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April 23 2012 delayed
FreeVenue public release of Jan 23rd MemberVenue guidance ~
All-grades retail gasoline averaged $3.33 in December ... down 11¢
over 30 days. With the
Gas
Pump model
projecting gasoline to trough @ $2.30/gal in Jan/2014,
anxiety may spark an unnecessary OPEC intervention. The
current slide reflects increasingly favourable USA contract crude price
fundamentals within the
Barrel Meter
model.
The primary forcing
for the early 2011 multi-month price spike was clearly USDollar
Debasement. Mismanagement of federal budgeting (see
Debt Wall
analysis) since Barack Hussein Obama's inauguration adds 11¢/gal to
current pump prices. Recent IAEA disclosures have led to
speculation on a third (Iraq/Syria/Iran) Israeli bombing raid on
illicit Middle East nuclear facilities in February.
Gas Pump
analysis suggests this could result in gasoline's monthly avg spiking to
$4.40/gallon before being reversed by the model's Demand Destruction
Barrier.
EFFECT on USA ECONOMY ~ When the Pump Price surged above
$3.26/gallon in Feb/2011, it breached the
model's Light Vehicle Sales Barrier (a
definitive Gasoline/GDP ratio) and as seen in the
(blue) FRB chart below, the post-Recession rebound of
unit sales was truncated the following month.
Since
November 2009 the
Barrel Meter
has been warning there is a line-in-the-sand that if surpassed would
strangle the post-Recession auto sector rebound. New Car
Sales were decimated upon crossing this same threshold in 1980, 1990 &
2007. During the Great Recession, volume declined from a 16
million unit annual rate to 9 mu/yr. Sales had climbed back to
13.2 mu/yr by Feb/2011, but then slipped to an 11.5 mu/yr pace
when consumers were once again confronted with high gasoline/diesel prices.
Now that Pump Price has dipped back below the LVSB ($3.37/gal & $93/barrel crude),
it is again probable for sales to surpass the 14 mu/yr pace.
The
Trendlines Recession Indicator
calculates cumulative high petroleum prices over past
Quarters trimmed 1.0% off the USA's GDP growth pace in
December. The former record for
this dampening factor set back in Oct/2008 was just
broken in October. It will take the economy a
couple of years to shake out this residual headwind. |
In case of a black swan event (eg Israeli raid),
the Gas
Pump model reveals
any extraordinary price spike would be blocked by
the same Demand Destruction Barrier (DDB) that firmly arrested the 2008 price
run @ $4.11/gal ($129/barrel crude). The negative effects of rising energy
costs on the disposable income of consumers and the profits and viability of
commerce and institutions inevitably takes a toll on the American economy.
The DDB represents a definitive Petroleum/GDP ratio (Dec = $4.37/gal &
$146/barrel) where certain critical feedbacks come to fruition. As
happened in the Summer of 2008, Demand is reversed as alternative energies,
substitution and conservation measures are pursued.
METRICS ~ Last month's avg Retail Price of $3.33/gal is
comprised of $2.65 Wholesale refinery product & a $o.68 Margin.
In turn, Margin is made up of $ .50 Taxes & $o.18 Profit. One
would think the retailers are getting very rich, eh. Well, the
Gas
Pump
reveals Margin was only $o.54 in January Y2k. Taxes & Profit
are up from 42¢
& 13¢
back then. In other words, nominal
Profit today is virtually unchanged.
The post-Y2k Crack Spread (diff betw Wholesale
& Contract Crude) for Refiners can be seen ranging from $1.06 &
$0.16 per gallon ($44 & $7/barrel). Crack Spread is currently
$0.16/gallon ($6.80/barrel). When the spread drops below
$o.48/gallon ($20/barrel), history shows Refiners prefer to produce
diesel from available crude and then import less expensive foreign
gasoline. It is this general lack of profitability that
underlies the massive shuttering and sell-off of refinery & retail
facilities. Improvements in mileage performance has augmented
the trend.
SILLY PREDICTIONS ~ Trendlines Research at no
time found merit in the rationalizations and musings in
Feb/2011 by cable news pundits warning of $5
to $7/gallon gasoline for the approaching driving season.
Most are merely repeat guestimates of the ilk heard
surrounding the July 2008 spike. Some of those
silly Crude Price forecasts are saved for posterity in
my COPF chart. |
BACKGROUNDER excerpts
(2011/10/12) ~
The primary forcing for the recent multi-month price run was clearly
Debasement of the USDollar amid heightened perception by the
international investment community that Congress & the President
were unwilling to address their Structural Deficits and mounting
Sovereign Debt (see
Debt Wall
analysis). Mismanagement of Federal Budgeting since Barack
Hussein Obama's inauguration adds 38¢/gal to today's pump price.
MENA geopolitical unrest added another 24¢/gal but was totally
extinguished upon NATO engagement.
BACKGROUNDER excerpts
(2011/7/18) ~
Based on activity by the int'l investment community, original
Gas
Pump
projections had assumed the current spike event would coincide with
an inevitable bond vigilante crisis (2014) as identified by our
Debt Meter.
Later it appeared the date would be associated with the Presidential
Election in November 2012. Then the Primaries. But it
seems there has been another acceleration via the "Tea Party"
strategy to use the opportunity of negotiations surrounding the
raising of the Debt Ceiling to bring this issue to a head.
Their original intent
was to stand firm and demand expenditure cuts in the magnitude of
"trillions of dollars" instead of billions. Such an endeavour
would facilitate a speedy correction to the USDollar back to early
2009 levels and subsequently a reversal of crude oil and gasoline
pump prices. To quantify this analysis, I am certain there
would be an eventual $4/barrel decline for every $1 trillion in
spending cuts and/or new tax revenues. |
BACKGROUNDER excerpts
(2011/2/9) ~ During 2005 &
2006, gasoline touched $3/gallon and fell back. It didn't in
2007Q4 and the breach of $3.19/gallon ($86/barrel crude) helped push
the American economy into a Technical Recession. It is little
known that this price event contributed to the collapse of North
American Light Vehicle Sales (see FRB chart below) and car/van/truck
units/parts imports from Canada.
It should be of grave
concern that the same Pump-Price/GDP ratio underlying that episode
is being re-approached. The failure of Congress & successive
Administrations to address America's structural deficits & mounting
national debt is troubling to the global investment community
(especially bond vigilantes) and is responsible for the USDollar's
secular decline since January 2002.
Our
Barrel Meter
illustrates this situation's adverse effect on oil price
after April 2004. As shown in the
Barrel Meter
component table, US$ Debasement was the largest
forcing ($28) among component fundamentals during the $94/barrel
price spike (2005-2008). As the Dollar falls, crude oil
pricing rises ... and this will continue 'til the Structural
Deficits are dealt with.
Our forecast of an imminent auto
sector downturn could be a major factor in relapsing the USA &
Canadian economies back into new Recessions. It is little
known that since 2004 more light vehicles/parts have been
manufactured /assembled in Ontario than Michigan. This present
danger is tracked at the
Trendlines Recession Indicator. |
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