This Week in Petroleum 9-06-07

Another week, another all-time low on gasoline inventories. As I wrote last week:

Gasoline inventories were not this low following Hurricane Katrina, and yet we have had an uneventful summer. It is very possible that we will not dig ourselves out of this hole for a long time. In the short term, an upturn in gasoline prices is inevitable.

I have been closely watching OPIS reports this week, and gas prices have ticked up most days. I don't have the numbers in front of me, but I think gas is at least a dime higher than it was a week ago. (It occurs to me that if I would ever act on my predictions and buy some futures, I could make a little money).

This week's inventory report saw another gasoline draw:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 3.9 million barrels compared to the previous week. However, at 329.7 million barrels, U.S. crude oil inventories remain above the upper end of the average range for this time of year. Total motor gasoline inventories dropped by 1.5 million barrels last week, and are well below the lower end of the average range.

"Well below" may be an understatement. Looking at my records, there haven't been too many weeks on record where gasoline inventories have been lower on an absolute basis (and never on a days of supply basis). In fact, the last time gasoline inventories were this low on an absolute basis was the week after Hurricane Katrina. Incidentally, this week's gasoline inventory is 191.1 million barrels. The lowest number on record was on August 29, 1997 at 185.6 million barrels.

The next few weeks will be interesting. We are at the end of peak driving season, but we will soon be heading into fall turnaround season where gasoline production will drop. Winter gasoline is also right around the corner. This time of year typically sees gasoline prices fall (prompting conspiracy calls when it also happens to be an election year) but with inventories where they are we probably won't see that typical price drop. In my opinion, we can't afford to see it. Last fall prices fell, and demand picked up. We can't afford for demand to pick up with inventories setting where they are.

I predict that prices will continue to rise. I think they have to. I also think we will see the ramifications of present inventory levels for quite some time. On the other hand, we did go into the end of 2003 with inventories in this range, so we do have some history suggesting that levels can recover without requiring sharply higher prices. But don't bet on it.

Update: Conoco Sweeny, Texas Refinery To Shut Gasoline Unit

NEW YORK -(Dow Jones)- ConocoPhillips (COP) plans to shut a key gasoline production unit at its Sweeny refinery in Texas on Thursday to make emergency repairs, according to a filing with state environmental regulators.

A plug valve in the reactor associated with the fluid catalytic cracker is the source of the problem, said the report to the Texas Commission on Environmental Quality. The shutdown, said to begin at 11 a.m. CDT Thursday, is seen lasting about 36 hours. The report didn't indicate how long repairs might take or when the unit would return to normal operations.

The Sweeny refinery is able to process about 247,000 barrels of crude oil a day.

That's not going to help matters any.

Is API not doing their teleconference any more? It would be interesting to hear their explanation for the tight inventories.

I got an e-mail from Jane Van Ryan (the coordinator of the calls) saying that she would be on vacation the first part of September. That may explain the lull in calls.

In the July 18 Conference call, I asked about future inventories, and the response was pretty much that we would have to wait and see. This was the discussion:

MS. TVERBERG: This is Gail Tverberg from The Oil Drum. I know the gasoline inventory has kind of been a problem, and I know, even this week, they’re talking about being on the low-ish side again. Do you folks have some thoughts on this situation? Is it going to get worse towards the end of the summer or what?

00:04:15 MR. PLANTING: This is Ron. We did see a small increase in gasoline inventories this week, which figures we published for the week ending, what July 13, so that’s a little more recent data than what we have in the June report. Still, demand has been strong, refinery outages have slowed production to some extent, but this week, we did see utilization pick up. So where it goes from here, we’ll just have to wait and see, but that was a positive note.

00:04:45 MR. FELMY: I would also add that one of the reasons why we did
have the tighter markets in the first part of the year was because of an unforeseen decline in imports, whereas since post-Katrina and Rita, we had seen imports of gasoline, which are usually about 12 percent of our supplies, had surged in in well excess of a million barrels a day, up to a million and a half barrels a day. For a variety of reasons, including some refinery problems in Europe, a strike and so on, we actually saw imports drop down to around 900,000 barrels a day.

Now, the good news is that since about the beginning of the second quarter, we’ve seen continued surges, and even last week, they were, what, about 1.3 million barrels a day. So that’s important in terms of additional supplies, and when you marry that with continued record production from the refineries, both because we’ve got higher capacity this year and higher yields, it’s helpful in terms of having those incremental supplies, but we still have a relatively tight market, as the recent past has demonstrated.

MS. TVERBERG: Thank you.

Thanks. So in other words, whether or not I can continue to get my gas tank filled at this point pretty much totally depends upon an uninterrupted stream gasoline imports coming in.

And the thought occurs to me: Isn't gasoline a pretty hazardous substance to be hauling around across the oceans?

In reference to your question about can be dangerous to haul around (after all, it is a flammable product in the form which we use it). But in some ways it's much easier to deal with gasoline than, say, oil. Much easier to pump into and out of ocean going vessels transporting the fuel. And we barge or rail ship lots of gasoline around because pipelines to large bulk storage facilites don't go "everywhere." Besides, that gasoline in your vehicle's tank probably came to the gas station in one of the many 8,000 gallon tanker trucks that routinely distribute more than 9.3 million barrels of gasoline per day (that's about 49,000 roundtrip cycles for these trucks every day).

Notably, gasoline can only burn if the vapor concentration is between the upper and lower explosive limit (sometimes referred to as the flammable limit). For gasoline, that's between 14,000 ppm and 76,000 ppm, if memory serves. Outside of those limits and the vapor cannot burn (and precautions are taken to keep vapor concentrations outside the flammable range). Other precautions are taken during liquid transfer to prevent static buildup and discharge that might accidentally ignite a flammable mixture.

Why is one refinery closing part of the process for 1,5 days a newsworthy problem? It ought to be random insignificant noise, not news.

Why is 247,000 barrels per day significant? Because we are about 6.5 million barrels per day over Minimum Operating Level (MOL) and we are consuming about 9.5 million barrels per day and not importing or refining enough to cover that difference (hence the drawdown in inventories). Thus, unless imports go up to compensate for the lost 247 KBpd , next week's inventory looks to be even lower, assuming similar consumption rates persist.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

Chevron's "Will You Join Us" website has a Sim City style game that challenges you to choose low impact energy sources for a city out to 2030:

There are many opportunities to click on "Learn More" links, one of which for petroleum actually mentions peak-oil, but then promptly drops the ball by focusing on refinery capacity as the major constraint on supply.

You can achieve consistently high scores by making hydro, wind and solar well over 50% of your energy mix which are weighted for low economic and environmental impacts. I won't speculate on how realistic that is, but some of the more "laugh out loud" assumptions in the game include hydrogen, oil shale and biomass as viable industrial strength energy sources.

Your score can be affected by what appear to be random future events (You get a different set of events each time you play) that are revealed after you've finished choosing your energy mix. These range from grim scenarios of war and drought to rosy scenarios of reforestation and renewable energy, but the impact of any given event on the economy or security of your city generally seems to be minimal. Again, I won't speculate on how realistic that is.

Taken all together it seems to be about what you would expect from an energy corporation that has a vested interest in business-as-usual, the now standard greenwash of "build a few solar panels and windmills and everything will be fine". I can only wonder how quaint that may look 20 years from now.


Without doubt, the major US oil companies and their lobbying group, the API, have become engaged in an increasingly intense and sophisticated public relations effort to paint a pretty picture and to show that Big Oil is part of the solution rather than part of the problem. The idea is get ahead of the issue and to define the debate in such a way that issues detrimental to the industry are pushed to the sidelines. It is the classical issue-marketing that one sees ad nauseum in political campaigns.

Their overall message seems to be:

1) While we may experience some minor supply problems now and then, we have things under control, and we can continue along on our present course.

2) Oil and gas is where it's at, and where it will be at for the foreseeable future. It's basically the only game in town.

3) Renewables, such as solar, wind, etc. are mainly feel-good measures and useful in their own right, but will never be all that important.

4) 'Energy security' is one of the critical 'challenges' facing the US in the years to come (the term energy security being a code-word for the crude but
a lot more honest, 'kick their ass and take their gas').

I think one has to be pretty dense not to see through this sort of self-serving corporate propaganda.

Permit me to ask a perhaps naive rhetorical question: while Big Oil is supposedly in favor of energy conservation and alternative energy, does it REALLY want you to use less of its products? I mean does it REALLY want next quarter's earnings to be less because people conserved more energy?

An oil company wants to sell oil. It does not NOT want to sell oil.

Big oil made oil available. It was the big auto makers advertising their oversize gas guzzling vehicles on TV that got the US some of the worse fuel economy miles/gallon ratings in the world. It was trial lawyers forcing manufacture of heavier vehicles by claiming they were unsafe. It is unsafe to get hit by a heavier vehicle and this makes drivers of large vehicles susceptible to lawsuits for wrongful death and injury. Heavier is less fuel efficient.

While gasoline levels were described as the lowest ever, refinery utilization was low. One oil company executive explained the new low sulphur rules imposed by EPA were making plants more complex and less easy to maintain. Crude inventories were higher than this time last year.

Natural gas is so low one company was shutting in production and canceling drilling runs. Not long ago Matt Simmons was writing that natural gas was about to fall off a steep cliff of decline. Natural gas closed below $5.65. After Katrina it rose to near $15.00. In some tight shale, offshore, and deep basins it is not profitable to drill for natural gas any more.

According to the EIA the residential price of natural gas in the USA has risen steadily by 13x in 40 years. Adjusted for inflation that's a 3.25x price increase.

Historically the price of natural gas is not low at all. I'm not sure how to parse the rest of what you said.

Here's an EIA chart of consumer gas prices that shows a clear upward trend:

Re: NG now at low price. My understanding is (and others here can flesh it out) that there is relatively little storage space for NG. Thus as long as "production" and consumption are roughly equal, you'll get large price swings as one is a bit more than the other at various times.

One thing that postponed the day of reckoning is the wholesale move in recent years of NG-intensive industries (ammonia fertilizer and some kinds of plastics) from the USA to other parts of the world where NG is still relatively abundant. Another cause has been the relatively mild weather in the last couple of winters. If this winter or the next one happens to be colder than what used to be called normal, expect much higher prices.

With declining extraction of NG in N.America, summers getting hotter, and an on-going well-deserved aversion to additional coal plants, it won't take many more years for the price to start staying higher. Moreover, there is a certain amount of fuel-switching possible between oil and gas, as a few power stations can use either, vehicles can be re-fitted to run on compressed NG, and home and business owners can replace a heating system that runs on one with one that burns the other. Thus, as long as NG is priced a lot less per BTU than oil, such conversion keeps happening, and that means rising NG demand that will eventually equalize the prices of oil vs gas.

Finally, remember that $5 is still a lot higher than it was a few years ago. With drilling for NG becoming less and less productive (4x the wells for the same output) that $5 price is apparently not quite enough for some drillers. That will accelerate the decline, leading to higher prices later...

I, for one, would like to see some more fleshing out. While your comments partially explain some of the recent decline in NG prices, and that's the only point at issue, they don't explain all. I am surprised to see NG come so far back off its high of 15 or 13, whatever it was.

there's quite a bit of natural gas storage in the US. The warm winters in the US over the last two years have meant the pipelines have had plenty of gas left in storage at the end of the last two winters, so the pipelines aren't purchasing more from producers and the producers are shutting in wells and slowing down drilling.

Most of the Barnett Shale was sold to investors with a orojected wellhead price of at least $7.00 per MCF, and those wells have rapid decline in prodution.Prices that are unstable make it difficult to raise money to drill .Bob Ebersole

USA NG consumption is running at a rate that looks like 23.6 TCF for 2007, same as 2003, but mix has changed a lot, with industrial down (fertilizer etc) and electricity generation up, and growing. USA production was down from the 2003 peak in 2004/5/6 but is about back to 2003 level this year. Drilling in ca June 2002 was 1100 wells/mo and in June 2007 was ca 2800 wells/mo, so 2&1/2x the drilling for the same production. Imports from Canada are down slightly this year, while LNG imports are up just about the same amount. Storage capacity now is very close to 3.6 Tcf, excluding line pack, up about 0.04 Tcf from last year. Storage just crossed 3.0 Tcf last week, and there are 8 to 10 weeks left in the injection period, with a mild fall being forecast. Gas available for storage is likely to exceed storage capacity by 100 to 400 Bcf before the end of the injection season, and that is why prices are (temporarily) down. If by late Sept the excess looks like 400 Bcf prices are likely to drop to the point where NG is temporarily substituted for coal for some electricity production, as a way to use the excess. I'm not sure what that price is, but it is probably near or below $4.00/kcf. As noted above a string of mild winters have balanced the situation nicely for NG, keeping prices from going real high. A "normal" winter this year will leave storage at the end of the withdrawal season low enough that it will not be possible to fully replenish storage during 2008. You can then expect NG prices in late Sept/early Oct 2008 >2x the same period in 2007, with the real possibility of a much higher spike. NG prices in early spring and fall are based much more on storage vs capacity than on supply vs demand. Murray

The price where gas is substituted for coal (in terms of loading/deloading) is around £0.25/(european)Therm depending on the relative efficiences of the gas plant and coal plant - what this relates to in $/kcf I'm not sure.

I don't think trial lawyers had anything to do with the decision making in Detroit, or in Torrance. Their decision making was driven by focus groups and what certain Americans wanted, and thought they wanted. Do you have any case cites on the wrongful death lawsuits? The verdicts woudl really have to be large to offset the profits made on each Escalade.

Amen. During the past few decades, the Detroit mantra has been "The more metal, the more margin."

Increase in weight may have been a factor in the early-to-late seventies when the first bumbling steps toward safety were taken, but in the intervening years, structural design innovations and new materials would have made it possible for Detroit to cut weight and maintain safety. You need only notice that we do have light cars on the road that meet safety ratings to see this.

However, Detroit found it much more profitable to sell massive amounts of metal to drag along under Bob Suburbia's ass, so they got to promoting that the vehicles were safer and more luxurious, with the unpublicized benefit of giving them more profits.

In reality, larger vehicles are not inherently that much safer than smaller vehicles, except when you increase the aggregate quantity of larger vehicles. Then, oddly enough, the probability that two vehicles with a significant weight differential increases and the safety of the small vehicle decreases, not because of anything inherent in the small vehicle, but because of systemic risk of collision with a vehicle of larger weight increases. So while Detroit has touting safety in the individual vehicle, systemically, it has been lowering safety by increasing the spread of vehicle weights. But it is more profitable, so all is well...

[It was trial lawyers forcing manufacture of heavier vehicles by claiming they were unsafe. It is unsafe to get hit by a heavier vehicle and this makes drivers of large vehicles susceptible to lawsuits for wrongful death and injury.]

While it is always fun to bash lawyers (until you need one, then suddenly they are your best friends), this statement seems pretty inaccurate. If anything, by your argument, trial lawyers would have made heavier vehicles less common by suing drivers who drove them. And I am unaware of any development in tort law that makes driving a heavier vehicle a basis for a personal injury suit. However, you are correct that if a driver is negligent and causes injury(a basis for a tort action), the damages may be greater becaue more injury was caused by the larger vehicle. But your statement as phrased is pretty misleading.

As a graduate student at Purdue U from 1959 to 1963 I did some work for API on opinion polling.

My job was to feed mark sense cards into computers to compute poll results.

Now there is really important stuff about the future of energy in the world.

So try to something postive. Not just words which go into the bit bucket.


I tried playing the game, only selecting renewables to power my city. It only let me select one unit of solar, and eventually I got a message telling me that I HAD to add oil to the mix. LOL!

Re: Chevron's "Will You Join Us" website and Sim City style game that challenges you to choose low impact energy sources for a city out to 2030:

The game is actually fun to play. I played it by ear, without knowing what the "optimum" scenario for high points should be, and came out about midpack compared to other players....a bit above mid when compared to only other American players (those dang Euro thinkers are apparently pretty sharp at this sort of thing! :-)

I completely refused to use any coal based on Kyoto and greenhouse gas assumptions, and instead highsided natural gas and wind, and put in one nuclear plant. The all around scenario seemed realistic to me....I also used no hydro or biomass, so I handicapped myself a bit, but since hydro is not available everywhere, and I think that biomass in most cases is a net energy sink....I installed solar as a more realistic option...then in the second round based on my assumptions upped the solar and the natural gas. Since there was no methane recapture option (which I see as an error of omision) and no provision specifically stated for plug hybrid autos (which I think will soon have a revolutionary impact) that was my best way forward.

I do not see shale oil as viable in anything like the next 20 to 30 years (even tar sand and hydrogen from renewables to my thinking has a far greater future) I left it clear out, and still came up with city that was viewed by the game as energy sufficient!

The game makes one think of how interesting it would be to do a dedicated complex type of online scenario simulation.....with much more complex parameters, including among other things, methane recapture, electric and plug hybrid cars given certain price and watt/hour storage parameters of batteries, solar with complex scenario building such as silicon vs. thin film vs. concentrating mirror and thermal hot water systems, at various price break points....various types of nuclear technologies, bermed housing, light rail, given various petroleum price points and ridership, on and could be a very involved but useful game!

O.k., who's up to volunteer to set up the site as an offshoot of TOD and do the programming.....anyone? anyone? :-)


As many of you are aware (including Jerry McManus) we're developing a dynamic systems model of energy flow and the economy for North America, with intentions to expand its scope to global next year. Nearly everyone who sees the proposal for a world energy model comments at some point, "This could be the basis for a really good game and learning tool", with Sim City as the oft-stated example for "look and feel" of such a game.

The user interface would be Sim City-like while behind it is the complete model with its differential equations, energy and ERoEI databases. The switches and levers available to the user for scenario control would be somewhat restricted compared to the academic version.

Next week we will inaugurate a new discussion forum for model development, and we will announce links for TOD readers.

- Dick Lawrence

Look forward to seeing this in its global implementation. Hope it's not too late by then.

Because modeling only the US gives, what, only between 5% and 25% of the system's overall effect and response regarding population pressure, climate change, resource and energy depletion.

Will the model include the effects of multiple dispersed disease outbreaks? Water shortages? Loss of heating in winter months? Food riots and famine? Chemical, biological, or nuclear wars? Terrorism? Social unrest, civil wars, revolution?

Will the model account for places like Zimbabwe, Iraq, and soon Iran?

Will the model account for human behavior that doesn't have access to the information that we do, i.e., the behavior of the unwashed masses?

Good for you. A great follow-on project would be something that could be scaled and fine-tuned for local communities. The Chevron simulation is a good start, but it assumes a relatively large city of fixed size, and allows no fine tuning for local conditions. It also has a relatively constrained mix of technology and policy options. Give us something with a good dashboard of controls and we would really have a useful tool.

I'm sorry to hear you've decided to go with the Sim City interface, I thought I made a pretty good case that it wouldn't serve the model well here. I would be much more interested in seeing a "Sim Policy Wonk" game as I believe that would better reflect the actual activities underlying the manipulation of the model and would be a better representation of the actual challenges involved.

Aside from the obvious deficiencies of the energy assumptions in the Chevron game I was really struck by the invisible unspoken assumption that powering cities full of cars is the primary challenge facing us. It is that assumption that must be rethought at the most fundamental level if we are to avoid the worst consequences of our behavior. A Sim City game would obviously fail to achieve that, just as surely the Chevron game has.

But, hey, as I'm well aware no one is listening to me, so best of luck with your efforts.


PowerGrid is a eurogame based on deciding which kinds of power plants to buy, in what order, to grow your company faster than the other players. It's been very popular among boardgamers posting on
Those would have scored high on the energy sim game.

First time I've ever heard trial lawyers blamed for Detroit's penchant for building gas guzzlers. But heck, trail lawyers are blamed for just about everything else so why not. Why stop at gas guzzlers, why not blame global warming on the %$#@! trial lawyers! Last I heard, Detroit preferred building big behemoths because they were more profitable to make than smaller vehicles.


Last I heard, Detroit preferred building big behemoths because they were more profitable to make than smaller vehicles.

Maybe that situation has changed. The big three lost about 15b US$ last year, while Toyota made about 14b US$.

It also gives a nice hook on the question: How fast can we change the motor-pool? You can get a 50 mpg car for under 8k US$ nowadays, while the average SUV sells for over 20k US$

What 50 mpg car sells for $8,000 (US dollars)?

I get 23 mpg on a 96 Maxima. (The car has 196,000 miles and purrs like a kitten.)

At $3/gal, and 16,000 miles per year, I would spend $2,087 per year on gas. A 50 mpg car would use $960 in gas, saving me $1,057 per year.

So let me rephrase the question. What $8,000 car that gets 50 mpg can I expect to drive for 128,000 miles over the next 8 years?

I can come close--
1994 Honda Civic VX, 262,000 miles and still gets 50 mpg (highway) and about 45 mpg if I drive a normal mix of city/highway without begin particularly careful about efficiency. I paid $12,000 for it in late 1993.

All in all, I think I got a pretty good deal...

I don't think the opportunity exists for many people to make that purchase. My Maxima exists, that doesn't mean it's for sale. I think you got a good 1993.

You're right...I'm certainly not about to sell mine. :)

Also profitable because the IRS gave a 100% current year tax credit to business owners for trucks/suv's that weighed over 7600 lbs gvw. Buy a rig that gets good mileage and you must depreciate it slowly.
Never underestimate the power of the government to help Detroit.
Delivery Fuel(s) are only 6% of our expenses. Labor is by far the biggest at 33%.
Energy while high is cheap in relationship to labor and the work it will do for you.

I notice that the OPIS site you link to has some articles about the short supply. These are some excerpts from one dated August 24:

Midwest Supply and Shipping Nightmare Endures

Many Midwest wholesale terminals have experienced persistent outages of gasoline and diesel this year. The latest Magellan report showed numerous racks out of product for at least 7-10 days: 15 terminals out of gasoline and 28 out of ultra-low-sulfur diesel.

There's only about 18 days of unleaded supplies in Magellan's system at this point, considered tight. That compares to 8 days for the Texas Eastern Products Pipeline Company (TEPPCO).

This past week, TEPPCO initiated Transit Time restrictions, forcing shippers to wait for barrels to arrive at their destinations before off-loading. Not only that, but the Lebanon, Ohio, terminal ran out of regular unleaded and low- sulfur diesel (16-500 ppm sulfur content).

I'm not sure I understand all of this. What are Transit Time restrictions, and what does it mean to "wait for barrels to arrive"?

In the part of the article I didn't quote, it talks about "allocations from over-nominations". Are nominations requests for gasoline (or whatever)? I would assume allocations prorate the available supply among those requesting it.

When a pipeline requires a shipper to wait for barrels this means the specific barrels must be delivered to the terminal before the shipper can start pulling them. It is fairly common for pipeline companies to allow shippers to draw barrels from existing inventory when a shipment is in the line. When you force the shipper to wait for the delivery, this means the terminal has minimal inventory. If this is not enforced a shipper cam strip product from another shippers inventory. IF the barrels are not in place to replace them a shipper could be short inventory they were expecting.
On nominations the pipeline has a finite amount of space in the line. The shipper nominates barrels from their source to be delivered to a terminal on the pipeline. If the shipper over nominates they want more barrels than they are allowed to transport on the line. This allows existing shippers to keep "space" on the pipeline and keeps other shippers from getting into the pipeline. Some shippers over nominate to be sure they have space. Sort of like reserving 4 seats on a airplane to guarantee one seat. The pipeline companies are requiring the shippers to ship what they nominate or they could loose future "space" on the pipeline.

Thanks! One of my favorite things about TOD is I learn new stuff all the time on this site, I appreciate your sharing this info. Bob Ebersole

Thanks for the info. I've been wondering what that meant.

(It occurs to me that if I would ever act on my predictions and buy some futures, I could make a little money).

Yes, you could, but you could lose a lot too. I started trading in oil futures and options a while back and I lost a lot of money at first. You have to be right about the timing of a market move as well as the direction to make money.

I am still a novice in the commodities markets, but my advice to anyone would be to only bet what you can afford to lose, and to either commit to spending hours a day studying the markets or stay out.

Seriously, don't ever feel bad about not acting on your predictions. Futures trading is not as easy as it looks!

P.S. Thank you for the great posts!

Another good piece of advice is to use 1/10 of the leverage you have available. If the margin on a contract is $5,000, put down $50,000. This is not easy financially and goes against one's basic instincts, but you vastly improve your odds if you are not vulnerable to every dip in the market. This is the single most important rule in futures trading. Put yourself in a position to be able to benefit from your macro knowledge. Too many traders get washed out because of excessive use of leverage even though they are right about the ultimate direction of the markets.

A second rule would be to have loss limits. However, you need to trade small even with loss limits because you can be wrong a lot of times before the price ultimately breaks out. You have to be able to sustain those losses. My advice to most people: forget the stops and trade only 2 to 1 leverage. Oil is not going back to $38 and you will be fine for the long run. As long, that is, as the markets continue to trade!!!

Good advice. As John Maynard Keynes said, "the market can stay irrational longer than you can stay solvent."

For those who prefer a lower octane play, consider investing in oil industry stocks or ETFs instead of commodities futures.

However, you need to trade small even with loss limits because you can be wrong a lot of times before the price ultimately breaks out.

Sounds almost exactly like 'counting' in the game of blackjack. Those good at this practice counsel patience because the odds will work in your favor if you are doing it right and are persistent. But then, hey, we all know that NYSE and NYMEX are much bigger casinos than you will find in Vegas.

Dante posted this at No public link (yet).

MEXICO CITY (Dow Jones)--Mexican state oil monopoly Petroleos Mexicanos will shut down one of its two crude distillation plants at its Cadereyta refinery as early as next week for planned maintenance, an engineer at the refinery told Dow Jones Newswires on Thursday.

The 275,000-barrels-a day-refinery also plans to shut down one of its two catalytic cracking units and an alkylation unit later in the month for planned work. These units are used to produce gasoline blending components.

The plant engineer, who asked not to be named because he is not authorized to speak to the media, said the total maintenance period would last over a month.

Pemex is carrying out refinery maintenance this fall ahead of a seasonal spike in gasoline demand during December when motorists increase driving during the holiday season. In October, Pemex will shut the catalytic cracker and other units at the Salina Cruz refinery for planned work.

I listened to an interview of Matt Simmons recently where I think he mentioned that since nearly all of our refineries are very old that this is the main reason for all of the non-scheduled maintenance that has been ocurring lately. He implied that age and rusting infra-structure are more to blame for the tightness in the gasoline market than our lack of total refining capacity. Any of you TODer's with expertise in this area want to weigh in on this? If we had a large percentage of newer refineries, would there be less unscheduled down time and hence less tightness (assuming of course that we have some degree of overall acceptable capacity)?

Thanks Robert.

Thanks Robert.

Definitely a tight situation.

But, yet another, wait and see situation...could be a whole lot of nothing or a disaster in the making.

The last thing the refiners want is a high price for gasoline while the Energy Bill is being debated. It also doesn't bother the refiners that gasoline importers aren't making as much as they had expected because of the record low inventories.

OPEC May Reject Calls for More Oil as Crude Rises Above $76