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April 4, 2007

No Relief At The Pump -- For Now

If you read Lynne Kiesling today you will receive some very good advice to go pay the Wall Street Journal's Energy Roundup blog a visit. And if you follow that advice, you will find yet more good advice, this time in the form of a link to a item on "This Week in Petroleum" at R-Squared Energy Blog. And from there you will be informed of this story, from CNN Money:

... the Energy Information Administration said gasoline stocks, closely watched ahead of the summer driving season, plummeted by 5 million barrels. Analysts were looking for a small drop of just 300,000 barrels, according to Reuters.

The fall in gasoline supplies pushed gasoline stocks to the lower end of their average range, the first time in several months the supplies have dipped below average...

"We're nowhere near where we should be in terms of inventories," said John Kilduff, an energy analyst at Fimat in New York, who also pointed to strong gasoline demand numbers in the report. "We're seeing the kind of numbers we only see during the peak summer season."

Kilduff also noted the relatively low rate of refinery operation, which EIA said was at 87 percent capacity last week.

"The failure of the refinery rate to go to 90 percent is spelling lots of trouble for us," he said.

From the Energy Information Administration report:

For years, the typical summer driving season was considered to occur between the Memorial Day and Labor Day holidays, with peak summer gasoline demand occurring sometime after the Fourth-of-July holiday. While this characterization still holds, in recent years, demand patterns have shifted somewhat to include more robust levels of gasoline demand earlier in the season with a pre-summer peak in gasoline prices.

Add it up and what do we get?  One more stress point for the economy in the near-term, and hopeful thinking about what the rest of the year will bring:

Consequently, as gasoline demand began to grow in earnest in April, gasoline supply has failed to keep pace, resulting in continued significant stock declines and sharp upward pressure on gasoline prices in recent weeks. Nevertheless, while the short term outlook for gasoline markets appears to be tight, the longer term outlook remains unclear. Thus, spring breakers will most likely notice higher gasoline prices during April, compared with last year. Following spring break, however, Memorial Day, Independence Day, and Labor Day vacationers may face different, possibly softer, markets.

Somehow I just dont find an "unclear" outlook and "possibly softer, markets" all that comforting.

Side note:  For a discussion of new research on the historical effect of oil price changes on economic growth, check out Econbrowser.