Well, spring is finally here, and so are four year high fuel prices. Gasoline is reaching almost $3, just in time to kick off the official driving season.
Why the high prices you ask? It’s simple, all energy products are valued off of supply and demand. The more supply you have the lower the value, while higher demand and low supply give you higher values.
Geopolitical unrest in the Middle East are causing production interruptions, as well as complete shutdowns of oil fields. Most recently, Venezuela, who is our 4th biggest importer has really caused some problems. They are having major financial woes, the country is practically bankrupt. In addition to their financial crisis over the past year, they recently had their presidential election. This election was deemed to be a shameful scam. The current president Nicolas Maduiro won again, with 66+% of the votes. Basically, it sounds like ole Nick had a bunch of his oppositions supporters thrown in jail for odd reasons; non-of which seems legit! I guess he has enough of them locked up, that it actually tipped the scales into Maduiro’s favor and with regards to the vote count. I just don’t get it…I mean…woohoo- I cheated to become the leader of a crummy, financially ruined country that owes other countries so much money that we are running the risk of being sold, to another country. Apparently, to celebrate his recent victory—he plans on liquidating the few “riches” the country has left by selling them. Personally, I like to celebrate things with cake, specifically Cheesecake!
OPEC has seen great success with production cuts. They may be a little too successful, taking crude oil from the huge glut we saw two years ago, to what I believe now, is almost a shortage. It has gotten to the point now, where pure greed has taken over, this is definitely not a good thing.
Asia has exactly the opposite problem that Venezuela has. They are booming economically, and are creating huge problems for us on the propane side of things. They are willing to pay $0.20 over the actual value of propane. This has caused record high exports, and now we are again seeing a shortages here in the U.S. So, when we should be seeing a decrease in propane prices, we are seeing this odd springtime boom….not normal.
Looking back over the past year, crude oil is 30% higher than last year at this time. With crude oil being the leader, all of our commodities are following that path, with diesel fuel seeing a 27% hike, gasoline is low man only realizing a 20% increase and propane is a steady 26% higher.
So to sum things up, the energy market seems to be a bit out of control right now, with certain commodities acting like they don’t even know what time of year it is (propane). Unfortunately, my crystal ball is in the shop getting overhauled, so I cannot predict when these bullish markets will back off, but what I can tell you is this -> The consumer sector can only handle so much. If the prices get too out of control and maintain for too long, people will start to cut back. We will cut back on driving, find more economical ways of farming, and we will even cut back in the grocery store. This all has a significant effect on the energy markets. When that times comes, I think we will see a swift collapse. But how soon will this happen? I guess we will have to wait for my crystal ball to get back from the repair shop to find out…
By Kim Leisner, Energy Sales Manager