Gas Prices

Regular unleaded jumped about 40 cents in two days here in West Michigan. No fun, but certainly not unexpected. My car was on ‘E’ Friday afternoon after work, but I managed to get a tank at a station that had not implemented the second half of the price bump yet. The station near my house was was 20 cents higher than I paid when I passed it thirty minutes later.

It appears that Gulf area refineries came through Ike okay, for the most part. This, of course, is the key to getting gas prices back to where they were before Ike-mania hit. (via Instapundit)

309,000 barrels of crude will be sent from the US Strategic Petroleum Reserve to two refineries that are running short due to hurricane-affected supply lines. I’m never a big fan of releasing crude from the SPR, but 309k barrels in a situation like this seems justified as long as it’s replaced as soon as possible. Two releases totalling 380k barrels were authorized earlier this month after Hurricane Gustav. Murdoc’s guess is that this won’t be the only Ike-related release of crude from the SPR, but hopefully there won’t be a lot more. For comparison, the Katrina-related release in 2005 was 9.8 million barrels.

Despite this apparent calming news, gasoline spiked to $4.99 in some places this weekend. Gunblogger extraordinaire and Tennessee resident Say Uncle writes Supply meets demand. And they’re not hitting it off, I’m told.

Someone asked me last week (before the big Ike Spike) why gas prices were creeping back up when crude oil prices were down. At the time I said that I suspected that a lot of it was due to hedging bets that the $100 barrel was a very short-term thing (primarily due to OPEC) and that oil companies didn’t want to sell gas at $100 barrel prices when they bought it at more than $100 a barrel and would have to replace it at more than $100 a barrel.

I think that is still part of it, but something that I hadn’t thought of is brought up in this excellent post. In a nutshell, oil companies have let crude stockpiles fall a bit due to a) existing large stockpiles and b) the downward trend of crude prices. They don’t want to maintain over-large stockpiles today if the oil will be cheaper next month. Couple that with OPEC, two hurricanes, and the general volatility of the market and you get a gasoline price spike. I’m not buying any of the quasi-altruistic reasoning mentioned in the post, but then you can trust supply-demand lightyears farther than you can trust well-meaning. Go read the whole thing.

Finally, I’ll mention again that Saudi Arabia walked out of the recent OPEC production level discussions. I haven’t seen any more on this, and it seems too good to be true that the Saudis are losing patience with their cartel brothers. But we can always hope.


  1. I disagree with you about the strategic reserve. That’s a part of what it’s for IMHO.

    It is not for simply lowering prices for a short time like Pelosi and company were advocating…but in this case, we have a short term shortage caused by a temporary disruption in supply. I see no problem with offsetting the shortage by releasing a bit of the strategic reserve. It can be replenished as soon as the temporary disruption is resolved.

    Our economy (which is based on transportation) is as vital to national security as our tanks or aircraft. I think this is a very fitting use of the strategic reserve.

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