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Gas Prices Resume Rise As RBOB Hits 2013 Highs

Tyler Durden's picture




 

The meme of the moment appears to be that sliding gas prices (which by the way merely fell back to mid-February levels) will no longer hamper the over-taxed and under-incomed consumer providing yet more upsided-ness for stocks. Sorry to burst another fictional bubble but Gas prices have now risen for the 3rd day in a row as RBOB (wholesale gas prices) surge to new 2013 highs and crude oil prices push back to one-month highs. Perhaps that is why today's retail sales data (unadjusted) is not providing the pop that so many talking-heads believe is warranted. Between RBOB highs and the RIN issues, is it any wonder the CME just hiked 'crack spread' margins in an effort to keep prices under control?

RBOB (wholesale) and Crude energy costs are re-surging and retail gas prices are on the rise once again (as they always lag)...

And while the CME hiked crack spread margins pushing down the price of RINs in the last week or so, they remain incredibly high...

From last week...

RBOB is up today because of RIN cost. They are currently adding almost 11 usc/gal to imported gasoline, last year was only about .01/gal. The additional savings that use ethanol if there ever was one is now completely gone due to the RFS manadate.

'RINSANITY' SEES ETHANOL RINS HIT $1/GAL; MAY BE IMPACTING NYMEX RBOB
Friday, March 08, 2013 11:19:47 AM

 

Ethanol RINs hit a value of $1/gal Friday morning up 93cts/gal so far this year and more than twenty times the value seen less than six months ago. Biodiesel RINs aren't exactly slouching either. Those RINs hit $1.06/gal in early trading with no end to the viral surge in sight. It now appears as though the soaring RINs values may be impacting NYMEX futures action as well.

 

The surge in RINs -- Renewable Identification Numbers necessary to balance out any deficit in achieving Environmental Protection Agency obligations for the Renewable Fuel Standard -- has been ongoing all year but a particularly frenetic pace has been witnessed this week.

Ethanol RINs began the week just above 50cts/gal but fears about a shortfall and the consequences of hitting a blend wall have sent sellers to the sidelines and put buyers (refiners and importers) in a pinch. RINs were worth just 7cts/gal on the first business day of 2013. RBOB futures this morning advanced as much as 5cts/gal and there is some suggestion that the high cost of RINs has inflated the NYMEX numbers. Obligated parties for RINs are limited to refiners and importers.

 

When a company takes title to RBOB through the NYMEX futures' delivery mechanism they do so without incurring the RINs obligation notes consultant Andy Lipow. An importer can get gasoline via the NYMEX at a 10cts/gal discount to the offshore price in other words since they do not incur the RINs obligation. This may become particularly topical if refinery margins narrow.

An East Coast refiner selling gasoline at 20cts/gal above crude and operational costs might turn to the NYMEX (or domestic spot market) for barrels rather than produce the fuel and face a 10cts/gal margin reduction because of RINs costs. Right now that is more hypothetical than actual since many refiners are seeing gasoline cracks that are $10/bbl or more above crude costs. But for importers the calculus already delivers a huge disadvantage for anyone looking to bring in foreign gasoline. In a sense gasoline "crack" spreads -- as measured by spot indices and futures markets -- have lost some of their relevance.

A Gulf Coast refiner found CBOB prices this morning of about $2.87/gal or about $120.50/bbl. On the surface that reflected a reasonable $7/bbl crack over the price of Light Louisiana Sweet crude a key Gulf Coast benchmark. But when adjusted for the 10cts/gal RINs cost a merchant refiner without downstream racks or blending privileges instead would receive about $2.77/gal for the gasoline or about $116.30/bbl. That puts the hypothetical crack at less than $4/bbl.

Downstream marketers and blenders meanwhile continue to reap some windfalls or perhaps more appropriately "RINfalls" as the credit prices soar. The RINs value for a jobber blending 1-million gal of E10 (and 100000 gal of ethanol) in 2012 might have been $5000 based on an average RINs price of 5cts/gal. The hypothetical value implied by current numbers for that same volume in 2013 at $1/gal per RIN is now $100000.

(h/t Tom Kloza)

 

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Wed, 03/13/2013 - 13:37 | 3326438 HelluvaEngineer
HelluvaEngineer's picture

Time to go long XRT calls, I guess.

Wed, 03/13/2013 - 13:41 | 3326451 kaiserhoff
kaiserhoff's picture

Spiffy charts, Tylers, but how well does that correlate with tar and feathers?

Wed, 03/13/2013 - 13:47 | 3326479 Dr. Richard Head
Dr. Richard Head's picture

I'm not Tyler, but believe I can answer that for him.

Tar and feathers only correlate with loss of cell phone reception and/or cable being disconnected.  You can dilute their beer, horse meat and saw dust their food, raise prices while dropping wages, steal retirements, drone them, bug them, torture them, detain them, tax them, legislate them, jail them, and belittle them, but don't you dare fuck with their cell phone or cable.  Capice?!?!?!?

Wed, 03/13/2013 - 14:14 | 3326571 NotApplicable
NotApplicable's picture

So how much of the RIN cost is applicable to all of those border crossings?

http://www.zerohedge.com/news/2013-01-02/why-did-train-carrying-biofuel-...

Wed, 03/13/2013 - 13:43 | 3326452 TruthInSunshine
TruthInSunshine's picture

Rising RBOB is problematic, but let's all just be thankful that sales of new cars and trucks in the U.S. have not cooled to the slowest pace in more than three years as automakers increase spending on incentives, as a result of the government intervening (aka taxpayer "sugar") and various Bernanke-inspired monetary/fiscal/social/political/psychological/astrological policies "fixing" the economy and "markets."

Wait...what?...huh?...

 

US Auto Sales Pace at Slowest Since GM, Chrysler Bankruptcies

"Sales of new cars and trucks in the U.S. have cooled to the slowest pace in more than three years even as automakers increase spending on incentives."

Wed, 03/13/2013 - 14:15 | 3326574 Dr Paul Krugman
Dr Paul Krugman's picture

Gas prices are not sticky - they are transitory - because improved technology will decrease input costs and increase output (production).

Wed, 03/13/2013 - 14:46 | 3326829 Flakmeister
Flakmeister's picture

you forgot the \sarc

Wed, 03/13/2013 - 15:28 | 3327071 tarsubil
tarsubil's picture

What does malinvestment do for input costs and real production?

Wed, 03/13/2013 - 14:41 | 3326795 de3de8
de3de8's picture

The cream (high sales) the automakers skimmed early on, where purchases of gas sippers forced on all by exploding fuel prices is over, all marginal now. On the other hand, appears the fuel suppliers figuring out how to raise prices to same relative level as before thereby negating the mpg pick-up afforded by the aforementioned gas sipper purchases. The Sheeple rejoice.

Wed, 03/13/2013 - 13:41 | 3326456 bobola
bobola's picture

Let it rise...

I ride a bicycle everywhere.

My truck misses me...

Wed, 03/13/2013 - 14:40 | 3326782 Badabing
Badabing's picture

I ride a bike from Penn Station to the village every day 6 miles round trip, I can crush a Volkswagen with my thighs.

Wed, 03/13/2013 - 13:38 | 3326440 Badabing
Badabing's picture

and.......it's gone, no more Hess

Wed, 03/13/2013 - 13:56 | 3326502 ebworthen
ebworthen's picture

Selling retail stores and refineries?  Why would they not want to refine?

And I thought a lack of refiners and refineries is what was increasing the cost of gas?

Are we going to be down to one refinery for each coast and gas at $10/gallon?

Wed, 03/13/2013 - 14:25 | 3326662 Badabing
Badabing's picture

EB,

Its all about monopoly

Wed, 03/13/2013 - 14:33 | 3326730 NotApplicable
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No different than Shell trying to shut down their Bakersfield refinery, when everyone knows it's near impossible to get any new ones built. Thankfully FlyingJ gave a flying fuck, and bought it instead.

Wed, 03/13/2013 - 13:39 | 3326447 CheapBastard
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"Mortgage Apps Fell Wed 13"

 

"Mar 13 | 01:00 PM ET The Mortgage Bankers Association reported applications for new mortgages fell 4.7 percent from the week before, with CNBC's Diana Olick. "

 

http://video.cnbc.com/gallery/?video=3000154156&__source=yahoo|headline|quote|video|&par=yahoo

 

Ssshhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh ... better not let the Muppets see this.

Wed, 03/13/2013 - 13:43 | 3326460 EscapeKey
EscapeKey's picture

you say that as if its somehow detrimental to the equities markets

Wed, 03/13/2013 - 13:46 | 3326471 Flakmeister
Flakmeister's picture

Mortgage apps might just be the noisiest time-series of them all...  modulo cum salis

Wed, 03/13/2013 - 13:43 | 3326459 Flakmeister
Flakmeister's picture

Long mid-continent refiners, e.g. HFC, short gulf-coast, VLO....

Wed, 03/13/2013 - 13:44 | 3326465 swissaustrian
swissaustrian's picture

Time to equip cars with wood gasifiers, timber has recently crashed

Wed, 03/13/2013 - 13:47 | 3326480 insanelysane
insanelysane's picture

Wood fired or pellet fired steam engines would work.  Today's valve technology would make they 10,000x safer than the steam engines of the 1800s.

Wed, 03/13/2013 - 13:50 | 3326488 ParkAveFlasher
ParkAveFlasher's picture

Yes, but would they have heated cupholders?

Wed, 03/13/2013 - 14:39 | 3326778 A Nanny Moose
A Nanny Moose's picture

and can it get us to 88mph?

Wed, 03/13/2013 - 14:46 | 3326824 de3de8
de3de8's picture

How about 100 mpc? (Miles per cord)

Wed, 03/13/2013 - 15:04 | 3326928 insanelysane
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Of course because the steam engine can also power the alternator which recharges the battery.

Wed, 03/13/2013 - 13:45 | 3326473 Paper CRUSHer
Paper CRUSHer's picture

Lumber prices are too on the up 'n up as futures hit multi year highs today.

Wed, 03/13/2013 - 14:10 | 3326552 TruthInSunshine
TruthInSunshine's picture

Well, this calls for the government using taxdollars to build up a strategic lumber stockpile immediately as a matter of national consumer insecurity to ensure prices keep rising moar!....err something...

Lean Forward, bitchez!

Wed, 03/13/2013 - 14:48 | 3326836 de3de8
de3de8's picture

Based on the make believe housing recovery.

Wed, 03/13/2013 - 14:49 | 3326838 de3de8
de3de8's picture

DP- sorry!

Wed, 03/13/2013 - 13:46 | 3326475 JustObserving
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As long as gold and silver are hammered, inflation is under control.  When does Bernanke get the Nobel Prize for Economics?

Wed, 03/13/2013 - 14:07 | 3326499 swissaustrian
swissaustrian's picture

NEVER reveal the man behind the curtain to the masses.

Obama is in control, slave! That's why he got the peace prize.

Wed, 03/13/2013 - 13:46 | 3326478 Abraxas
Abraxas's picture

Gas, food, oil, and hydro are not a reliable measure of inflation. This is because they are not necessities. Instead, prices of cell phones, computers, video games and sex toys should be used.

Wed, 03/13/2013 - 13:48 | 3326483 q99x2
q99x2's picture

Good time to start an emergency gasoline service. Lots more going to be testing the limit of their yellow indicator lights.

"If I can just make it into work. It's Friday." Wrong fat f'kg government employee bitch. You get the 6 lane intersection to stall in. But don't worry call q99x2 and he'll be there to save the day.

Wed, 03/13/2013 - 13:49 | 3326486 ebworthen
ebworthen's picture

U.S.D.A. is mulling buying sugar to help out the processors who borrowed too much money.

Hey U.S.D.A., hire me to do nothing because I'm real sweet and have debt, deal?

Wed, 03/13/2013 - 14:00 | 3326519 TruthInSunshine
TruthInSunshine's picture

It's  better than that. Think of yourself as a widget producer. 

The government gave you nearly a billion USD in the form of a taxpayer "loan" a few years ago, but now, the market conditions are unfavorable for the price of your widgets, and so to ensure that you can pay back that cool billion, the U.S. Government is going to buy 400,000 tons of your widgets at artificially high prices, which will remove a lot of widgets from the supply stream, causing the price of your widgets to rise.

Bingo. That's how you do it. That's how a free market economy works.

Wed, 03/13/2013 - 14:06 | 3326538 ebworthen
ebworthen's picture

LOL, true, very true.

Those poor sugar producers.

The kleptocrats and plutocrats are free, the taxpayers are at the livestock auction getting prodded.

Wed, 03/13/2013 - 14:00 | 3326521 ebworthen
ebworthen's picture

I get down voted for it but I don't care - using natural gas for cars and trucks and energy (generating electricity) is going to make heating homes and businesses unaffordable.

Ethanol - when you mandate something you of course make it a racket (like insurance); so now our food and fuel are more expensive with no net benefit.  The corn lobby thanks you for your contributions to the kleptoligarchy (and John Deere, and CONgress, and Monsanto).

Wed, 03/13/2013 - 14:04 | 3326534 TruthInSunshine
TruthInSunshine's picture

Ethanol ruins the gaskets, seals and valves in vehicle motors, too, but it's all good...Team BigGov + Corn Lobby is going to mandate an increase in the % of ethanol that must be used in blended gasoline very soon.

From broken windows to broken motors!

Wed, 03/13/2013 - 15:01 | 3326914 de3de8
de3de8's picture

It's all part of the nobama STEALTH economics policy. The ethanol deterioration of older vehicle fuel systems and related parts forces the prudent,responsible,frugal and the poor into new gas sipper tomato cans, propping up the unsustainable auto companies all in the name of clean air as cover. Keep shear'n the Sheeple.

Wed, 03/13/2013 - 14:07 | 3326544 miker
miker's picture

Even economically insightful people underestimate the level of price control the Central Banks have enforced on oil and gasoline.  However, holdling oil up is getting tougher and tougher as demand sags in the East and the exporting countries need cash.  So it is very possible oil will drop signficantly in the coming months.  Don't expect gasoline to do likewise.  They will hold this up because they retain more control of that market.  Holding energy prices up is critical because it is the foundation of all price structures.  .

The difference this go around is the sheer magnitude of the debt.  A deflationary spiral will collapse the entire system.  They know it now and will do everything possible to prevent; even at the expense of implementing dangerous and reckless printing policies. 

Wed, 03/13/2013 - 14:19 | 3326611 Flakmeister
Flakmeister's picture

The price of oil is going to stay at these level or higher unless there is a substantial economic collapse....

An like gold, only those holding paper oil and not physical will get burned....

Wed, 03/13/2013 - 14:33 | 3326731 d_taco
d_taco's picture

There will be an economic oil colapse.

As we speak the US is 3 weeks away from an all time record of crude inventory.

Seasonal adjusted the US already past that point. And I will tell you a secret nobody will buy these inventory for current prices.

Oil price collapse immanent

Gasoline price at a record an inventories at a record that smells Enron is back in town

Wed, 03/13/2013 - 14:50 | 3326842 Flakmeister
Flakmeister's picture

Go ahead, take a massive short position....

PS while you are at it, please explain the regional discrepancies in refined stocks vis a vis the inventories in Cushing...

Wed, 03/13/2013 - 17:02 | 3327542 d_taco
d_taco's picture

Already short from Brent 116 level and WTI 95.

US gasoline stock is average.

Us consumption is down.

US crude stock is a absolute record

Us production is up.

Gasoline price up=> demand destruction.

Managed money in oil very high 

Open intrest very high

D&J very high.

I do not see a point for a long position

Wed, 03/13/2013 - 17:19 | 3327617 d_taco
d_taco's picture

It is enron over again

Create an artifically shortage.

Watch http://www.youtube.com/embed/_xIO731MAO4

Wed, 03/13/2013 - 17:39 | 3327670 d_taco
d_taco's picture

And those who hold physical oil are already in the burning process.

Oil is in backwardation the future contracts are cheaper than the spot price. So if you have oil in store you are under water and without considering storage cost.

Companies that are in the physical bussiness returned bad results in 2012, see for example VOPAK

So I think there are a lot of people who want to sell you the real stuf, I will not be surpriced if you get some cash and carry discount.

 

Wed, 03/13/2013 - 15:05 | 3326929 de3de8
de3de8's picture

Miker,
As long as nobama in office, will never happen. Dismantle his agenda, don't think so. Do I hope you are correct, he'll yes, will get to use the Raptor more often!

Wed, 03/13/2013 - 14:17 | 3326592 steve brassey
steve brassey's picture

top in 3-4 weeks ago most likely; time for hedgies to pummel prices south for 30-40 cents now

Wed, 03/13/2013 - 14:17 | 3326596 Rustysilver
Rustysilver's picture

CT: $4.02 / gallon regular. It's helping the recovery.

Wed, 03/13/2013 - 14:26 | 3326669 firstdivision
firstdivision's picture

Hmmm, lets see here.  Demand is falling for gas, yet the price rises.  Well we all knoow there is no inflation through QE, for the Bernak told us so, so it has to be that the economy is almost to full recovery circa 2007/08 since prices are almost at the same level...demand has to be higher....

Wed, 03/13/2013 - 15:03 | 3326924 NoWayJose
NoWayJose's picture

As long as the Fed has its foot on the accelerator, the price if gas will go higher. The algos will keep pushing everything higher, expanding every bubble, until things POP!

Wed, 03/13/2013 - 17:13 | 3327592 SmittyinLA
SmittyinLA's picture

Aw snap, too bad I didn't bet on the fed NOT printing money. 

Let me repeat, they will print, they will print more, and print again, their choices are print, print or print....and then print some more.

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