You've probably heard a lot in the general media that oil prices have been strangely calm, even lower, as Hurricane Ike nears landfall later today near Houston. You may even be figuring: those gas prices on the corner will hold, even as the storm hits.
You might want to rid yourself of those views.
The cash markets, which ultimately set the street price of gasoline, have been soaring. Here are some highlights from Thursday's market:
--Conventional unleaded gasoline values surged to record levels on the US Gulf Coast cash market on a buying frenzy. During the Platts Market on Close assessment process, differentials for conventional unleaded hit a high of NYMEX October RBOB contract plus $2.03/gal before falling back to NYMEX plus $2/gal. Those differentials are up more than $1.52/gal compared with levels on Wednesday. Our assessment for conventional Gulf Coast gasoline yesterday was $4.7463/gal, our highest ever.
--New York harbor conventional gasoline barges rose from $2.83/gal a day before to an assessment of $3.29/gal. Similar gains were posted in other parts of the country.
The issue is simpe: Ike is not rampaging through an area of significant offshore production as it goes through the Gulf. However, it is targeting one of the world's three main refining centers (Rotterdam and Singapore being the other two). Refineries are down in anticipation. They could be down for awhile.
When oil company pricing departments sit down to calculate their wholesale numbers, it is these spot markets that get the most attention. That is why you should not expect to see any moderation at the pump in coming days. To the contrary, prices will be moving sharply higher.
Leave a comment