TUESDAY APRIL 17 2001 Petrol panic threatens UK again BY CARL MORTISHED, INTERNATIONAL BUSINESS EDITOR FEARS are growing that America’s energy shortage will lead to a rerun in Britain of last autumn’s panic over petrol, with a round of pump price increases and concern over the level of fuel tax. The price of wholesale petrol in Britain is rising rapidly as fuel is shipped across the Atlantic, drawn by a US gasoline price that has risen by 27 per cent since the end of February.

Cargoes of petrol are heading to US ports to boost low American stockpiles. However, the rush to fill US gas tanks is occurring at a time when many European refineries have shut down for maintenance. Oil industry experts believe that petrol retailers are already taking losses and expect a pump price increase after the Easter break.

Industry experts fear that the current price pressure is just the beginning of an upward spiral into the summer. With Opec intent on keeping crude prices high, the Government may face a petrol price surge as it fights the election.

“We could be heading for a rerun of last year with insufficient stocks in the US,” said Peter Regnier of the consultancy Oil Price Assessment. “Stocks are at their lowest for 15 years at a time when they should be building inventories for the summer driving season.”

This week the cargo price of unleaded petrol climbed to $325 (£226) per tonne compared with $267 at the end of February. “UK pump prices moved up 2p last week but it was an attempt to restore margin. Since the cargo price has gone up another 2p per litre they need to increase it again to bring it back to where it was,” Mr Regnier said.

Even then the margin is not enough for a decent return for retailers, he said. He suggested the superstores and the oil companies were reluctant to annoy the Government with a big price rise prior to a May election. “But they cannot wait until June,” he said.

The alarm bell was rung last week by the International Energy Agency, the West’s energy watchdog, which said that US petrol stocks would be tight again this summer. The problem is being compounded by an unusually high number of shutdowns by refiners in Europe. Many companies delayed essential maintenance last year in an effort to maintain supplies during a period of high margins. According to Ian Rolph, trading manager at TotalfinaElf, the UK’s second largest refiner, UK supplies are likely to be relatively weak at the moment.

Merrill Lynch reckons that some 1.5 million barrels per day of capacity was out of commission in March. “Low inventories in the US and reduced capacity mean it is not looking very good,” Amanda Jones, an analyst at Merrill Lynch, said.

The key factor in the energy crunch is the US refinery system, which is struggling to maintain supplies of fuel oil to America’s electricity utilities.

Typically, refineries produce heavy fuels for heating in the summer and autumn and shift to gasoline production in late winter and spring in order to build up their stocks. However, refineries have been struggling with the West Coast power crisis, a shortage of natural gas and unexpectedly strong gasoline demand. In turn, anxiety about low stocks is feeding the crude oil price at a time when Opec is proving unusually vigilant in defending high prices.

Refining margins soared last summer in Europe and in a recent report Merrill Lynch predicted a sunny outlook for refiners as the supply demand balance continues to tighten.

“Should demand growth occur at average historical levels, we believe it is not impossible to see a repeat of last year’s ‘blow-out margins’ for 2001,” the investment bank said.

http://www.thetimes.co.uk/article/0,,5-115624,00.html

-- Martin Thompson (mthom1927@aol.com), April 16, 2001