The Dude of Crude

Fuel analyst Kloza punctuates insights with irreverence.

Mitch Morrison, Vice President of Retailer Relations

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What do actress PenelopeCruz, Jethro Bodine of “TheBeverly Hillbillies” and oilreserves have in common?Nothing really, unless you’re “petrotainer”Tom Kloza, whose bag of partsand props punctuate his often amusingpresentations.

Kloza, the unconventional publisher and chief oil analyst for Oil Price Information Service (OPIS), Wall, N.J., blended his typical coarse humor with impressive insights about oil trends, commodity markets and global-to-local retail relationships.

Is Kloza politically incorrect? Absolutely, and that’s, several retailers said, what makes him refreshing amid the chorus line of choreographed pundits who dominate much of today’s media.

His 45-minute slide show featured a reel of pop culture references going as far back as the 1960s, tapping sports, mafia images and TV icons as metaphors for the often-complex labyrinths that makeup today’s fuel markets.

“The genie is out of the bottle,” he said, a slide of Barbara Eden’s “I Dream of Jeannie” character backing him up. Specifically, Kloza drew a strong contrast between the decline in consumption and the commodity markets and widespread speculation that through early April continued to drive up the price of crude.

On an active day, he said, 2 million contracts trade on NYMEX and ICE—more than 20 times what trades in the total global market. And the speculations expanding.

In addition to participation from hedge funds and commodity pools, Kloza suggested that multinational oil companies and trading houses are engaging in the paper business more now than at any previous time.

“From 2011 to 2012, the paper market grew by 30%,” he said, despite the fact that U.S. gasoline demand has slid from estimates of 3% to 7%.

To that point, Kloza roundly dismissed the thesis presented earlier by Fox Business Network contributor Phil Flynn, who had defended the practice of commodity traders as injecting important liquidity to the crude markets.

“This market needs extra liquidity like Charlie Sheen needs liquidity or Lindsay Lohan needs liquidity,” Kloza said. There is more than enough legitimate money in the market, he said, without the chaos attributed to futures speculators who invest based on questionable assumptions instead of on-the groundreality.

The Year to Come

As is his modus operandi in public formats, Kloza hop scotched, covering a number of issues rather than dwelling on a single topic:

Diesel: Outside of the United States, diesel has emerged as the fuel of choice. “Diesel fuel, not gasoline, will bathe hot global fuel of the decade,” he said.

Future Markets: Oil reserves, he said, will move over the next couple of decades to the Western Hemisphere.

High Street Prices: “Blaming[President] Obama on this is like blaming President Bush if your home value went down from 2004 to 2008. … There are greater forces at work.” Expanding on his point, he said the country’s gas prices represent an inversion of the political map. Democrats are strongest on the East and West Coasts, while Republicans make up much of the nation’s midsection; the country’s highest street prices, with some exceptions, are on the two coasts.

Growing Markets: While the Middle East and North Africa are home to much of the world’s readily accessible oil supplies, Kloza said consumption will continue to accelerate in China, India and Russia. Much of this growth is fueled by economic expansion, a growing working-to-middle class sector in these highly populated nations, and a widening transportation network.

The next six to nine months should be a fascinating roller-coaster ride, Kloza said. The spring season should reverse some of the major spikes in crude oil, and an unusually warm winter and accompanying lower heating bills will spur motorists to drive more, thereby increasing what has been declining consumption at the pump.

But expect the summer to rekindle higher prices, in part, because of reformulated fuels mandated as part of the federal Clean Air Act, which reduces the number of available blends and total output. Comparing gasoline to an ingredient, he said, “It’s much more difficult to bake a reformulated cake.”

What About Street Prices?

Kloza is rarely polemical when it comes to forecasting absurd gas prices. So it wasn’t surprising when he cited a US Today report of late March for the PowerPoint slide titled, “This Just in From the Lunatic Fringe.”

“Gas prices could double if Iran acts to close the Strait of Hormuz to oil tanker traffic near the beginning of next year,” the article said.

The article cited an official who suggested that crude could surge to an unfathomable $240 a barrel, resulting in what would be $8-per-gallon prices at the pump.

Such statements, Kloza insisted, drum up doom and gloom and make captivating headlines, but they bear little semblance to reality. Kloza expects the national average to stay under $4 per gallon, barring sudden news overseas. And when rhetorically asking himself whether oil markets will age gracefully, Kloza returned to his slides of tricks: a picture of Dos Equis’ Most Interesting Man in the World.

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