EVERY DAY YOU DELAY, THE LESS YOU'LL PAY!
It was the best of times; it was the worst of times. It was the age of wisdom; it was the age of foolishness. It was the spring of hope; it was the winter of despair and …$2.50 per gallon gasoline.
In this tale of two cities life cannot exist without that precious commodity called gasoline. In one city there are the Indies, "non-branded independents", who are struggling to survive while in the second city the Majors, "Chevron, Shell, Mobil, 76 an Arco", are having one of their most profitable years. The Majors vastly outnumber the Indies by almost ten to one.
The Indies are mad and saying that they have almost been starved out by the Majors for the last five weeks. They claim that the Majors have been buying up the gasoline from their suppliers at higher prices than what they could turn around and sell it for to their own customers. The Majors, for their part, claim that they did not have a choice since their gasoline making machines, "refineries", slowed down at this time of the year because of inefficient supply of oil as well as having to perform maintenance on them.
The Indies sent out their spies to find out if it was true that the Majors were thinking of dismantling one of the much needed gasoline making machines thereby tightening the noose around their necks even more. The state constable, "Attorney General Lockyear", was asked to intervene on their behalf and he received assurances by one of the Majors that such a dastardly thing would not occur before spring.
But, now relief is finally here for the Indies as cargoes of gasoline have been sighted coming in from far abroad. Ships are coming from as far away as the Caribbean with that precious commodity called gasoline. This could be the time for the Indies to get even with the Majors by obtaining those imports for their customers. But, don't count the Majors out yet, as with just one burp in any one of their gasoline making machines, the good fortunes of the Indies can be reversed almost immediately.
The Indies will play catch up as their unbranded gasoline could prices drop faster than the Majors. At the same time the Majors will be trying to hold on to their record high prices as long as possible. The Indies are in good position as they are willing to pass on the lower wholesale gasoline price to the public more quickly than the Majors. In that way, they can recoup the volume lost to the Majors over the last five weeks as fast as possible.
If the Majors don't buy up significant quantities of the spot market gasoline, then you will see the price dropping at the Indies stations. If the Majors do have to go out and buy spot market gasoline then the retail gasoline market could stay firm until after Thanksgiving.
All these things, and a thousand like them, may come to pass in and close upon the dear old year two thousand and four.
The biggest factor that will play a major role in the lowering of the price of gasoline is that the overall production of finished gasoline will increase by 10% after the summer to winter switch over is completed. Therefore gasoline could be down below $2 per gallon again before Thanksgiving with consumers doing their part.
The first indication that the Majors are willing to start the downward trend for branded prices will happen in order to stay competitive. Also a factor will be the drop in demand for petroleum products in both U.S. and China due to current high crude prices.
Consumers can help bring gasoline prices down even more dramatically by continuing to conserve, as they have already been forced to do this year.
They can contribute to the building of inventories of gasoline in storage tanks back at the oil companies' terminals and refineries by not topping off the fuel tanks in their cars and trucks. Refiners will lower gasoline prices when their fuel stocks grow as demand for gasoline slacks.
"Every day you delay, the less you'll pay".
Bob van der Valk is the Bulk Fuels Manager for Cosby Oil Company in Santa Fe Springs, California - an independent petroleum marketer. He is a fuel-pricing analyst and can be contacted at (562) 236-1949 or e-mail:. His viewpoints about the California petroleum industry are posted on the 4VQP.COM website by going to:
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