The only thing heating up as fast as gasoline prices these days seems to be the water in the Gulf of Mexico. With temperatures that average about 80 degrees Fahrenheit or more there is already plenty of heat to help sustain fierce hurricanes. Having the first named tropical storm three weeks ahead of the official start of the Atlantic hurricane season could be a tell tale sign. Should major hurricanes smash into oil platforms, refineries and processing infrastructure there could be gasoline rationing this summer in the USA.
Image source Rutgers University
The U.S. gasoline stocks have finally paused their continuous fall, there was even a small gain of 400k barrels. The stockpiles remain just a few million barrels above the threshold of possible shortages, so things are tight. Meanwhile people in Nepal are experiencing real shortages, it seems that the Nepal Oil Corporation (NOC) owes too much money to the Indian Oil Corporation (IOC). By the way if you need a little cheering up this is an excellent read The Peak Oil Crisis: The Summer Ahead
Some people must be getting desperate for good news or have absolutely no clue of what they are talking about. This piece on the BBC is a prime example, the headline talks about a major find in China of between three billion to 650 million barrels. At the current rate of worldwide extraction three billion and 650 million barrels would respectively be 35.29 and 7.64 days of supply, nothing to get excited about.
North American gasoline prices have risen a little bit and that has sparked the beginning of the blame game in the mainstream media. Big oil, Nigerian rebels and the likes will have their share of responsability. There may even be blurbs about how governments should control retailers because they are gouging the population. But the true reasons of the price increases will remain well hidden from the majority of consumers, demand has outstripped supply plain and simple. Most people cannot stand the truth and that is why they won't hear it on TV or the radio, but they are the ones to blame. All those who's lifestyles revolve around automobiles will be in a much worse mood when not only the price goes up there are shortages of the stuff.
From the NRCan website.
"Furthermore, most Canadian refineries operate at near capacity with high utilization rates which means that markets have become increasingly vulnerable even to small supply disruptions. Thus a combination of little spare capacity and unexpected supply disruptions can result in upward price pressure until the balance between supply and demand is achieved."
Things are tight all over, real tight.
Obviously traders and analysts haven't caught up with the seriousness of the situation yet. Gasoline prices are still way too low for any demand destruction to occur. With the eleventh straight week of US gasoline stock depletion they now stand at 194.2 million barrels, barely above the level at which shortages are probable. Perhaps shortages are the only effective means of demand destruction that remain, we will see in the coming weeks.
With the ever increasing probability of gasoline shortages in North America it's hard to believe the lack of information available in the mainstream media. Everybody seems to be sleepwalking into this mess without even moments of lucidity, most folks are in for a very harsh awakening. Gasoline stocks have been falling for ten straight weeks due to demand outstripping refining capacity, meanwhile prices at the pump are too low to even begin killing demand in any meaningful way. This whole situation just weeks ahead of the summer driving season is looking more and more like a potential train wreck. Instead of high prices slowing demand and avoiding shortages there are probably going to be both, get ready for some serious pain at the pump. It will be soon that we find out what level of gasoline prices make motorists drive less, clearly that has to be a lot more than the present one.