6
The J J
CXV Edition February 2009
Gasoline Retailers Association of Florida
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Pat Moricca President Member Service Station Dealers of America
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Gasoline Retailers Association of Florida is a non-profit association representing Independent Gasoline Retailers, Convenience Stores, Gasoline Service Stations, Repair Shops, Tire Retailers, Truck Stops and Associates throughout Florida. Our goal is to improve the interests of these independent businesses and the motoring public. Cooperation with insurance companies provides benefits for our members. These benefits include money-saving programs for group health, workers' compensation, casualty and property and gasoline tank liability insurance. Benefits also include financing to purchase your gasoline station property and much more.
The problems facing our industry today affect every dealer, no matter how large or small. And, since no one individual could possibly begin to solve these problems alone, it remains that each should join in a collective effort to protect his/her business investment.
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High Gasoline Prices Again?
In the first week of 2009, wholesale gasoline price increase was approximately 25 cents a gallon. Don’t let OPEC; oil companies and Wall Street dictate the prices. The public should keep the pressure on our elected officials.
Hostile countries are in an economic freefall and new technologies for powering our autos are expanding every day. ExxonMobil and the major oil companies record profits, fancy charts, supply and demand are working overtime.
Pat Moricca The consumer has felt the pain of outrageous high gasoline prices and should continue conserving. The time is now to tighten our belts and let OPEC, the oil companies and Wall Street know before outrageous high gasoline prices.
Each time gasoline prices rise, the consumer should drive less and maybe OPEC and the oil companies will get the message. The consumer has the strongest message to lower gasoline prices, conserve.
Chevron’s third-quarter reports ended with Chevron Corp, which more than doubled its profits to $7.9 billion while the U.S. and world economies slid toward recession, said Consumer Watchdog. “These profits show the extent of the oil industry’s vampire attack on a weakened economy,” said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog. “Fuel and energy prices bled away the reserves of family budgets and corporate treasuries. Energy inflation deepened the effect of the financial markets’ meltdown. We shouldn’t be lulled into thinking it won’t happen again.”
Chevron’s third-quarter profit nearly equals its $8.2 billion profit for all of 2003, the year in which the major oil companies began their steady march of new record profits, said Consumer Watchdog.
Chevron also noted margins for refined products such as gasoline declined markedly from the third quarter to the fourth.
With prices plunging, Chevron and its competitors simply haven't been making as much money as they did during the spring and summer. Chevron recorded a third-quarter profit of $7.89 billion the most for any three-month period in its
129-year corporate history. ExxonMobil Corp., the world's largest publicly traded oil company, reported income of $14.83 billion for the same period, breaking its own record for the biggest profit from operations by a U.S. corporation.
Exxon Mobil shatters US record for annual profit
Exxon Mobil Corp. on Friday January 30th reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company. The previous record for annual profit was $40.6 billion, which the world's largest publicly traded oil company set in 2007. Irving, Texas-based Exxon said net income slid to $7.8 billion in the October-December period. That compared with $11.7 billion in the same period a year ago, when Exxon set a U.S. record for quarterly profit. It has since topped that mark twice, first in last year's second quarter and then with earnings of $14.83 billion in the third quarter 2008.
More Major Mergers?
Industry analysts speculate over ExxonMobil buying Shell, Shell buying BP
New York -- Remember the old children's song that goes "there was an old lady who swallowed a fly"? She then swallows a spider to eat the fly, a bird to eat the spider, a cat to eat the bird and so on. A scenario reminiscent of that could play out with the major oil companies. Among other economic predictions for 2009, Business Week is predicting more petroleum-industry mergers. The publication said, "With the rapid collapse of oil prices, and the resulting financial pressures, expect two or more mergers among Big Oil. Our best guess? Royal Dutch Shell buys troubled BP, in part to avoid regulatory issues that could come from merging with a U.S. oil company."
But yet another major merger could be brewing, according to CNNMoney.com. With ExxonMobil "sitting on a massive pile of money," and thanks to record oil prices over the last few years and a cautious investment strategy that drew fire from critics, the company has nearly $40 billion in cash reserves. It has another $225 billion in repurchased stock tucked away. "That's enough money to pay a nearly 60% premium, in cash, for every share of its next largest competitor--Royal Dutch Shell," it said.
"It's not if, it's when and which [company]," Fadel Gheit, a senior energy analyst at the investment bank Oppenheimer, told the website. Gheit is in the minority of oil analysts, said the report, but he is still convinced ExxonMobil's target will be one of the big oil firms.
"When Exxon came calling last time, they didn't dial the little guys," he added, referring to the 1999 takeover of Mobil, then the country's second-largest oil company. "It has to be a big one in order to move the needle."
Shrewd management has put Exxon in this position to buy, CNNMoney said. Over the last five years, oil companies worldwide have scrambled to develop new projects to take advantage of oil's rising price, often paying exorbitant sums for leases, drilling rigs and other assets needed to bring crude to market.
But not Exxon. Although criticized for not doing enough to pump more crude, the company has maintained the price spike was temporary, and that it would not overpay for projects. The position has paid off, said the report. With crude prices crashing, many oil firms are now deep in debt and stuck with expensive projects.
For ExxonMobil, taking over another big firm would give it much-needed oil reserves in a time when the multinational oil companies find themselves increasingly locked out of the best new oil plays by national firms like Russian's Gazprom, Saudi Arabia's Aramco or Venezuela's PDVSA. It would also give it more financial muscle when negotiating with these governments, said the report. "A deal with Shell might be particularly sweet for Exxon's ego," CNNMoney said.
The two firms have been archrivals since the early days of the oil barons, with the Anglo-Dutch Shell and John D. Rockefeller's Standard Oil, which spawned Exxon, going head to head in markets around the globe. Competition and price wars were fierce, and several times during the late 1800s and early 1900s men in gray suits crossed the Atlantic looking to strike a deal between the world's two giant firms, to no avail.
"Ultimately, Exxon will do something with this money," Blake Fernandez, an integrated oil analyst at the New Orleans-based investment bank Howard Weil, told the website. "But why would they buy someone with the same growth problems they've got?"
ExxonMobil itself has certainly left the door wide open to doing any or all of the above, the report said. "We're watching the valuations of a broad range of companies, just as we've done all the time," ExxonMobil head Rex Tillerson told reporters at a recent industry gathering. "Just have to wait and see."
These mergers should not be approved by the Federal Government and create less competition and lead to higher gasoline prices. We had enough mergers and the results were high gasoline prices and outrageous record profits since the mergers.
EIA projects average price for regular in 2009: $1.87
Economic contraction in 2009 and lower projected crude oil prices are expected to reduce annual average retail gasoline and diesel fuel prices in 2009 to $1.87 and $2.27 per gallon, respectively, according to the latest Short-Term Energy Outlook issued by the Energy Information Administration.
Average monthly U.S. prices for regular gasoline and diesel fuel were $1.69 and $2.45 per gallon, respectively, in December 2008, more than $2.25 per gallon below their monthly peaks last July, the EIA noted in its Outlook.
Regular-grade gasoline prices averaged $1.68 per gallon on January 5, down substantially from their July 14 peak of $4.11 per gallon. These prices are projected to average $1.87 per gallon in 2009 and $2.18 per gallon in 2010. Because of lower motor gasoline consumption, the difference between the retail gasoline price and the cost of crude oil is expected to remain narrow for much of 2009 but is expected to increase slightly in 2010.
Crude Oil Uneasy Mideast
Israel's ground offensive in Gaza pushed oil prices up, but some analysts say there's more than just unrest in the Middle East behind the rally; also the reduction in OPEC.
Energy consultancy Cameron Hanover said some traders like to point to violence in the Middle East as a cause of higher oil prices, but the reality is slightly different.
"Any time that prices react by moving higher, in response to violence in the Middle East, particularly in non-oil producing countries like Israel or the Palestinian territories next door, it is a good sign that the market wants to move higher".
Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, "Would we really be concerned about these geopolitical issues as it relates to oil if we didn't think that the demand was going to improve somewhat in the coming year? Probably not," Flynn said.
Adam J. Robinson, director of commodities at Armored Wolf L.L.C., a hedge fund said he was unconvinced that oil and gasoline prices would go back up for long. “I think it is too soon to call a bottom in oil or gasoline because demand is falling faster than OPEC is cutting,” he said.
Goldman Expects ‘Weak’ Demand to Dominate Oil Market
Goldman Sachs Group Inc. said “weak underlying economic fundamentals” will dominate the oil market as it maintained its forecast that prices will fall to $30 a barrel this quarter. Oil inventories in Organization for Economic Cooperation and Development nations will likely rise to a 10-year high in the next two months, Goldman analysts Giovanni Serio and Jeffrey Currie said in a note to clients.
“The ongoing market surplus will likely continue to drive inventories higher,” Goldman’s analysts said. “Weak demand and large surpluses will dominate, pushing prices lower.” Crude futures fell below $40 a barrel in New York on speculation that the first simultaneous recession in the U.S., Europe and Japan since World War II will continue to shrink energy demand worldwide.
With holding tanks on land filled to capacity, The New York Times reports fully loaded supertankers carrying oil are cruising the seas or anchoring, being used as auxiliary storage while their owners await a rise in price. The lack of space to store burgeoning crude inventories and another major energy group predicting demand will fall again this year
Prices have recovered from a four-year low of $32.40 reached on Dec. 19 2008 amid fighting between Israel and Hamas, the dispute over gas exports between Russia and Ukraine. And below- normal winter temperatures in Europe. The support from these events will likely be “transient,” according to the report.
Here are some headlines in 2008
Chevron Doubles Profit –Exxon, Shell Post Record Profits - BP's 3rd Qtr Profit $10+ Billion – ConocoPhillips Doubles Profit - Chevron: Drill Less, Profit More - Exxon: 'Pumping Cash, Not Oil'
Hundreds of Florida gasoline stations face closure over new tank rule
Tallahassee, Fla. -- Hundreds of gas stations around the state of Florida may be forced to shutdown because of a new insurance regulation that requires them to have a double-walled underground gasoline storage tank by the end of the year even though the new tank deadline is not until Dec. 31, 2009. Insurers have already begun cutting off station owners who will not or cannot upgrade to the new tanks which can cost from $200,000 to $400,000.
It is illegal to operate in Florida without pollution insurance; approximately 20% of the state's 8,000 to 9,000 stations have yet to make the change.
If a mom-and-pop or any gasoline station where the margins are slim and low volume, it's not worthwhile for them to spend $250,000 to $300,000 to upgrade their tanks. Some will shut down and just run the convenience store and some will go out of business. There will be more and more casualties by the end of the year.
Panel Proposes Federal Gas Tax Hike
Washington -- A 15-member panel created by Congress is urging lawmakers to increase the federal gasoline and diesel fuel taxes by 50 percent to finance highway construction and repairs, until the government devises another way for motorists to pay for using public roads, the Associated Press reported.
In a report scheduled for late January, the National Commission on Surface Transportation Infrastructure Financing is expected to recommend raising the gasoline tax by 10 cents a gallon and the diesel fuel tax by 12 to 15 cents a gallon. It will also advise that fuel tax rates be tied to inflation. The commission will also recommend states raise fuel taxes and make greater use of toll roads and fees for rush-hour driving.
As motorists drive less and buy less fuel, the current tax rates of 18.4 cents per gallon for gas and 24.4 cents a gallon for diesel do not raise enough money to keep pace with the cost of road, bridge and transit programs, the AP reported. The annual gap between revenues and investments needed to improve systems was roughly $105 billion in 2007, and will increase to $134 billion in 2017 under current trends, according to a study by the Transportation Research Board of the National Academies. Commission members argued the government must find funds somewhere.
"I'm not excited about a gas tax increase, but the reality is our current gas tax doesn't pay for upkeep of the system we have now," Adrian Moore, vice president of the Reason Foundation, a libertarian think tank and a member of the highway revenue commission, told the AP. "We can either let the roads go to hell or we can pay more." A draft of the commission’s recommendations called for creating a new system where motorists are taxed according to how much they use roads.
Charles Whittington, chairman of the American Trucking Associations (ATA) supports a fuel tax increase as long as the money goes to highway projects, according to the report.