Texaco Inc., Shell Oil Co. and Saudi Aramco have attained all government and company approvals for the consummation of the joint venture combining major elements of their eastern and Gulf Coast U.S. refining and marketing businesses.
That week saw implied gasoline demand down 556,000 b/d from the previous week's record 8.6 million b/d level. That contrasts with the first week of May, which saw demand bolt higher at a 10-year record pace and achieve a 4.6% increase compared to 1997, said the Department of Energy (DOE). DOE's Energy Information Administration this spring predicted 3% growth in gasoline demand this year. At the same time, EIA projected gasoline prices would be the lowest in years, tracking weakness in crude rather than strength from demand. With the fall in demand, API noted that May ended with a 24 million bbl build in gasoline inventory over last year's levels. Stocks swelled to hit 215 million bbl, fueled also by higher gasoline production. Output hit 8.2 million b/d, up from 7.9 million b/d last year. Refineries went into overdrive, hitting the 98.4% utilization rate at the end of the month.
Volatility in methanol pricing can play havoc with consumers and producers, so it would be in the best interest of both sides of the equation to have more stability in the market. However, with the current climate of the industry, attaining such stability is a difficult proposition. To facilitate this higher level of cooperation between producers and consumers of methanol on a global basis, the industry could set up a international clearing house for information and market research, theoretically known as the World Methanol Institute, suggested Rampersad Motilal, manager with the Trinidad and Tobago Methanol Co., at the recent Latin American Methanol Conference.
The House/Senate Conference Committee debating the fate of the federal highway bill has decided to extend the tax incentives for ethanol and ETBE through the year 2007. Although the ethanol credit faced fierce opposition at times in the past year, House and Senate Republicans and Democrats agreed to keep the incentives in place, with a slight decrease after 2001. However, action on a proposal to extend the small-producer tax credit to members of cooperatives has been postponed.
Valero Energy Corp. will buy Mobil Oil Corp.'s 155,000 b/d Paulsboro, NJ, refinery for $336 million, lifting the San Antonio, TX- based firm into the number-two spot among independent U.S. refiner/marketers behind Tosco. Valero will purchase the plant for $228 million plus $108 million for inventory in a deal the parties hope to close by July 1. The purchase breaks Valero out of its traditional Gulf Coast environment and sets up the company to build on its existing 30,000 b/d unbranded RFG market in the Northeast. "We market in more than 30 states, but we remain tied to Gulf Coast economics," Valero chairman and CEO Bill Greehey told analysts. "Growing on the East Coast offsets the volatility of Gulf Coast margins." Mobil's shift in recent years toward exploration and production and away from domestic refining opened the door for Valero's purchase, said company chairman and CEO Bill Greehey. Paulsboro provided Valero with a better fit than Shell's 108,000 b/d Anacortes, WA, plant offered, he noted.
After winning the bidding war for Shell's 108,000 b/d Anacortes, WA, refinery, Tesoro Petroleum Corp. believes it is well-positioned to supply products throughout PADD 5, the company said. Tesoro seeks to capitalize on the Anacortes plant's ability to process a wide slate of crude into CARB Phase 2 RFG, jet fuel, diesel and other products. The plant's flexibility would allow Tesoro to enter easily the California market, though its flag is currently confined to Washington state and Oregon, an observer said.
Facing mounting pressure from the U.S. EPA to reduce air pollution in the St. Louis metropolitan area, Missouri lawmakers last month took the necessary first steps toward implementing an RFG program. In an eleventh-hour push, legislators approved a bill lifting the state's current ban on reformulated fuel programs and approved a possible state-run RFG program. Securing a role for ethanol in the new fuel plan remains a stumbling block for implementation, said state sources.
DuPont decision to spin off Conoco as a stand-alone firm has rekindled speculation that a down-stream merger with Phillips may be possible after all, said a Phillips insider. "Conoco has been a strong contributor to DuPont's earnings and cash flow for nearly 17 years," said company President and CEO Charles Holliday Jr. "However, we believe that value and growth can be enhanced for DuPont's materials and life sciences businesses and for Conoco by separating the two operations."
Facing the same challenge from low crude prices as the entire refined products market, MTBE spot prices slid badly late in May. In at least one trade, Gulf Coast MTBE was sold for 67 c/gal, according to market analysts. That is down at least 3 c/gal since April. Similarly, New York Harbor spot prices struggled to maintain the 69 c/gal mark in what one observer called a "sloppy" market. Paper prices look only slightly better, said Bill Richard of DeWitt & Company. "June has been talked a little higher by about a half penny to a penny, and July is about 2 c/gal over current prices. So there's a little contango but not a lot," he said.
The Clinton Administration remains committed to a "government- owned and controlled, centrally located Strategic Petroleum Reserve (SPR) of crude oil," the Department of Energy (DOE) said in its recent Statement of Policy. DOE issued the policy about a year late, and just three days after Congress blocked the sale of $207 million worth of SPR crude it previously mandated.
After several dismal months, ethanol prices steadied in May, and provided producers with unexpected welcome news as demand held up better than anticipated. Ethanol prices have been decimated this spring by falling gasoline prices. In some markets, ethanol prices reportedly were below $1.00/gal. Pre-filling, especially in the Southwest, is pushing prices slowly upward, market observers said. "There was a little bit of recovery seen on corn price increases," said Bonner & Moore's Rob Harvan.