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zugzwang

Us Gasoline Prices Nearing Danger Zone Again

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Hurricane season hasn't even started yet!

http://finance.yahoo...-112837394.html

It happened in 2008, then again in 2011. Finally in April 2012, average gasoline prices once again topped $3.85 a gallon. While still well shy of the record high $4.11 set in July of 2008, Jeff Kleintop, chief market strategist at LPL Financial says, every time pump prices top what he calls the "danger zone," stocks have taken a hit.

"For the last five years, whenever we got into (the danger zone), stocks pulled back back five to ten percent," Kleintop says in the attached video, in reference to the 2008, 2011 and 2012 price peaks.

Fortunately, after a sharp run-up in July, the past two weeks have seen a modest dip in gas prices, at a time when crude oil has held steady above $100 a barrel.

From Kleintop's point of view, it's only a matter of time before pump prices follow the run-up in oil. If he's right and high fuel costs do indeed begin to take a larger bite out of family budgets, then the danger zone curse could happen again.

"When you really increase a household expenditure, like gasoline, it can have a major impact on retail sales," he says, "so watch those retailers."

The QE bubble in financial assets continues to waterfall into commodities.

http://moneymorning....for-oil-prices/

What's Driving Oil Prices Higher

First and foremost is an unexpected increase in demand for oil from the developed world.

In the United States, oil refineries are processing the most crude oil since 2005.

Part of that is due to increased refining capacity with the opening this year of the largest U.S. refinery – the Motiva refinery in Port Arthur, TX, which is owned by Royal Dutch Shell and Saudi Aramco. Once again, improved infrastructure – pipeline and rails – has raised refineries' access to crude oil.

This other source of increased demand may surprise you…

Oil demand in Europe has risen recently, contributing to the price jump. Government data for April and May showed that overall oil demand in Europe rose for the first time in two years.

Data shows that demand for diesel rose now for three months in a row. That is a sure sign of trucks making more trips (as a result of increased economic activity), as reported by David Wech, an analyst at JBC Energy in Vienna, to the Financial Times.

The ECB's less-aggressive stance than the Fed's seems to be working in reviving the European economy.

The first consecutive gains in oil demand since the beginning of 2011 mean that Europe will have its first quarter of growth in crude oil demand since 2010.

A further indication of strong European demand for oil is the fact that Brent crude oil futures are in backwardation – that is, traders are paying a premium for oil for immediate delivery.

QE and Crude Oil Prices

One final reason for oil's rise is the continued easy monetary policies followed by the developed world's central bankers.

There is a lot of liquidity in the financial markets, thanks to the Fed, the Bank of Japan and the European Central Bank. A lot of money is pouring into stocks – the stock market's recent rally is predicated on traders' belief that "tapering" of asset purchases by the U.S. Federal Reserve will now not likely happen until early 2014.

People worried about preserving their wealth are using crude oil as an insurance policy – a position like the one gold has held for so long.

Indeed, Money Morning's Moors says that the Fed's QE (quantitative easing) policy is positioning crude oil as "a store of market value."

Edited by zugzwang

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Hurricane season hasn't even started yet!

The QE bubble in financial assets continues to waterfall into commodities.

IN SOVIET RUSSIA

Supply and demand have no effect on prices.

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Here in the Southern California Inland Empire, the petrol price has been around the $4 (per US gallon, i.e. around 3.9 litres) mark since the spring, and hasn't been consistently below $3.50 for over a year. Once you've accounted for the two major differences between US and UK petrol usage - normal grade petrol here is only 87 RON (compared to 95 in the UK), and so it contains significantly less energy, and larger petrol-engined cars are the norm and Diesel engines in cars virtually unheard of - I reckon that the cost of fuel in pennies per mile driven is around the same as in the UK. My 2009 Honda Civic costs around $40 to fill up and will do around 250 miles on a tank (mainly local driving) or 280-290 (mainly motorway). My Fiesta in Britain cost around £30 for 300 miles' worth.

Long-established locals here tell me that fuel economy is now factoring into long-term as well as short-term thinking. What we would call hatchbacks and superminis are now starting to be seen on America's roads in significant numbers - Versa, New VW Beetle (built in Mexico and selling heavily here), Smart, Fiat 500 etc. This is really starting to be reflected in the price of second-hand vehicles, and sales of Detroit-built saloons with 3-litre plus petrol engines are plummeting - in fact, the only new ones you tend to see now are owned by the big rental chains. Car pooling for commutes is becoming more popular. My wife lives only four miles from her workplace, and is getting envious comments from people who live 30-50 miles away and are trying to move closer to put a dent in their $500 a month petrol bill. Expanding the Metrolink (the commuter train service that radiates out from Los Angeles) is on the local political agenda, too, even in a country that is notoriously reluctant to use any form of public transport apart from planes.

Interestingly, though, no-one seems to think that electric or hybrid cars are the way forward. Only OAPs who only drive to the supermarket are to be seen in Priuses: for your your average 12k-mile a year driver, the cost of battery replacement rules them out. In particular, the hot climate is notorious for killing them.

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Here in the Southern California Inland Empire, the petrol price has been around the $4 (per US gallon, i.e. around 3.9 litres) mark since the spring, and hasn't been consistently below $3.50 for over a year. Once you've accounted for the two major differences between US and UK petrol usage - normal grade petrol here is only 87 RON (compared to 95 in the UK), and so it contains significantly less energy, and larger petrol-engined cars are the norm and Diesel engines in cars virtually unheard of - I reckon that the cost of fuel in pennies per mile driven is around the same as in the UK.

The US octane ratings arent directly comparable to UK ones. IIRC midgrade in the US is the same as regular here.

Im not actually sure its quite as simple as higher octane = more energy anyway...LPG is 114 octane equivalent and is slower and less fuel efficient than 95 oct petrol.

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Octane is a measurement of the fuels resistance to combustion under pressure only.

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Cheers, Morgan Stanley (and the Fed).

http://www.cnbc.com/id/100937811

In Monday's speech, Chilton will reveal how the CFTC has found out Morgan Stanley has ownership stakes in oil tankers and a fuel distributor. "And, of course, they also trade crude oil and other energy contracts." he added.

and here's the conspiracy behind it all:

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Octane is a measurement of the fuels resistance to combustion under pressure only.

A measure of the resistance to auto-ignition (detonation or knocking or pinking). The higher the compression ratio of the engine the higher the octane number required.

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