Retail gasoline prices have hit their high for the year, but the news is not all bad. Despite the fact that AAA says prices have risen 17 cents a gallon, hitting $265 per gallon, prices are a lot lower than a year ago--and taking into consideration the fact that crude oil prices have soared, it could have been a lot worse.
A few years ago the increase in gas prices as compared to crude would have been more dramatic. The percentage correlation of gasoline versus crude is at its lowest in many years. Gas prices are showing less sensitivity to oil as the U.S. shale oil keeps the refiners well-supplied and increased refining capacity is allowing more price movement in the crude before that input cost shows up at the pump.
Natural gas is going to produce to a level where the United States will become a net exporter as soon as 2040 if not sooner. The United States could export anywhere between 0.2 trillion cubic feet and 10.3 trillion cubic feet of liquefied natural gas annually by 2040. That is according to a report by the Energy Information Administration. The EIA says that the United States will be a net natural gas exporter by 2017.
Then, after 2017, according to the EIA, natural gas trade will be driven largely by the availability of natural gas resources and by world energy prices. Increased availability of domestic gas or higher world energy prices each increase the gap between the cost of U.S. natural gas and world prices, which encourages exports of liquefied natural gas (LNG), and, to a lesser extent, greater exports by pipeline to Mexico.
Most of the growth in U.S. net natural gas exports will occur before 2030, as increased domestic natural gas supply satisfies new demand, both internationally (with the development of LNG export capacity and growing demand for pipeline exports), and domestically (particularly in the industrial and electric power sectors). Increased shale gas production accounts for three-quarters of the increase in total dry gas production. More than half of the increase in shale gas production comes from the Haynesville and Marcellus formations.
Crude oil prices this morning are looking at the better-than-expected manufacturing data in Europe raising hopes that EU oil demand will improve and worse-than-expected data out of China that suggests that more quantitative easing in China will be coming. While China data seemed to shake out the bulls, the European data is evidence of the fact that QE and stmulus is bullish for oil. Data firm Markit said the EU purchasing managers Index came in at a robust 52.0 for April, down from 52.2 in March but higher than the 51.9 figure Markit estimated. In China, the bad news was the HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 in April — the lowest level since April 2014 — from 49.6 in March..