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May-June 2009 Update
It's been a strange year. We predicted early that pre-buy would be a good
idea. Except for Irving who chose not to buy early, our other dealers gave us
prices ranging from $1.98/gallon to $2.11/gallon beginning in February. The
inexplicable thing is that we had very little interest in fuel at those prices
until recently. We ran out of oil with Eastern about a month ago but still have
oil with Fielding's and Gorham at those prices as of May 31, 2009. We think that people were
wrestling with the idea of giving up "Rack Plus".
As we suspected the speculators jumped in to the market again about the time
Eastern ran out on first bid. We've been waiting for prices to drop but instead
they have climbed steadily. There is absolutely no demand/supply reason for
this. We have the highest oil stockpiles in twenty years and demand in the US
and Europe is decreasing, not increasing. China is up 4% in oil use last
month but was flat the month before. I have been in touch with Bob Moller,
Energy Specialist in Congresswoman Carol Shea-Porter's office regarding
speculators. Shea-Porter sponsored a bill limiting speculation last year (after
she received 4000 emails/letters from our members). Moller said
Congressman Stupak* has introduced another bill to ban speculators from the
energy commodities market. It was attached to the Climate bill which has a
good chance of passing. Unfortunately, the timetable for passage is October.
Details of the bill are below, courtesy of Mr. Moller.
Here is a link to the Climate bill:
http://energycommerce.house.gov/Press_111/20090518/hr2454_ans.pdf The
section you want to see is Sec. 351 on page 701.
Also, here is a link to the press release about *Mr. Stupak’s bill, which
Congresswoman Shea Porter will be cosponsoring:
http://www.house.gov/apps/list/speech/mi01_stupak/morenews/20090515pump.html
Where are we now?
Irving was late in wanting to bid this year. Though we had been
requesting bidding since mid-February, they felt it was too early and were
finally ready to bid on May 14th. By that time, the market had heated up. The
first bid was $2.29/gallon and we decided that given current oversupply
conditions, it would be prudent to wait. Similarly, Eastern ran out of the
$1.99 oil at about the same time. Prices have continued to climb for no
discernable reason except stock market euphoria and hype by Goldman Sachs.
When oil prices dropped by 3.5% in one day recently, Goldman Sachs, the same
company that predicted $200 per barrel oil last year (and needed a tax payer
bailout due to its subprime and commodity market losses), predicted $85/barrel
oil later at the end of the day, enabling the market to almost completely
recover its price losses. For some reason, investors listen to Goldman Sachs,
even though they know Goldman Sachs is a huge player in the oil market and that
when Goldman wins, a lot of small investors must lose.
See: Oil
Price Spike Looks like 2008-WSJ and
Energy execs worry oil rise just mood swing -Reuters
We are in "Watch & Wait" mode at this time and may consider "Rack Plus"
again if the market does not return to fundamentals, i.e. pricing more in line
with actual supply and demand. In the meantime, I would suggest
writing or calling all your Congressional representatives and Senators about
banning speculation in the energy markets on the basis of national interest and
security.
We will keep you posted here on the News Page. For more overall perspective see "A
Brief History of OTEA Energy Pricing"
Regards,
Dan
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