WALL, N.J. -- When talking about oil and gas, I often use a quote that is attributed to no one, but apparently dates back to Dickensian England.
“He uses statistics like a drunken man uses a lamp post ... for support, and certainly not for illumination.”
Anyone who watches CNBC, Fox Business, Bloomberg or even the 2016 Summer Olympics can find wisdom in that quote, since it speaks to the propensity for politicians, analysts and statisticians to selectively grab data that neatly backs up a point or a prognostication. For example, mainstream media recently declared that oil was in a “bear market” since it retreated more than 20% from its spring highs. (By the measures of Wall Street, gasoline futures have both bull and bear markets every year!)
But risks of personal credibility aside, the summer of 2016 is yielding some numbers in the downstream fuel space that are worth a reflective moment or two. In no particular order, here are some statistics that are among the most compelling:
- It’s almost mid-August and the Gulf of Mexico hasn’t seen a hurricane since Sept. 16, 2013, when Hurricane Ingrid slammed into Mexico. As of Aug. 9, that reflects 1,057 days and counting, and it is the longest streak in 130 years.
- Speaking of streaks, it has been 411 days since NYMEX West Texas Intermediate crude last settled above $60 per barrel (on June 24, 2015). If a $60 value is the new $40 price (thanks to inflation), keep this in mind: After closing above $40 per barrel on Oct. 11, 1990, oil traders did not see another settlement above that level until May 11, 2004, a span of 4,961 days.
- Year-to-date gasoline prices have averaged $2.07 per gallon, with some of the weak autumn months yet to come. Nationwide prices averaged between $3.34 and $3.60 per gallon during the 2011, 2012 and 2014 years, and are likely to reflect the cheapest year since 2004. That year saw Michael Phelps win six gold medals in the Athens Olympics, and yielded an average price for gas of just $1.843 per gallon.
- There’s a long way to go, but chain retailers are on a pace to enjoy their largest rack-to-retail margins of the century, according to OPIS data. Horace Greeley’s advice to “go west” is well taken in the convenience-store business. Year-to-date margins in western states average more than 36.5 cents per gallon (CPG). The competitive southeastern and southwestern regions, meanwhile, see just under 15 CPG. Still, these are phenomenal margins in a low-yield environment, and explain why c-store chains are being targeted by Wall Street.
- Demand for premium-grade gasoline, while difficult to gauge, has been galvanized by cheap fuel prices and lots of luxury car offerings. But going unnoticed is the relative cost of 91-octane to 93-octane gasoline. The gap has more than tripled in the 21st century. The year 2000 saw high-octane gas fetch below a 15-CPG premium to regular on the street. By 2005, the “premium for premium” swelled to 20 CPG, and it averaged 44 CPG last year. Year-to-date, premium costs more than 48.5 CPG above regular.
- This year was once deemed a certain record year for demand, but that status is now very much in doubt. The all-time high watermark for gasoline demand was the 9.286 million barrels per day (bpd) recorded in 2007. Energy Information Administration monthly assessments suggest 50-50 odds to better that total, with the “lift” trending lower lately thanks to drastic downward revisions in weekly demand estimates. OPIS’ exclusive survey of about 10,000 actual stations suggests that the 2007 record will hold.
- About 5,000 dispensers will be capable of providing E15 by year’s end. Right now, the calculus suggests that marketers will save about 5 to 6 CPG on wholesale costs for 88-octane E15 this autumn. But as with most pricing formulae, this can see drastic alterations in the months ahead.
- No U.S. refineries have closed, and indeed the U.S. refining industry has expanded by almost precisely 1 million bpd since the watershed demand year of 2007. The new century has delivered nearly 2 million bpd of new capacity, with most of the additions coming at the U.S. Gulf Coast. Think about those Gulf Coast expansions as the Gulf of Mexico hurricane-less streak continues.
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