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With ample supplies, gas price tests $4Tell North Platte what you think
Photo by George Lauby
Gas price, U.S. Highway 83 entrance to North Platte, May 3.
Photo by George Lauby
Jim Elletts recently spent $100 for gas on a weekend trip to Grand Island.
Photo by George Lauby
Roberta Karchner paid $83 to fill the family van.
Photo by George Lauby
Kristin Hayes buys gas $10 at a time.
Photo by 
Kirk Nichols, Jr. buys about 55 gallons a week for himself and his family.

As the price of gasoline neared the $4 a gallon mark in Nebraska, Exxon’s first-quarter earnings surged 69 percent.

The giant oil company took in $11 billion in profits during the first three months of 2011, the highest profits since 2008, a year when the retail gasoline price also approached $4 a gallon.

After the 2008 price zenith, gas fell back to $2.60 a gallon late last summer, but started skyrocketing again a few months ago.

“I don’t like it, it’s too high,” said Jim Elletts of North Platte May 3 as he gassed up the family car. “I got a little irate when I read (about Exxon’s profits.)”

Another motorist, Roberta Karchner of Brady, said the price of gas is "just crazy."

“It’s ridiculous that we have to pay this much,” she said.

Karchner, a mother of three children, drives from Brady to North Platte once a week to take care of family errands. She fills the car with gas about once a week, spending $80-100 per tank-full.

North Platte gas station owner Don Mentzer said the price is too high.

“It can’t stay like this,” Mentzer said. “It’s harmful to the country.”

But Mentzer is at a loss to explain what is driving prices higher.

“It’s not lack of supplies; there’s plenty of oil right now,” he said.

According to a report by Fortune magazine, OPEC (the Organization of the Petroleum Exporting Countries) currently has a spare capacity three times higher than in 2008, the last time oil prices soared.

“The market is adequately supplied and our (OPEC’s) production in March was almost the same as in December even though (Libya) is out of production,” Abdullah Al-Badri, OPEC’s secretary general, said recently.

In the United States, there is around 54 days of oil supply in storage tanks across the nation, which is 7.7 more days than in 2008, the Fortune report said.

Nebraska continues to have significantly higher average prices for gasoline than surrounding states.

A snapshot:

• Wyoming - $3.61 a gallon

• Colorado - $3.70

• Kansas - $3.81

• SD & Iowa - $3.90

• Nebraska - $3.97

Source CNN, May 3, 2011


Many people, such as Mentzer, think there is too much speculation in the oil market.

“There is lots of speculation,” he said, “and some suspect that the biggest speculators are manipulating the market. There’s not a shortage of product. There’s something going on.”

Goldman Sachs acknowledged earlier this month that speculation is at least partially responsible, driving oil prices up faster and higher than supply and demand could possibly explain.

Mentzer said local dealers are suffering too, because it costs about $30,000 to buy a single semi-load of gasoline. That drives up their overhead costs and increases their risks.

Mentzer is concerned about the overall effect on the economy. Nebraskans have to travel considerable distances to farm, ranch and take care of family members. And nationally, the rising costs of transportation could drive the costs of nearly all goods and services higher, an inflationary influence that seems bound to attack an already weak economy.

Increasingly, the futures market and related “derivatives” play a big hand in setting the prices of basic necessities.

Over-active trading was identified as a key cause of the housing market collapse in 2005-08, because actual assets (home mortgages) were bundled and traded in “instruments” to investors all over the world seeking to make quick profits.

When the owners of the “instruments” started selling, the world economy nearly collapsed. The U.S. government bailed out the largest investment banks with loans and grants to the tune of nearly $700 billion.

After that collapse in late 2008, policy makers and the public called for more financial oversight and reform. In 2010 Congress finally passed new laws.

The legislation on derivatives originated in the Senate Agriculture Committee, which oversees commodity futures trading.

Derivatives are a category of financial instruments whose value is based on ( derived from) an underlying asset, such as futures contracts for commodities such as oil, according to an industry analyst.

Derivatives also include vastly complex financial instruments that many believe sparked the financial crisis, such as credit-default swaps.

The new bill was aimed to bring more transparency to derivatives markets and curb the influence of speculative traders.

A segment of the new reforms called for the Commodity Futures Trading Commission to impose “position limits” that would have capped the amount of oil that speculators could trade in the futures market.

Those regulations were supposed to take effect by Jan. 22, but the commission, by a split vote, did not enact the rules. Vermont Sen. Bernie Sanders is among those calling on the commission, and the White House, to see that the limits are applied.

A recent Congressional budget resolution directed the CFTC to spend at least $37.2 million on the "highest priority information technology activities" such as systems to integrate data on futures and swaps.

More recently, the U.S. House has tried to cut back on authorizing such funds.

Down, then back up

The price of crude oil – a key factor in the price of gas – went down nearly 15 percent Thursday-Friday, closing below $100 a barrel for the first time in several weeks on the New York Mercantile Exchange. The NYMEX is one of the nation’s futures markets.

But the crude oil price rebounded Monday to above $100 again.

Much of the selling last week wasn't carried out by traders, but by computers programmed to sell if the price fell to certain levels — $105.50 and $102.70, for example, according to a report in the Wall Street Journal.

Investors, not companies that produce and consume oil (such as refiners), are the primary users of such sell orders, the Journal said. Near record numbers of those speculative investors were in the oil market on Thursday. Open interest, or the total number of open contracts, of the New York Mercantile’s main oil-futures contract surged to a record 1.65 million, the Journal reported.

As the futures prices of oil decreased last week, in North Platte the price of gasoline generally dipped from $3.95 to $3.89.9 a gallon.

“I think it’s crazy,” Karchner said when she put $83 worth of gas in her family van.

“It’s outrageous,” said Kristin Hayes, 19, a community college student who bought only 2.6 gallons – about $10 worth.

Kirk Nichols, Jr. who paid $61 for 14 gallons of premium for his Harley, said the price is “a little ridiculous.”

“I love Alaska as much as the next guy,” Nichols said, “but I think we need to start drilling somewhere.”

Mentzer hopes speculators will sell and the price will fall, which would seem logical.

“You’d think they’d be selling it,” he said. “They’d make a huge profit.”

Alternate vehicles

Overhauling the nation’s financial laws is not foremost on the mind of Ron Snell of North Platte, an avid bicycler. He’s thinking about human-powered transportation

Snell is starting a “Bike ’n Hike Fridays” program that will begin May 20.

“It isn’t a fundraiser and doesn’t benefit anyone in particular,” he said. “I’m just trying to get lots of businesses and individuals to buy in. We’ll be facebooking at ‘Bike ’n Hike Fridays – North Platte’ and there may be some activities during the summer just for bikers/hikers.”

Snell extolls the benefits of bicycling in his emails.

“Explore, smile, save gas, breathe deeply, lose pounds, find friends, move, chat and live,” his email announcement says.

This report was first published in the May 4 print edition of the North Platte Bulletin. It was expanded and updated May 9. - Editor.

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The North Platte Bulletin - Published 5/10/2011
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