The En-Pro Blog

At bat is Casey Consumer, a batter with a good eye for the strike zone with a count of three balls and one strike. The umpire is moody, shortsighted Eddie
Esso. Here’s the pitch. The call. “Strike two the batter is out!” No. Wait. Hold on it’s three strikes and you’re out. Not so, as Eddie Esso changed the rules. The sports metaphor applies; as it seems the constant back and forth, rallying is what is happening with diesel prices right now.

But the rules have changed. When the rules of the diesel price game were established, daily rack prices in the eastern part of the country followed the daily changes in the New York Harbor (NYH) futures prices of Heating Oil while in the west rack prices tended to follow the price of crude.

This was fine when refining margins demand and reported quarterly earnings were high. Now we have low margins, demand down 11% and earnings down on an average so far 50%. What we have noticed, as illustrated in the graph, is that since early June of this year the daily rack changes have not been following the changes at the NYH. In other words, the rack increases have been higher than the NYH increases while the rack decreases have been lower than the decreases at NYH. In addition, we are now, at the mid point of the traditional high gasoline demand season.

What does this mean for refinery utilization and a seven-month look back to the beginning of this year? And how will the daily cost of leasing capacitor tankers influence the coming months? Check out the En-Pro Energy Report. Sign up; send us your email to info@en-pro.com for the latest news, views, and oil industry buzz.

By: Roger McKnight, Senior Petroleum Advisor