Critical News & Information for Businesses
that Depend on Fuel and Fuel Services
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| Oil Goes Lower? |
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Well maybe that's a case of a little wishful thinking. The reality is crude oil, for the past 2 weeks, has bounced around from $124.31 a barrel to $130 a barrel. Prices at the pump have gone up due to the lag period it takes for retail to catch up with crude changes.
National Retail Average
May 1 May 15 June 3
GAS $3.603 $3.776 $3.978
DIESEL $4.177 $4.455 $4.707
In truth, crude has remained flat, at least in the market we have lived in other the past 6 months. Here is where it should start to really get interesting, as normally after Memorial Day, energy prices take a break. This happens because refineries have met supply demands coming out of a turnaround. Turnarounds happen twice a year when demands for either gas and diesel (summer) or distillates and heating oil (winter) are flip-flopped and inventory builds to meet that demand.
Everyone expects a big build of supply on Wednesday, June 4th when DOE releases its weekly numbers. Federal Reserve Chairman, Ben Bernanke, indicated on Tuesday, June 3rd, more interest rate reductions were unlikely, so that should help strengthen the US dollar.
All good news so far, but Colorado State University Hurricane forecast team said Tuesday that they stand behind their April forecasts for 15 named storms this year. Computer models show there is a 45% chance that a major hurricane will make landfall on the East Coast. The main question will be Supply or Storms?
Where are the speculators going to bet their money?
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| Greetings!
We hope you find this issue valuable and informative. Please visit our new website, www.sokolisgroup.com for additional information.
Your ideas are always welcome for future articles. This month we have the results of April's survey, which 37% of you read and answered. Your participation is very much appreciated.
Glen Sokolis
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Sokolis Solutions
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Review your truck size and specs
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Consult with your tire manufacturer
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Put a fuel program in place
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Review all reports, the drivers don't respect what you don't inspect
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Stress idling reduction
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Challenge your drivers for ideas. If you don't get control, you might be out of business. |
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Oil's Assault
Are these prices for real or a temporary thing? Here are five possible solutions, along with the outlook for each.
Solution #1:
Pump more oil out of the ground.
Outlook:
Not likely to happen for a long time. Last week the International Energy Agency said that oil companies might be incapable of keeping up with demand over the next 20 years. The OPEC oil cartel is disinclined to try harder, now knowing the ceiling for crude is a lot higher than its old $50/barrel.
Solution #2:
Reduce the world's demand for oil.
Outlook:
Not very likely. We can try to reduce it by using hybrid vehicles, alternative fuels and ethanol, but the world's growth in China, India and other second and third world countries will continue to add pressure for more oil.
Solution #3:
Strengthen the weakened dollar.
Outlook:
This could happen in coming months however, The Federal Reserve has said that it doesn't foresee further interest rate cuts.........for now.
Solution #4:
Pop the speculation bubble.
Outlook:
Try to change human nature. Speculators are simply paying what they think a barrel will be worth in the future. They are using the same fundamental factors that have propelled the price of oil for the last six years.
Solution #5:
A bad recession
Outlook:
Oil could finally tip the economy into a recession. Experts say that gasoline prices have yet to catch up to the recent spikes. Add in the "super spikes" of $200/barrel and its possible it could cost us $6.00 per gallon of gas and $7.00 for a gallon of diesel.
Solution #6:
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DOE Prices
as of June 2, 2008
East Coast = $4.759
New England = $4.846
Cntrl Atlantic = $4.907
Lower Atlantic = $4.687
Midwest = $4.643
GulfCoast = $4.664
Rocky Mtn = $4.680
West Coast = $4.878
California = $5.027 |
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NOT A SOKOLIS GROUP CLIENT?
Contact us online or call 267-482-6155
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Philadelphia Metro Area
** Free Seminar **
June 11, 2008
presented by
Sokolis Group & KMRD
Fuel Saving & Insurance Seminar
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$4 Gas/$5 Diesel A Bargain?
What we are paying for a gallon of gas, here in the United States, doesn't even compare with what others have to pay for that same gallon. In places like Norway and Great Britain they are paying twice our current rate.
Paying 1920's prices
When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in 1922. According to the Energy Information Administration, in 1922, a gallon of gasoline cost the current-day equivalent of $3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20% more than 86 years ago. Given the ever increasing global demand for oil products -- during the first quarter of this year, China's oil consumption jumped by 16.5% - - and with the increasing costs associated with finding, producing and refining crude oil, it makes sense that today's motorists are paying more for their motor fuel than their grandparents and great-grandparents did.
High prices, lower consumption
Significant declines in U.S. oil consumption have occurred only after prolonged periods of high prices. Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a buying binge that put millions of giant SUVs, pick-ups and other gas guzzlers on our roads.
Today's higher prices are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year - the first drop in demand in 17 years. In April, sales of small cars in the United States were up by 17% over the same period a year earlier, while sales of SUVs, trucks and large cars fell by about 30%.
We are with you
We don't like paying higher prices any more than the next company. Certainly, energy is critical to all of our operations. To determine how crazy the current fuel prices of $4 for a gallon of gas and $5 for the same amount of diesel are let's analyze where the prices comes from. About .50 cents of the gallon is comprised of taxes, in most states. The oil has to be explored, drilled, piped, transported, refined and delivered to make it to your local filling hole. Think about how much effort it takes to make the following products and notice their equivalent cost per gallon.
Bottled water $5.16/gallon
Mouth wash $12.40/gallon
Beer $18.00/gallon
Starbucks coffee $15.60/gallon
We might all have to go out and have a few beers, stay hydrated with some bottled water, get a good night's sleep and rinse with mouth wash and grab a cup of Joe and stare reality in it's face. Fuel cost is not so bad when compared with the other products we use. |
Testimonial
"The Sokolis Group has been able to help our company get a better understanding of managing our fuel costs. They have been very positive for our company at a critical time for fuel prices."
Mike DiLarso, Corp. VP of Operations
Maines Paper & Food Services, Inc.
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Survey Results
The readers of our survey had the following results:
1. How many power units are in your fleet?
18% less than 50
37% 50-200
29% 200-1,000
16% over 1,000
2. How do you fuel today?
30% Retail/Truck stops
20% Cardlock
18% Bulk tanks (On-site)
16% Mobile Fuel
16% Other-leasing
3. Where does the cost of fuel rank on your P/L?
31% 1st
22% 2nd
14% 3rd
18% 4th
15% 5th
4. Is your company working to improve its fuel economy?
86.3% Yes
13.7% No
comments:
Anti-idle, tires, speed governance, aerodynamics, slower speed and tire pressure
5. Approximate gallons of fuel purchased annually?
3.8% 100,000 or less
27.7% 100,001 to 500,000 gallons
31.4% 500,001 to 1.5 million
37.1% 1.5 million or more
6. What kind of fuel management program do you have?
26.4% Reviewed, but not managed
33.5% Managed to satisfaction
23.5% Managed, extremely well
7. If you were setting your ULSD fuel budget for the next year, starting today (April 7, 2008), what would it be?
4.3% $3.00/gallon
17.6% $3.50/gallon
37.3% $4.00/gallon
21.2% $4.50/gallon
19.6% over $4.50/gallon
8. What will the price top-out at for the National DOE ULSD from now (April 7, 2008) until September 1, 2008?
Of all of our readers responses, only 7 contenders remain, with guesses over $4.723.
9. What fuel card company do you use?
37.9% Wex
24.1% Comdata
24% Other, variety
10.6% none
3.4% T-check
10. What do you like/dislike about your fuel card company?
Here are some of your comments:
Like:
Discounted OTR fuel
Seems fine
Overall, good at collecting data
Dislike:
Lack of proprietary network
Poor customer service
Does nothing to help manage out fuel costs.
11. Does you company care about its carbon footprint?
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Quote
"The economic incentive to go green is very difficult. Your choices make a difference."
Anonymous CEO |
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Hurricane Season
Hurricane Season Starts Now; Forecasters Predict "Average" Season
An average season has 11 named storms, including six hurricanes for which two reach major status, and that's what professional forecasters are calling for in the summer of 2008. NOAA's Climate Prediction Center "projected climate conditions point to a near normal or above normal hurricane season in the Atlantic Basin this year. The prediction was issued at a news conference called to urge residents in vulnerable areas to be fully prepared for the onset of hurricane season, which begins June 1." NOAA's Atlantic hurricane season outlook will be updated on August 7, just prior to what is historically the peak period for hurricane activity. The season runs through November 30.
For 2008, the outlook indicates a 60-70 percent chance of 12-16 named storms, including 6 - 9 hurricanes and 2 to 5 major hurricanes (Category 3, 4 or 5 on the Saffir-Simpson Scale).
As we all know, hurricanes, or the mere mention of hurricanes and tropical storms, usually means an increase in fuel costs. Click here to prepare.
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