Gasoline Limbo ... How Looooooow can they go?
UCAN News
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Gas Limbo ... |
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We've been saying for weeks now that prices should start to firm up in December, when demand usually starts to climb, but this is another week of Gasoline Limbo, where the Master of the Dance asks "How Low Can They Go?"
Oil prices continue to slide downward on skids greased by economic uncertainty and lower business and consumer demand. Oil closed on the NYMEX today at $40.81 a barrel. The last time oil cost less than $42 a barrel was four years ago on December 12, 2004.
Our insiders tell us that California refineries are dumping fuel at a "loss" of 25 cents a gallon (that's $10.50 for every barrel of oil turned into gasoline - and the quotes around the word "loss" are intentional). The next big benchmark is if oil slides down into the thirty-dollar-a-barrel range.
Just to put things in perspective, UCAN's estimated breakeven for a gallon of gas sold by an unbranded cash-only dealer this morning was pegged at $1.41 a gallon. On Monday, it was $1.64 a gallon.
We think the gasoline limbo will continue through at least next week delivering a return to massive prices slides (you're gonna feel this) of another 18 to 30 cents a gallon by next Friday.
A word on Limbo ...
It is worth noting that there are two definitions for "Limbo." The first is a the popular West Indian dance ... and the second is the realm between Heaven and Hell where the souls of the lost await judgement.
For the speculators who drove the price of oil to $147 a barrel on July 3, that judgement is yet to come.
Gas & Autos Gas Prices - Oil Watch -
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Watch out for the rebound
One of the stations I've been reporting on has jumped from 1.59 to 1.71 in just a day. That's got to be the spot market as it's an independent. Such an overnight jump when prices are still dropping (although slower) seems to be distributors taking advantage of an opportunity to profit off news before it really has a chance to affect supplies. And just the appearance of profit-taking gives impressions of rip-off and gouging.
Have we seen the Bottom?
With word that crude prices have risen slightly and we've even had a bounce effect on the price of gas can we really think we've hit bottom? With the delay in delivery of crude- to-station we should expect some weeks of slowly decreasing costs. Will it happen?
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