchanging customers who purchased “hot fuel”—referring to the fact that the volume of gasoline rises along with its temperature. Consumers were, in effect, paying a full gallon price for less than a gallon of fuel, plaintiffs alleged, because these retailers did not have automatic-temperature-compensation (ATC) devices installed at the pump that would adjust the price based on the fuel volume and did not alert consumers to the fuel’s temperature.
More than two dozen fuel retailers, ranging from major oils to retail chains such as Casey’s General Stores, Sam’s Club and Valero, had settled on the case, although they denied any wrong-doing. Three different settlement groups emerged. Six of the companies, including the major oil companies, agreed to settlements that would put $22.925 million into a fund to reimburse retailers for installing ATC equipment. Four of the defendants, including Casey’s and Valero, agreed to settlements to install ATC pumps at their branded sites over time. And the remaining 18 defendants—including CITGO and Thorntons—agreed to pay into a fund totaling $1.577 million that would help state weights and measures agencies ensure ATC upgrades were done lawfully.
But as U.S. District Court Judge Kathryn H. Vratil prepares to review the proposed settlements this June, two objections were filed this week on the terms, according to court documents obtained by CSP Daily News. One of the objections comes from more than a dozen of the industry’s largest petroleum-retail chains; another is led by Theodore Frank, founder of the Center for Class Action Fairness, according to Law.com.
According to the objection filing by the retail chains, one big problem with the settlements is the fact that consumers would get none of the payments. Nearly two-thirds of the settlement money going to fuel wholesalers and retailers.
Both objections also cite the payments going into a fund for weights and measures agencies as especially problematic. Because no states yet approve of ATC for motor-fuel retail sales, the objectors argue that the fund would influence regulators who might be opposed to ATC to change their positions in favor of legislation approving its use to receive the money.
The retailers’ objection filing describes it as “a de factoslush fund that will make payments to state governments if and when states change their laws in accordance with the named plaintiffs’, and plaintiffs’ counsels’, wishes,” and raised constitutional red flags.
Convenience retailers named in the objection include QuikTrip, 7-Eleven (which fought the litigation and won), Circle K, Kum & Go, Murphy Oil, Pilot Travel Centers, Flying J, RaceTrac, Sheetz, Speedway, The Pantry and Wawa. Frank with the Center for Class Action Fairness, a law firm and nonprofit that represents consumers in class-action lawsuits, described the settlement as “uncomfortably close to political bribery.” “It’s a zero-dollar settlement,” Frank told Law.com. “The lawyers are the only people getting paid, and the relief is to require lobbying for a means of selling gasoline that would make consumers worse off.”
A hearing is scheduled for Tuesday, June 9, when Judge Vratil will determine whether to give final approval to the settlements.
January 6, 2015 By Brian Milne, Energy Editor, Schneider Electric
In the U.S., gasoline demand was the strongest in 2014 during the final full week of the year even though historically driving demand is greatest during the summer months, with demand during the fourth quarter averaging 90,000 bpd or 0.9% more at 9.11 million bpd than the June through August average.
In parsing gasoline data from the Energy Information Administration, implied demand, which refers to product supplied to the primary wholesale market, had their two strongest weeks in late December, with the third highest weekly demand rate occurring in late August. Moreover, four of the five weeks with the greatest weekly demand rate in 2014 were in the fourth quarter, arguing that low gasoline prices spur greater driving activity.
Retail gasoline prices are averaging more than $1 gallon less nationally than a year ago while down $1.40 or 40% from late June when the national average was $3.704 gallon. Slipping below $2.30 gallon on Dec. 29, the U.S. average could drop below $2 gallon during the first quarter.
The sharp price decline was spawned by growing oil production that not only has outstripped demand, but has created a growing glut of supply domestically and internationally. US crude imports continue to trend lower while oil product exports remain robust, including for gasoline exports, which averaged 354,000 bpd in December. Some of the crude that was previously shipped to the U.S. is looking for new markets, while tankers are again being used for storage, moored near key shipping ports and loaded with crude as they were during the Great Recession in 2009.
The plunge in crude oil prices joined by the abundance of supply has also prompted refiners to process more crude, with U.S. refiner and blender net production spiking over 10 million bpd in late December for the first time, EIA data shows. In late 2014, the EIA said spot gasoline prices, the primary wholesale market with rack postings the secondary wholesale market, are often the world’s lowest during fall and winter in the Midwest and Gulf Coast regional markets.
As the inventory bubble moves down the supply chain, the data on implied demand illustrates the change from a “just in time” inventory management strategy adopted by the US industry more than a decade ago and when the bull market in oil was in its early stages to “supply push” management. Akin with the adage “if you build it, they will come” dynamic, the added gasoline supply to the domestic market should continue to pressure gasoline prices in the near term while driving demand for the motor transportation fuel higher.