Fuel Prices Rocked With Uncertainty Over Tension in Syria
Today, the Energy Information Administration released its weekly reports on the status of various liquid fuels in the United States, covering the week that ended August 30th. The reports cover natural gas and petroleum, presenting data about the production, storage, and prices of the fuels. Changes in the data can reflect natural variations, seasonal trends, long-term market effects, and current events in regions of the globe where liquid fuels are produced, processed, and sold. This week was highlighted by tension in Syria where the U.S. is leading calls for military action in response to a gas attack carried out by the current regime in power.
Working natural gas in storage — the volume readily available to the market — increased by 58 billion cubic feet in the week ended August 30 to 3,188 Bcf, according to EIA estimates. This is down by 210 Bcf from the same period last year, but at the upper-end of the five-year historical range. As of Thursday, futures traded at $3.683/mmBTU, up nearly 12 cents on the week but still below the $4 to $6 range within which producers can both earn a profit remain and compete with alternative fuels such as coal.
The data shows a trend has developed over the past few years. Inventories have been on the rise as domestic production increases, largely thanks to advances in horizontal drilling and hydraulic fracturing technology. These advances have contributed to a revolution in energy production in the U.S. and producers are rapidly helping make the dream of energy independence come true. Domestic production supplied the U.S. with 84 percent of its total energy needs in 2012, the highest level since 1991. The EIA estimates that the U.S. could become a net exporter of natural gas as early as 2020, assuming regulatory hurdles can be overcome.
U.S. crude oil refinery inputs averaged about 15.9 million barrels per day during the week ending August 30, 2013 with refineries operating at 91.7 percent capacity. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. At 360.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year.
This did come as a surprise to many experts, who believed that the reserves would only shrink by 200,000 barrels or less. The news agitated already tense markets and sent the price of crude oil futures sharply upwards.
WTI, a grade of crude oil used as a benchmark in oil pricing, was $107.65 per barrel, $1.23 more than last week’s price but $13.02 more than a year ago. Many are concerned about the price of oil because of tension in Syria with Chinese officials claiming a potential spike in oil prices as a reason not to launch a strike against the nation. Prices in oil futures have risen steadily since 2012 due to steady increases in demand from the U.S. and China, among other countries.
As the EIA put it, “All else equal, changes in gasoline prices follow changes in crude prices.” For the week ended August 26, the average retail price of a gallon of gasoline in the U.S. was $3.587. This is down 24 cents from the year-ago period, though up a fraction from the previous week. It is also down from the summer-to-date peak of $3.68, which was hit on July 22.
Earlier in August, the EIA projected that oil and gas prices would decline throughout 2014 — with regular gasoline approaching $3.00 per gallon by the end of the year. Thanks to increased production in the U.S. and other non-OPEC countries, prices could very well still continue to decline after some of the dust has settled over Syria.