Category Archives: CNG Blog

Gasoline Prices Up Again?

Gasoline Prices

 

Since mid January gasoline prices have rebounded from the low price of $1.50 on the futures market.   There have been various factors disrupting the falling prices in spite of historically high inventory levels.  In fact, gasoline prices have gained more than 40 cents per gallon in the last 45 days.  Some factors pushing up prices have been:

  1. Refinery accidents forcing additional plants to slow down gasoline production.  A lot of people are speculating that these accidents occur every time gasoline prices drop below $3 per gallon in California and closer to $2 per gallon across the nation as an excuse to charge higher prices.
  2. The end of the winter schedule for refineries.  They close for maintenance and to reformulate the gasoline in preparation for the hotter summer months ahead.  Reformulation usually adds an extra 20 cents per gallon for most states.  California is an exception as they have an extremely stringent pollution policy which costs about 40 cents more per gallon.
  3. The largest United Steel Workers Union’ strike in 30 years.  Workers are striking at various oil refineries across the nation including Motiva Enterprises which is the nation’s largest oil refinery in Texas that carries a crude capacity of 600,000 barrels a day.  These refineries account for 20% of the national production.  The negotiations are being held up over whether to replace contractors hired for specialized jobs with union members.
  4. The cold weather freezing major water transportation corridors on our nation’s rivers and lakes.  Many of these passageways are frozen solid.  Refineries depend on lubrication oils to operate their machines.  90% of the Great Lakes are frozen over and are blocking most traffic and supplies needed by these refineries to continue processing oil into gasoline.
  5. Terrorist groups like ISIS who make it their mantra to surprise and shock others with their destructive and frightening acts of violence.
  6. Older news resurfacing such as the threat of Iran developing nuclear bombs using long range missiles capable of targeting the US and closer enemies.

I question which (if any of these) catalysts will send gasoline prices back up?  The month of March may just possibly be one of the more volatile months for gasoline and oil prices this year.  Both commodities have spent the last several weeks consolidating and waiting for fresh news to either continue the upwards trend or to reverse the trend downwards.  Many industry experts are reporting record levels of gasoline supplies and they speculate that prices will level off closer to $2.50 per gallon nationwide.  California is an exception as their stricter guidelines for emission reductions and the recent refinery explosions have driven their prices back up to $3.50+ per gallon.  When the reformulated blends hit the market this month we might expect an additional 10 – 20 cent increase per gallon from the current prices.

Gasoline Prices

Technically, gasoline is poised for a spike in price.  The chart formation shows us how gasoline prices have been consolidating  with buy orders on the lower line and sell orders on the top line keeping the price within a defined range.  Traders have been waiting for fresh news to determine the next direction of gasoline.  Either prices will increase and continue the previous trend or we will see a reversal in prices.   If the technical formation holds then we might anticipate a spike in prices accommodated with high volume.  The million dollar question is what will move prices out of this recently developed range?  The Baker Hughes oil rig count is due out later today, perhaps we may pay more for gasoline over the weekend.

 

The Seasonal Rise of Gasoline Prices…or is it?

Gasoline Prices

There’s a lot of finger pointing going on with regards to the glut of oil and gasoline prices rising.  Yes, gasoline is directly tied to oil prices.  According to the EIA,   19 gallons of gasoline are produced out of every 42 gallon barrel of oil.

Gasoline prices have been trading in sync with oil for most of 2014.  Only recently has this trend broken with gasoline prices diverting itself from oil’s downward price path.  Since mid January gasoline prices have gained over 40 cents per gallon.  Both markets are exhibiting extreme volatility as gasoline prices traded inside a 12 cent range during yesterdays’ (Wednesday) trading session.  Gasoline prices closed at $1.91 per gallon which was a few cents from the day’s high further widening the price differential between crude oil and gasoline.  US gasoline averaged $2.12/gallon in January which was the lowest price since April 2009.

 

Gasoline Prices

 

 Gasoline prices are increasing…Who or What is to Blame?

Is it the oil companies fault that they are experiencing refinery accidents forcing additional plants to slow down gasoline production?  A lot of people are speculating that these accidents occur every time gasoline prices drop below $3 per gallon in California and closer to $2 per gallon across the nation as an excuse to charge higher prices.

Perhaps it is the end of the winter schedule when the refineries close for maintenance and to reformulate the gasoline in preparation for the hotter summer months ahead.  Reformulation usually adds an extra 20 cents per gallon for most states.  California is an exception as they have an extremely stringent pollution policy which costs about 40 cents more per gallon.

Perhaps it’s due to the largest United Steel Workers Union’ strike in 30 years.  Workers are striking at various oil refineries across the nation including Motiva Enterprises which is the nation’s largest oil refinery in Texas that carries a crude capacity of 600,000 barrels a day.  These refineries account for 20% of the national production.  The negotiations are being held up over whether to replace contractors hired for specialized jobs with union members.

Perhaps it’s the cold weather freezing the transportation corridors on our nation’s rivers and lakes.  Many of these passageways are frozen solid.  Refineries depend on lubrication oils to operate their machines.  90% of the Great Lakes are frozen over and are blocking most traffic and supplies needed by these refineries to continue processing oil into gasoline.

Or maybe the fault lies with terror groups like ISIS who make it their mantra to surprise and shock others with their destructive and frightening acts of violence.

I question what (if any) catalyst will send gasoline prices back up?  The month of March may just possibly be one of the more volatile months for gasoline and oil prices.  Both commodities have spent the last several weeks consolidating and waiting for fresh news to either continue the upwards trend or to reverse the trend downwards.

 

 Gasoline PricesWill This Trend Continue?

Many industry experts are reporting record levels of gasoline supplies and they speculate that prices will level off closer to $2.50 per gallon nationwide.  There is unfortunately all the above mentioned threats that are pricing in supply uncertainty and volatility into the gasoline market.  Outside of all these reasons for the increase in gasoline prices are the dependable cost break down for each gallon of gasoline.  The main costs to produce gasoline are:

  • The cost of crude oil (54%)
  • Refining costs and profits (6%)
  • Distribution and marketing costs and profits (20%)
  • Taxes (20%)
  • Wars, disputes, supply disruptions, poor weather, strikes, refinery shutdowns, greedy bastards from the oil companies who just want us to pay more, you can add your opinion to this last item 😯  None of these unpredictable factors and events are priced into a normal market….when was the last time you remember having a normal gasoline market?

 

Oil May Be Ready to Crack

Kramer said it best, “oil is a battlefield” .  It seems that both technical and fundamental news share little to no consensus as to which direction oil prices will trend. ….except that we may be missing a small signal alerting us to oil’s next move.

If you look at the monthly crude oil chart, the last 2 weeks of price activity appear to qualify as an “ascending triangle”.

Crude Oil Prices
April Crude Oil

An Ascending Triangle will have a resistance price.  In our case the April contract for WTI oil has been unable to trade higher than $55 and it has tested this level 3 times.  The reason the price has been met with resistance is that there are a number of sell orders at or around $55 which cause the price to drop each time it is tested.  Eventually the market will run low on sell orders at $55 which will enable the price to break through this price and trade higher.  These breaks are usually accommodated with very high volume.

In the mean time, the lower trend line is slanted upwards indicating higher lows.  For an Ascending Triangle to be validated it must have a minimum of 2 reaction lows (the points that connect the lower trend line) which this formation has.

Ascending Triangles are a bullish indicator, which if the formation holds then we might anticipate a strong break out to the upside.  Many times a news item will facilitate this push.  The latest irrational and self-destructive terrorist actions from ISIS having slaughtered 21 Egyptian Christians in Libya wasn’t enough.  The ongoing threat to Iraq and Libyan oil supplies isn’t enough. West Virginia’s train derailment spilling and exploding over 410,000 gallons of oil into the Kanawha River wasn’t enough.  So what will it take? Will today’s Baker Hughes Rig Count be enough?  My guess is probably not.  We are still producing more oil than is consumed which is reinforcing the selling pressure on oil prices.

How long before the price breaks out of this consolidation phase?  No one knows and is driving a lot of investors and analysts crazy.  As I mentioned in my last Blog post analysts never get enough credit for being correct in their projections and those analysts that make the wrong educated guess get slaughtered by all the armchair players.  However, with out these educated projections how can companies reduce risk and still increase profits?

It’s the waiting that kills everyone.  Meanwhile, gasoline prices are moving higher and instep with oil prices.

Gasoline Prices
Monthly Gasoline Prices

 

Gasoline prices have been consolidating and making slightly higher highs as well.  Only a close above $1.88 will show us that this round of sell orders have been eliminated.

My family and friends  in California can not catch a break.  Just when they finally experienced a few months of lower gasoline prices, the United Steel workers walked out of 9 refineries which make up 13% of US gasoline production.  These workers are fighting for safer working conditions. Last Wednesday the electrostatic precipitators (ESP) in the Torrance refinery near Los Angeles exploded.   The irony of this story is that no one from the Torrance refinery was striking.  In fact the 12-story tall equipment that exploded and released toxic fumes into the nearby neighborhoods was used to reduce particulate matter and ammonia emissions during the refining process. The ESP unit inside the refinery could stay closed for 6 months and take up to a year to be replaced.

California gasoline prices spiked 10 cents higher after the plant explosion.

I guess our friend Kramer should change his statement to “Both oil and gasoline are battlefields”!

***Post Update:  The Baker Hughes Weekly Report for February 20, 2015, counted 48 additional closed rigs from last week which is a 4% drop.  Oil futures dropped 1% (52 cents) on the news.   This makes a total of 461 closed US rigs over the last 12 months.

 

 

Natural Gas Prices at All Time Lows

Today’s session natural gas is trading at it’s monthly low of $2.66, just 76 cents from its record low of $1.90.  Did you know that you can lock in your natural gas fuel prices for the next 5-10 years at today’s historic low prices?  Call today for more information! 321.307.5058

 

Natural Gas Prices
Natural gas is trading just 76 cents from its all time low

 

Natural Gas Prices

 

Natural gas is traded on the New York Mercantile Exchange (NYMEX) and is priced in terms of dollars per mmBtu.

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Cheap Gas

About CNG 

CNG Prices and Stability:

Did you know that a spike in natural gas prices hardly affects the retail costs of CNG?  Natural gas is traded on the New York Mercantile Exchange (NYMEX).  The natural gas futures contract represents 10,000 million British thermal units (mmBtu) at the Henry Hub in Louisiana.  This hub is the nexus of 16 intra and inter state pipelines.  The contract is priced in terms of dollars per mmBtu.   The exchange represents the prices for the next month’s delivery of natural gas.

Gasoline, diesel and natural gas are converted into the energy equivalent for one standard gasoline gallon (GGE).  This means we are creating a platform to display the energy efficiency for each fuel.  We will then look at the costs of each fuel per BTU.  This comparison clarifies what we are actually paying for before of state and federal taxes.

  • 1 GGE = 126.67 scf
  • 1 MMBTU of Gas = 7.74 GGEs
  • 1 DGE = 143.94 scf
  • 1 MMBTU = 6.81 DGEs
About CNG
Click Image to view today’s natural gas prices

You can see that even if the natural gas prices spike from $3 to $6 on the exchange this only increases the price 39 cents per GGE at the CNG fueling station ($.78 – $.39 = $.39)  This is one of the reasons the retail prices for natural gas hardly changed during the extreme storms that brought in freezing temperatures in the north during the first quarter of 2014.  Click here to see where natural gas prices are trading today.

To determine the real price of fuel you need to know how much energy is in every gas gallon equivalent (GGE).  This means that for the same amount of energy you purchase to fill your vehicle what are the price differences between diesel, gasoline and natural gas.

1. First lets look at the energy content in the different fuels

  • Diesel has 129,500 BTUs
  • Winter blends of gasoline mixed with 10% ethanol has 112,500 BTUs
  • Natural gas has 114,000 BTUs

2. Next we will look at the retail cost per gallon for the different fuels

  • Diesel costs $3.00 per gallon
  • Gasoline costs $2.00 per gallon
  • Natural gas costs $1.75 per gallon

3. Next we will compare the price vs. the energy content per 100,000 BTU

  • Diesel is $3.00 per gallon x 100,000 BTU/129,500 BTU/gallon = $2.31/100,000 BTU
  • Gasoline is $2.00 per gallon x 100,000 BTU/112,500 BTU/gallon = $1.78/ 100,000 BTU
  • Natural gas is $1.75 per gallon x 100,000 BTU/114,000 BTU/gallon = $1.54/ 100,000 BTU

 

About CNG Fuel Mileage Compared to Gasoline and Diesel

Fuel Mileage and Vehicle Performance have every thing to do with the British thermal units (BTU) in the fuel, the Technology built into the CNG Conversion System, and the CNG Kit Installer.

  • BTUs: The energy content of liquid fuels like gasoline and diesel is dependent on the season and oxygenated fuel additives that reduce emissions.  
    • A summer gallon of gasoline will typically contain 114,500 British Thermal Units (BTUs)
    • A winter gallon of gasoline contains 112,500 BTUs.    

Blends with 10% ethanol and reformulations with MTBE  both have fewer BTUs than pure gasoline.  

  • Summer blends  with MTBE contain 112,000 
  • Summer blends with 10% ethanol contain 110,210 BTUs 
  • Winter blends with 10% ethanol contain 112,210 BTUs

Natural gas has 114,000 BTUs.

Diesel has 129,500 BTUs.

Because fueling stations don’t have to advertise that they are blending cheaper and lower BTU 10% ethanol mix in their gasoline, most don’t; however, most stations sell the blend.  Ironically, this means that in the summer, vehicles running on CNG more than likely receive 3,790 more BTUs than running the vehicle on gasoline and CNG costs 40% less.

As for dual-fuel CNG diesel  conversions, the mixture of natural gas with air in the cylinders creates a denser and more explosive reaction after the diesel is injected.  Diesel CNG conversion system delivers more power and saves approximately 35 % in fuel savings.

  • Technology: The air fuel mixture will to a large extent determine the efficiency of your vehicle.  CNG Conversion Systems that can duplicate the OEM fuel map settings will provide the best fuel mileage. Quality CNG kits will use powerful processors that read and respond to over 30 million signals per second.
  • CNG Kit Installer:  Tuning the CNG Conversion System properly is essential for a successful installation.  Technicians must be trained and certified in CNG fuel systems installation and maintenance through accredited CNG Conversion Schools to prevent damage to your vehicle’s engine.  If the fuel mixture is off, the conversion can cause severe damage to the valves or catalytic converter.  When installed and calibrated correctly, the majority admit to experiencing more pep and receiving substantially better mileage.

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