OIL PRICES HIT ALL TIME HIGHS, AGAIN, AGAIN and AGAIN!!! Gas Prices Break the Feared $3.00 Per Gallon Mark in the U.S.A. Los Angeles, California: People who visit our website know we try to maintain a "positive outlook" on the oil situation and "offer alternatives" to people instead of complaining about the price of gas... After all, it takes a whole less effort to form an opinion than it does to create a solution. But after a long road trip this weekend we are in shock at the gas prices being charged in the U.S.A. Prices for regular grade gas has gone above $3.00 per gallon throughout California. As we all know "as California goes so will the U.S.A." so the outlook for all of our fuel budgeting over the next year looks bleak. We thought we would compile a short collection of news reports to explain why the prices are surging again. Oil Rises to Record, Nears $63 on Refinery, Middle East Concern Aug. 8 (Bloomberg) -- Crude oil rose to a record, nearing $63 a barrel in New York, as surging fuel demand strains refineries and after a terrorist threat against the U.S. embassy in Saudi Arabia heightened concern about Middle East supplies. Exxon Mobil Corp., BP Plc and Valero Energy Corp. are among oil companies that have shut U.S. refinery units in the past few weeks, reducing output of fuels such as gasoline. The U.S. embassy in Saudi Arabia, the world's top oil producer, has closed today and tomorrow because of a threat against its buildings. ``People are still concerned about refining capacity being knocked out,'' said Craig Pennington, the head energy analyst at Schroders Plc in London. Even with ``high prices, demand for gasoline keeps growing in the U.S. The market is also concerned about terrorist warnings in Saudi Arabia.'' Crude oil for September delivery rose 59 cents, or 1 percent, to $62.90 a barrel at 1:11 p.m. London time, the highest since the contract debuted on the New York Mercantile Exchange in 1983. Oil has almost doubled from the end of 2003, gaining 40 percent in the past year. U.S. refineries have operated at more than 90 percent of capacity since March, racing to meet surging demand for transport fuels from the world's largest consuming nation. They've also increased supplies of heating oil before requirements pick up in the fourth quarter. No new refineries have been built in the U.S. in almost 30 years. Sitting atop the world's largest oil reserves, Saudi Arabia pumps more than 10 percent of global crude supplies. Steady flows from the kingdom are vital for industrialized and developing economies from the U.S. to China and Japan, the three top consumers. The government of King Abdullah, who rose to the throne last week after the death of King Fahd, aims to continue the country's policy of meeting demand for its oil. Expensive Gasoline Gasoline for September delivery today peaked at $1.8530 a gallon on Nymex, the highest price since July 8, when it touched a record $1.86. It was recently at $1.8493. The U.S. uses about 10 percent of global crude supply to meet its gasoline needs. Average retail prices for regular gasoline in the U.S. today surged to a record $2.34 a gallon, the AAA, formerly the American Automobile Association, said on its Web site. The Organization of Petroleum Exporting Countries, the source of more than a third of the world's oil, is pumping almost as much as it can to increase stockpiles. Output from most producers not belonging to OPEC is steady or falling. ``The world's oil production system has received little investment in the last 20 years and we are feeling the effects of that,'' said Francisco Blanch, senior energy strategist at Merrill Lynch & Co. in London. ``The only solution is to invest huge amounts of capital in production and refining.'' Refineries Shut Exxon Mobil shut its Joliet, Illinois, refinery on July 30 because of a failure of the water-cooling system. BP closed a unit at its Texas City, Texas, refinery on July 31 for maintenance. The plant also suffered an explosion and fire last month, the second since March. The U.S. Congress passed an energy bill with bipartisan support on July 29 that will spread $14.5 billion in tax breaks among hundreds of U.S. companies. President George W. Bush will sign it into law today, the Associated Press reported. The U.S. closed its Saudi Arabian embassy in Riyadh in response to threats against its diplomatic missions in the kingdom, an embassy spokesman, who declined to be identified, said today. The kingdom is battling al-Qaeda, which has killed almost 100 foreigners in the country during the past two years. Iranian Nuclear Plans Iran, the second-largest oil-producing nation in OPEC, said yesterday that it would respond today to a European Union proposal that the country suspend plans to enrich uranium, according to a foreign ministry spokesman, who two days ago said Iran had rejected the proposal. Agence France-Pressed today reported that Iran resumed activities at its nuclear plant, citing a top Iranian nuclear official. Iran says the plant is exclusively for electricity generation. ``Any small political problem creates additional concern'' about supplies, Blanch at Merrill Lynch said. ``The thing that the market needs the least is threats against stability in the Middle East.'' Brent crude for September settlement rose 55 cents, or 0.9 percent, to $61.62 a barrel on London's International Petroleum Exchange. Earlier, it climbed to a record $61.76. Fuel Demand In the four weeks to July 29, U.S. gasoline use rose 1.1 percent from a year earlier, to 9.5 million barrels a day, the Energy Department said last week. Demand for distillates, which includes heating oil and diesel, jumped 4.2 percent. U.S. gasoline demand is expanding. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG led the second-highest month ever for U.S. auto sales in July. Sales rose 22 percent to an annualized 20.9 million units last month, according to Autodata Corp. ``People are still traveling long distances,'' Pennington at Schroders said. ``They are spending their money in new cars because the perception is that the economy is really racing ahead.'' While consumers are concerned about higher oil prices, the U.S. economy is continuing to create more jobs and expand at a strong rate, Labor Secretary Elaine Chao said on Aug. 5. U.S. employers added 207,000 workers in July, beating a median estimate of 180,000 in a Bloomberg survey. ``There's going to be a price level at which demand will get hurt,'' Merrill's Blanch said. If the price rises another $10 or $15, demand in ``non-oil-producing developing economies will get fairly damaged.'' Click Here for More Info Refinery worries add to oil market jitters August 8, 2005 Paris - The latest turmoil in the oil market, which sent prices to new record levels last week, is partly due to bottlenecks in global refining capacity - a looming problem for some time but only a recent preoccupation for the market, say experts. A series of incidents at important refineries in the last few weeks has prompted knee-jerk buying, demonstrating the sensitivity of the market to news of any threat to global output. First, BP reported an explosion at its biggest US refinery in Texas, where a similar accident killed 15 people in March. Then ExxonMobil joined the casualty list by reporting problems at its refinery in Joliet, Illinois. In London, Brent hit a new record of $62.50 a barrel, while Light sweet crude rose to $61.26 a barrel in New York. The twitchy reaction of oil traders reflects growing worries in the market about the lack of spare distillation capacity in the system. This fear joins a long list of explanations for the doubling of oil prices since the beginning of 2003: geopolitical tensions, higher-than-expected demand, and speculative buying. Fears about refining capacity have also coincided with the start of the "driving season" in the United States, the start of the summer holidays when US highways are filled with holidaymakers. The United States accounts for about a quarter of global oil demand, with about half of its consumption in the form of transport fuel. Furthermore, traders are looking ahead to the winter season in the northern hemisphere when oil consumption grows due to demand for heating fuel. As a result, each week, they pore over data on the evolution of US oil stocks, seizing on every variation. And traders are not alone in expressing concerns about the capability of refineries to meet global demand. In April, the chairman of the US Federal Reserve, Alan Greenspan, declared the state of global refining capacity to be "worrying". Indeed, refineries were estimated to be producing at 87 percent of their capacity last year, a new record. By 2008, they could be producing at 90 percent capacity, some analysts say. In June, the head of the Organisation of the Petroleum Exporting Countries (Opec), Ali al-Nouaimi of Saudi Arabia, issued some advice to the oil-importing countries of the world: "Start building refineries and you will resolve perhaps half of the problem" of high oil prices. Oil analysts are of the same opinion. "The global refining industry has been in a state of chronic under-investment since the late 1990s Asian crisis," said Alastair Syme, an analyst at US investment bank Merrill Lynch, in a recent note to clients. "Single-handedly, that demand shock caused the industry to lose confidence in new grassroots investment, the result being that through the first half of this decade refining capacity was added at a rate that met only two-thirds of incremental oil demand." In the United States, the last new refinery built was in 1976, prompting President George W. Bush to promise to encourage new projects as part of his energy strategy for the country. Other analysts believe the oil companies, currently posting record profits on the back of the high oil prices and wide refining margins, have been reluctant to invest in new capacity because they have been burnt in the past by the volatility of the market. For Alastair Syme, tightness in capacity is here to stay in the medium-term, given the paucity of new projects and the lag time between investment and the arrival of new output on the market. "The conclusion is that although there are a number of refining newbuild and expansion projects on the table, there has been little physical commitment of the investment dollar," he said. "Resolving this key bottleneck in the oil complex will take time and money." - AFP Click Here for More Info Oil prices hit record highs after US shuts embassy in Saudi Arabia New York's main contract, light sweet crude for delivery in September, gained 38 cents Monday to 62.69 dollars per barrel in electronic dealing after striking a record 62.90 dollars. That beat the previous high of 62.50 dollars reached last Wednesday after US refineries were hit by disruptions. In London, the price of Brent North Sea crude oil for delivery in September rose 43 cents to 61.50 dollars per barrel after earlier hitting a record 61.76 dollars. The contract's previous historic peak was 61.26 dollars, reached also last Wednesday. "There's uncertainty in the market," a trader at Bache Financial said. "People are worrying about terrorist action or disruption of oil supplies in Saudi Arabia." The US embassy in the Gulf kingdom had said Sunday that its premises in Riyadh as well as two consulates would shut until Wednesday in response to an unspecified threat. "In response to a threat against US government buildings in the kingdom the US embassy in Riyadh and the US consulates general in Jeddah and Dhahran will be closed on August 8 and 9," it said, without providing further details. The US embassy warned on July 20 that terrorists could strike again in Saudi Arabia, which has been rocked by a spate of bloody attacks attributed to Al-Qaeda militants in the past two years. The British Foreign Office on Monday warned Britons travelling to Saudi Arabia that the terrorist threat there remains high and that there are "credible reports" of further attacks in the near future. Saudi Arabia is the world's biggest oil exporter, producing about 9.5 million barrels per day and has the capacity for an additional daily quota of 1.5 million. A week ago the kingdom's King Fahd died in hospital after a long period of ill health that saw him hand over the reins of power in the last years of his turbulent rule. Fahd's death had provided only limited support to oil prices, with the event seen as unlikely to disrupt energy production in Saudi Arabia. Oil prices are 40 percent higher than a year ago. However adjusted for inflation, they remain far below levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today's money. Prices had reached historic peaks last week owing to disruptions at US refineries, which are battling to provide sufficient gasoline and heating fuel to meet robust demand, particularly from the northern hemisphere. The United States is the world's biggest consumer of energy. "Some refineries are down for maintenance but there a lot of general problems," Investec analyst Bruce Evers said Monday. The failure by oil giant ExxonMobil to restart its 245,000 barrels-per-day refinery in Joliet, Illinois, as scheduled last Thursday, was particularly compounding worries of a supply disruption, dealers said. Although consumers have access to large supplies of heavy, sour crude, refiners prefer light, sweet oil -- such as Brent North Sea -- because of its low sulphur content and relatively high yields of gasoline, heating oil as well as diesel and jet fuel Click Here for More Info