Headwind for consumers again:Gasoline Rising to Holiday High as Storm Surge Presses Obama
By Asjylyn Loder
August 28 (Bloomberg) — Hurricane Isaac and a deadly blast at Venezuela’s Amuay refinery pushed gasoline to an almost four- month high and threatened to revive a debate about energy costs in the run-up to the presidential election in November.
Futures jumped yesterday in New York as Isaac forced closures of Gulf Coast refineries and reduced rates at others. That market is also reeling from an Aug. 25 explosion in Venezuela that killed at least 48 people and closed the country’s largest fuel-making plant. Futures are up 23 percent since their 2012 settlement low of $2.5501 a gallon on June 21.
Prices at the pump will be the highest ever for the U.S. Labor Day holiday, AAA said yesterday. The surge reignites an issue that has pitted President Barack Obama, who has called for the elimination of billions of dollars of subsidies enjoyed by the oil and gas industry, against the presumptive Republican nominee Mitt Romney. It also spurs speculation that Obama will release supplies from the Strategic Petroleum Reserve to ease prices for consumers.
“Given this administration’s belligerent rhetoric against the oil industry, it’s going to be very easy for Romney to pin the blame on Obama,” said Stephen Schork, president of Schork Group Inc., a consulting firm in Villanova, Pennsylvania. “The White House will be on the defensive. It makes an SPR release likely sooner rather than later.”
Gasoline for September delivery advanced 7.68 cents, or 2.5 percent, to $3.1548 a gallon yesterday on the New York Mercantile Exchange, the highest level since April 30. Futures fell 2.87 cents, or 0.9 percent, to settle at $3.1261 today.
Retail prices for regular grade increased 0.6 cent to $3.756 a gallon yesterday, the highest level since May 7, according to AAA, the largest U.S. motoring group. Gasoline at the pump cost $4.138 in California yesterday, $4.008 in Connecticut and $3.973 in New York.
The nationwide average fuel cost rose to $3.75 a gallon on Aug. 26, the highest price ever for that day, Michael Green, a spokesman for AAA in Washington, said in an e-mail.
“We expect the national average price of gasoline for Labor Day this year to be the highest ever for the holiday,” he said.
Drivers could be paying $4 a gallon by the end of September, Schork said. The first presidential debate is scheduled for Oct. 3.
Gasoline futures for October delivery fell 0.6 percent to settle at $2.9333 a gallon, 19.28 cents a gallon below the September contract. The discount reflects speculation that demand will slip as peak driving season ends with the Sept. 3 Labor Day holiday, and the switch to winter-grade fuel that doesn’t have to meet as stringent emissions rules and is cheaper to produce.
Obama has described his energy strategy, unveiled in March, as an “all-of-the-above” approach that encourages fossil fuel development, energy efficiency and renewable technology. He has also called for a repeal of what he estimated is $4 billion in subsidies every year.
Romney’s energy plan, released last week, faulted Obama for discouraging drilling on federal land, stifling offshore exploration, imposing costly regulations and subsidizing uncompetitive technology that can’t survive without government backing.
Solyndra LLC, a solar-panel maker in Fremont, California, that received a $535 million U.S. loan guarantee, sought bankruptcy protection in September and fired its 1,100 workers.
Gasoline advanced yesterday as refiners including Exxon Mobil Corp., Phillips 66 (PSX) and Valero Energy Corp. (VLO) said they are temporarily shutting down Gulf Coast plants as Isaac churns toward the Louisiana coast.
Six plants with a combined ability to process about 1.15 million barrels of crude a day are shut, according to data compiled by Bloomberg. That’s 6.7 percent of U.S. capacity.
In addition, plants including Motiva Enterprises LLC’s Norco, Louisiana, Exxon’s Baton Rouge operations and Marathon Petroleum Corp.’s Garyville facility are at lower rates. Valero’s Memphis plant was said to be operating at minimum rates after Royal Dutch Shell Plc shut the Capline pipeline that transports crude oil from the Gulf to the Midwest.
“Right or wrong, higher gasoline prices don’t help Obama,” Kyle Cooper, director of research for IAF Advisors, a Houston consulting group, and Cypress Energy Management LP, a $20 million natural-gas hedge fund based in Houston, said by phone yesterday. “All Obama’s rhetoric and all his propaganda can’t do a thing if the refineries are flooded. He can’t change physics. And Romney will take the other side of it, but this storm is not Obama’s fault.”