Thursday, January 27, 2022

Schork on Gasoline Prices: ‘We’re looking at a potential 40-45 cent increase’

Interesting talk with a guy who knows hydrocarbons.

From Yahoo Finance, January 25:

The Schork Group Principal Stephen Schork joins Yahoo Finance Live to discuss the energy market, U.S. gas prices, and the factors contributing to rising oil prices.

- Another volatile day in the oil pits. We've got crude oil now hitting a fresh seven year high. Jared Blikre is here with a recap for us. Jared?

JARED BILKRE: That's right. WTI futures for February settlement, they just closed at $86.96 per barrel. Haven't seen anything like that since October of 2014.

Let's go to the Wi-Fi interactive, where we can see our commodities heat map has a lot of green on it. Some of the biggest gainers today are in metals, but we're here for the oil close. So let's take a look at crude oil, up about 1.5%.

I like showing this three month chart so you can see the considerable rise we've had since the beginning of December, wiping out those losses from Omicron and just building on them. There's going to be a lot of concern about energy prices this year, because it is an election year. Midterm elections get swung by energy prices. So it really puts pressure on the Fed in terms of inflation. And while energy is flagging today as a sector-- you can see most of these stocks in the red-- they have had a banner year.

In fact, let's take a look at the 12 day performance. You can see Exxon already up 20% on the year, so is ConocoPhillips and British Petroleum. Some of these guys up even more. Halliburton up over 23%, and Occidental Petroleum just a little bit more. So energy still in the driver's seat for the year, but flagging a little bit today.

- All right, I'm going to bounce off that driving situation, and talk about the bumpy ride it's been for drivers this year. According to AAA the average price for a gallon of regular unleaded $3.31. That's up more than a penny from the prior week. And experts are warning there could be more pain ahead at the pump this spring. Here with his outlook on gas prices and the overall energy market is Stephen Schork, the Schork Group principal.

So Stephen, how high are we talking here? How do you see gas prices going? Could we have a national average well above $4 a gallon come springtime?

STEPHEN SCHORK: Well, it's trending that way. We have to keep in mind that what we're consuming now, in the United States at the retail level, is, quote unquote, "winter grade" gasoline. This is a gasoline where the feedstocks that go in to make it are abundant, therefore cheap relative to other feedstocks later in the year. So we're now consuming the cheapest manufactured gasoline of the year.

As we roll into next month, and as we get into the spring and then this summer, we begin to transition over to what is called summer grade gasoline. This gasoline is much more expensive to manufacture, so just from that standpoint alone we're looking at probably a $0.20 to $0.25 increase when we roll over to these newer fuels. Now, when you factor in where crude oil prices are and where they're likely going, we're forecasting in our modeling a 13% probability that oil will be above $100 a barrel by the start of the summer, which would add another $0.20 to the average price. So when we take into account the rollover in the specifications for gasoline $0.20, and the potential 13% that will be over $100, we're looking at a potential $0.40 to $0.45 increase in gasoline prices as we get ready to head to our summer vacations....


During the huge run-up and collapse in 2008 Schork proved to be pretty insightful. However, we haven't had his name in pixels since 2016. Pay attention or pay the offer.