Certain Cars Can Be Banned From Streets, Court Rules. Total Ban By 2040?

Image source: Pixabay.com

The country where the internal combustion engine originated might be among the first to ban it.

Germany’s Federal Administrative Court ruled Tuesday that cities have the right to ban gasoline and diesel vehicles in an attempt to curb pollution.

“These vehicles have no place in our cities anymore,” Jürgen Resch, the managing director of an environmental group called Deutsche Umwelthilfe, told The New York Times. Resch’s group brought suit after German governments who had failed to take action against polluting vehicles.

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The suit demanded that German cities start enforcing air quality standards mandated by the European Union (EU), The Times reported. Enforcing those standards would require cities to ban many older diesel vehicles.

“Limited bans for certain diesel cars are within the law,” the court ruled. The Federal Administrative Court is one of the highest in Germany.

The city of Paris, which has some of the worst smog in Europe, has already banned vehicles built before 1997, Car Insurance Samurai reported. The French government wants to get rid of all gas and diesel vehicles by 2040.

Three German cities — Stuttgart, Munich and Dusseldorf — are considering banning diesel. Resch expects the first diesel bans in Germany to be enacted by fall of this year. It is not known how the ban would impact Germany’s auto industry, which has promoted diesel for decades and employs 800,000 people.

Germany was the country where the automobile was invented by Karl Benz in 1885.

“The days of flooding the inner cities with poisonous diesel emissions are over,” Resch said.

Many people around the world seem to agree with his sentiment.

City governments in Madrid and Athens want to ban diesel vehicles completely, and officials in the United Kingdom hope to ban diesel completely by 2040, The New York Times reported. The government of India wants to require all cars to be electric by 2030, CNN Money reported.

China Vice Minister of Information Zin Guobin told reporters his government wants to ban the sale of new fossil fuel burning vehicles by 2030, The Economist reported. Closer to home, Mary Nichols, the chairman of California’s Air Resources board, said she would like to see a ban on internal combustion vehicles by 2040.

What is your reaction? What it in the section below:

Oregon Lifts Ban On Pumping Your Own Gas (Sort Of)

The state of Oregon has finally loosened restrictions that prohibited residents from pumping their own gas – even though it’s still illegal in most of the state.

Self-service gas stations became legal in 15 rural Oregon counties on Monday.

The new law, HB 2482, decriminalized gas pumping at any time in 15 counties with populations under 40,000, The Bulletin reported.

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Pumping your own gas is still banned for 90 percent of the population.

Some Oregon residents, though, didn’t take kindly to the new law.

“I don’t even know HOW to pump gas and I am 62, native Oregonian…..I say NO THANKS!” resident Sandy Franklin posted on Facebook.

The San Francisco Chronicle and Texas TV station KSAT 12 were among the many out-of-state media outlets making fun of some Oregonians’ fear of gas pumps.

“Many people are not capable of knowing how to pump gas and the hazards of not doing it correctly,” Tina Good wrote. “Besides, I don’t want to go to work smelling of gas when I get it on my hands or clothes.”

“I’ve lived in this state all my life and I REFUSE to pump my own gas,” Mike Perone wrote. “I had to do it once in California while visiting my brother and almost died doing it. This a service only qualified people should perform. I will literally park at the pump and wait until someone pumps my gas. I can’t even.”

New Jersey is the only other state where filling your gas tank is still a crime.

What is your reaction? Share it in the section below:

Is U.S. Gasoline Consumption Set To Collapse?

Authored by Tsvetana Paraskova via OilPrice.com,

U.S. individual vehicle miles traveled (VMT) growth has been flat since June 2017, and the potential end of the VMT growth that started in early 2014 may be an indicator of slowing oil consumption, according to government data compiled by Labyrinth Consulting Services, Inc.

(Click to enlarge)

Gasoline is the most consumed petroleum product in the U.S. Last year, motor gasoline consumption averaged about 9.3 million bpd, or 391 million gallons per day - the largest amount recorded and equal to about 47 percent of total U.S. petroleum consumption, data by the EIA shows.

Some 29 percent of all U.S. energy consumption in 2016 was for transporting people and goods from one place to another, the EIA says. Petroleum products provided around 92 percent of the total energy the U.S. transportation sector used last year.

The latest available data by the U.S. Department of Transportation shows that the seasonally adjusted vehicle miles traveled for October 2017 stood at 268 billion miles, a 0.8-percent increase over October 2016, and 0.2-percent growth as compared to September 2017. The cumulative estimate for this year is 2,685 billion vehicle miles of travel.

In its latest Short-Term Energy Outlook (STEO), the EIA said that in November, U.S. regular gasoline retail prices averaged $2.56/gallon, an increase of nearly 6 cents/gal from the average in October, primarily reflecting rising crude oil prices. EIA forecasts the U.S. regular gasoline retail price will average $2.59/gal this month, 34 cents/gal higher than at the same time in 2016. For 2018, EIA expects U.S. regular gasoline retail prices to average $2.51/gal.

Gasoline prices and increases in fuel efficiency are important factors in U.S. gasoline sales that are also highly seasonal, but according to Jill Mislinski at Advisor Perspectives, there are also some significant demographic and cultural dynamics affecting the U.S. gasoline consumption trends.

In a post from November 2017, Advisor Perspectives said that apart from fuel efficiency improvements, declines in gasoline consumption can be attributable in large part to factors such as an aging population leaving the workforce; growing trend toward working from home; social media providing alternatives to face-to-face interaction requiring transportation; a general trend in young adults to drive less; and accelerating urban population growth, which reduces the per-capita dependence on gasoline.  

WTI/RBOB Steady Despite Huge Gasoline Build, New Crude Production Record

Despite last night"s surprisingly large API-reported crude draw, WTI/RBOB prices were sliding in early trading but as the DOE data printed prices stabilized despite a smaller crude draw than API and a much bigger gasoline builds than expected. Production surged on the week to a new record high.

Bloomberg"s Mitch Martin noted that the Brent pipeline leak and another in Canada have U.S. refineries running hard to capture the widening crude differentials. That"s leading to oversupply in the gasoline market, which has seen inventories build for three straight weeks; a fourth is expected, increasing supply by 1.8 million barrels. Distillates also are expected to build, rising 1.1 million barrels, even as crack spreads recovered to more than $20 a barrel.

API

• Crude -7.382mm (-2.89mm exp) - biggest draw in 4 months


• Cushing -2.704mm (-2.5mm exp)


• Gasoline +2.334mm


• Distillates +1.5384mm

“We’re seeing U.S. inventories really continue to fall,” Phil Flynn, senior market analyst at Price Futures Group, says. Investors will focus on whether we see large builds in gasoline and distillates, which may hold back crude from rallying strongly, “but I don’t think you can underestimate the strong demand from the refiners.”

DOE

• Crude -5.12mm (-2.89mm exp)


• Cushing (-2.5mm exp) - biggest draw since Sept 09


• Gasoline +5.66mm (+2.3mm exp)


• Distillates -1.37mm (+1.2mm exp)

A 5th weekly build in gasoline inventories (much larger than expected), and unexpected distillates draw, as crude (and Cushing) stocks are reduced...

As Bloomberg notes, crude production topped 9.7 million barrels a day in last week"s data for the first time since weekly records began in 1983. Even more importantly, the EIA"s monthly assessment of crude production - seen as more accurate than the weekly figures - caught up with the more frequent data in September, after lagging for the previous 5 months.

The last week saw another surge to record highs...

 

WTI/RBOB prices extended yesterday"s losses ahead of the DOE data (despite API"s big crude draw) but the algos managed gains after the print even as crude drew less than API and gasoline"s build build...

WTI/RBOB Extend Losses On Biggest Gasoline Build In 11 Months, Record Crude Production

Following last night"s API-reported huge product inventory builds, bulls were hoping DOE would rescue WTI/RBOB prices but it did not as the dat confirmed a huge crude draw and even bigger product build (gasoline"s biggest weekly build since January). Adding to the pain, US crude production rose to another new record.

A gasoline build is likely as “refineries have been running very high, so it’s pretty natural,” James Williams, president of energy researcher WTRG Economics, says, adding that investors will also look to see the magnitude of a potential drop at Cushing.

API

• Crude -5.48mm (-2.5mm exp)


• Cushing -1.95mm (-2.4mm exp)


• Gasoline +9.196mm - biggest build since Jan 2016


• Distillates +4.259mm - biggest build since Jul 2017

DOE

• Crude -5.61mm (-2.5mm exp)


• Cushing -2.753mm (-2.4mm exp)


• Gasoline +6.78mm (+2.56mm exp) - biggest build since Jan 2017


• Distillates +1.667mm

Confirming API"s data, DOE showed a major crude draw, big drop at Cushing but major builds in products...

 

US Crude production rose 25k b/d to a new record high...

 

And WTI/RBOB prices were unable to bounce...

"Take That OPEC" - WTI Slides As US Crude Production Jumps To Record High

WTI/RBOB extended losses post-API data overnight, but DOE data sparked some algo chaos as a surprise crude build (+2.24mm vs -2.45mm exp) was offset by a bigger than expected gasoline draw (exactly opposite what API reported). In addition, US crude production jumped to a new all-time high - take that OPEC!

 

API

• Crude -1.562mm (-2.45mm exp)


• Cushing +812k


• Gasoline +520k (-1.85mm exp)


• Distilates-3.133mm

ADOEPI

• Crude +2.24mm (-2.45mm exp)


• Cushing +720k


• Gasoline -3.31mm (-1.85mm exp)


• Distilates -3.359mm

Last night"s API data showed smaller crude draw and a surprise gasoline build, but DOE surprised with a big crude build and biugger gasoline draw (and a notable build in Cushing stocks)...

 

Production has normalized back at cycle highs as storm effects fade, surging to new cycle highs in the last week

 

And total US Crude output just hit a new record high...

 

The trend is not OPEC"s friend...

 

WTI was back below $57 and RBOB below $1.80 ahead of the DOE data, sinking after last night"s surprise gasoline build

“If the EIA data disappoints then it could take further steam off the market,” says Jan Edelmann, analyst at HSH Nordbank.

India Stack and Bitcoin (An Insider's View)

By Chris at www.CapitalistExploits.at

Before the good stuff... the fun stuff.

Here"s a fan mail I received in response to this.

I guess he/she never made it as far as this part:

"Don’t get me wrong. I’m not against EVs, and I’m all for technological innovation."

Though, in all fairness, it may be the collagen talking. Either way, definitely not an Insider member, otherwise he/she/it would be well aware of where we"re actually invested. Ha!

Dregs from the bottom of the barrel occasionally drift into my corner of cyberspace. That they respond like this must be due to this fascinating misconception that I give a damn.

Still, if we poke them hard enough in the chest, they"ll bugger off leaving us with the fine specimens that make up the overwhelming majority of our distinguished readership. Which brings me neatly to:

"Hi Chris,

I"m not sure if this gets to you or is stuck in the admin box.

Love your work, really enjoy it.

Your current one on the knock off effects of banning gasoline and diesel cars made me want to bring up another point that is seldom discussed when people talk about the future of EVs... the profitability of refineries when they don"t have a market for gasoline.

When a barrel of crude is refined, about half of its volume ends up as gasoline.  The other half ends up as diesel, jet fuel, bunker oil, chemical feedstocks, etc... Gasoline is great for running automobiles, but pretty lousy for any other industrial process.  Industrial processes such as mining, refining, transporting, and processing cobalt, lithium, and molybdenum into EV parts.  These processes depend on the other half of the barrel.

Driving away (pun intended) the demand for gasoline by mandating EVs means that refineries have half of their product become much less valuable.  I don"t have the research or know of who has done the research, but I wonder what such a move would mean for the price of diesel, jet fuel, bunker oil, chemical feedstocks, etc...?

Hope all is well, cheers!"

Fair points and worth thinking about.

For example. Do those industries taking up the "other half of a barrel" benefit? To what degree? For how long? And is the market pricing this?

All fun stuff which we spend all most of our time doing here.

Anyway, today I"ve got something special for you and it"s got nothing to do with EVs or gasoline.

Bitcoin and India Stack

It was Raoul Pal who first brought to my attention the incredible galactic sized project that is India Stack.

I"ve since spoken with quite a variety of people both in India and out in order to better understand the dynamics of what"s taking place in India. I think it provides a fascinating and illuminating view into how certain problems can be dealt with.

In particular (and I"ve not seen anyone mention this), the ability to recapitalise a banking system on the brink and to do so while transitioning over a billion citizens onto a digital system.

Pre-cash elimination, India"s banks were in a shocking state. What better way to "fix" them than to get the poor to bail them out.

Ever since man began forming communities, we"ve had a setup where those at the top manufacture ways and means to have those at the bottom pay for the things they want.

Kings told stories about their "divine rights", people believed it, priests told stories about the church"s relationship with God, people believed it. And today politicians tell stories about "the greater good"... and people believe it. Some things never change.

Aside from the banking system being recapitalised...

It"s been fascinating to watch what was up until recently one of the world"s largest cash economies and where millions never even had a bank account suddenly goes digital.

So there were two steps here.

The first being the elimination of cash in the economy, and the second bringing online the digital platform otherwise known as IndiaStack, an open source platform where information is a utility.

The set of open API for developers includes:

• The Aadhaar for authentication


• The e-KYC documents that have been generated


• Digital lockers


• e-signatures (software based as against the present dongle based e-signs)


• The Unified Payments Interface which rides on top of the National Payment Corporation of India’s Immediate Payment System.

You can check out a presentation which provides a decent overview of it here.

I"ve spoken with a lot of guys who see this as being a major boon for India"s economy, eliminating fraud, destroying swathes of bureaucracy, and bringing millions of people into the economy who previously never had access.

I don"t disagree with any of this, but what I wanted to do was to find someone who wasn"t very bullish, someone who would challenge some of these thoughts. And with that in mind, I found and spoke to Deepankar Kapoor.

Deepankar Kapoor - as you can probably infer from his name - is not only Indian but he"s also the founder of Bitcoinwiser, a well known face in the digital advertising industry in India with his most recent stint being as the Vice President & National Strategy Head at Ogilvy India.

He has 9+ years of full time recognised experience in digital business transformation of Fortune 500 brands and won many accolades throughout his career. Academically, he holds an MBA from University of Calcutta wherein he majored in Marketing [Forecasting & Econometrics], BMS from Symbiosis International University and a Diploma in Cyber Laws from the Government Law College, Mumbai. Additionally, he is a Google and Twitter Certified Professional.

You can listen to our conversation below. I apologise for the dodgy line at times - Kenyan Wi-Fi isn"t the best in the world.

And a Question for This Week

Cast your vote here and also see what others think

- Chris

"Change is opportunity." — Suresh Prabhu, Union Minister for Commerce

--------------------------------------

Liked this article? Then you"ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

--------------------------------------

Hurricane Harvey Looters Targeting Fuel Tanks As Google Searches For "How To Siphon Gas" Soar

Texas resident Joe Roan woke up to a rather unpleasant surprise yesterday morning as he discovered the remnants of a would-be thief attempting to steal gasoline from his Jeep Wrangler tank.  Unfortunately, as a local CBS affiliate pointed out last night, with refinery outages resulting in growing gasoline shortages, this is becoming a rather common occurrence for Texas residents.

Joe Roan didn’t witness the crime, but he found the evidence in his driveway.

“I came outside this morning and found this water hose was sticking out,” he said, holding the hose a thief left hanging out of his Jeep’s tank.

On the ground sat a gas tank.

“Instantly I knew someone was trying to steal my gas,” he said. “Maybe a car drove by when they were doing it and they ran? I don’t know.”

Roan said the thief didn’t even manage to get any fuel.

Meanwhile, Google searches for "how to siphon gas" have soared as criminals have been forced to hone their skills before taking to the streets.

Of course, the rampant onset of gasoline thieves is the result of fuel shortages which are often exacerbated by the pure panic of people trying to keep their tanks topped off. As we"ve reported several times in recent days, long lines at gas stations have become a common sight from the Texas shores up to Dallas.

Flooding from Harvey has caused a temporary gas shortage, creating long lines and price hikes at gas stations in Texas. pic.twitter.com/azLD5hZOZE

— ABC World News Now (@abcWNN) September 1, 2017

Watch live: Lines at gas pumps growing longer in North Texas --> https://t.co/oHTLanM0ec#Harvey pic.twitter.com/7XcZN1JGXO

— NBC DFW (@NBCDFW) August 31, 2017

Meanwhile, one seasoned energy trader warned this is "only just beginning" as the hangover from Hurricane Harvey flows downstream to retail gas prices...

As Bloomberg notes, Harvey impact currently includes:

• Colonial says it’ll commingle Rbob and conventional gasoline


• Explorer Pipeline planning to start lines Saturday, Sunday


• Logjam grows to 29 oil tankers as 11 ports remain closed


• Total Port Arthur is said facing extended shutdown on power loss


• Texas storm bucks N.Y. traders with wild gasoline expiry swings


• NHC issues final advisory on Harvey; losing tropical character

Which has left retail gas prices at the pump at their highest in 2 years...

And, judging by their usual lagged response to RBOB, they are set to go dramatically higher in the next few weeks...

All of which has resulted in the predictable onslaught of price gouging, with the Dallas News reporting sightings of gas prices ranging from $2.99 a gallon to $8....

There were multiple reports of gas stations charging anywhere from $2.99 to $8 for a gallon of regular gas.

At the 76 gas station in Garland, the fuel-price display unit outside showed $8 for a gallon. The station was swamped with calls from angry customers after a photo was posted on social media, according to Robert Fernandez, who works there.

There have been numerous complaints about high gas prices, according to Kayleigh Lovvorn, spokeswoman for the office of Texas Attorney General.

“When evaluating whether a business is engaging in price gouging in the sale of fuel, we look to see if they are charging excessive or exorbitant prices,” Lovvorn said in an emailed statement. “We recognize that certain market conditions, such as decreased production and closed refineries, might cause market fluctuations.”

The attorney general’s office is looking into 984 complaints filed between August 25 and Thursday afternoon. On Thursday alone, its Consumer Protection Division received more than 500 complaints, “many of which involve allegations of high fuel prices in Dallas, including amounts ranging from $6 to $8 dollars per gallon.”

...which is still pretty cheap compared to what Best Buy is charging for water.

Gas Station Shortages Expected In Texas As Gulf Coast Premiums Hit Record Highs

According to retail fuel supplier Mansfield Oil, short-term fuel supplies for Houston and San Antonio are significantly impacted by Tropical Storm Harvey.

Bloomberg reports that San Antonio and Houston supplies are at code red, while Corpus Christi was downgraded to code orange as terminals have come online already and limited spot supplies are available.

For now, GasBuddy.com reports a number of stations are still open, though prices are rising...

However, the Gulf Coast CBOB gasoline spread to NYMEX futures rose 9.50c to a 16.50c/gal. premium - the highest on record in data from 2012.

The U.S. could see 30 percent of refining capacity shut on Harvey and if the storm moves up the Texas coast toward Louisiana, then additional shutdowns could occur in Port Arthur and Beaumont as well as in Lake Charles, Louisiana, Tudor Pickering Holt & Co. LLC analysts said. Port Arthur is home to the nation’s largest refinery operated by Motiva Enterprises LLC.

“There’s a big drop-off suddenly in crude oil demand,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “We have a supply disruption event in gasoline production. Gasoline demand in the balance of the country is still elevated, so we could see a real impact on gasoline inventories if these refineries are unable to get restaffed quickly.”

WTI/RBOB Slide After Oil Production Surge Offsets Biggest Crude Draw Since Sept

Following last night"s mixed mesage from API (crude draw, gasoline build), WTI prices have gone nowhere as all eyes focus on DOE data this morning. Confirming API"s trend, crude saw its biggest draw since Sept 2016 but Gasoline, Distillates, and Cushing (most since March) saw builds which upset the machines and sent prices lower. Crude production rose once again to its highest since July 2015.

API

• Crude -9.2mm (-3.38mm exp) - biggest draw since Sept 2016


• Cushing +1.7mm (+700k exp) - biggest build since March


• Gasoline +301k (-450k exp) - second weekly build in a row


• Distillates -2.1mm (-250k exp)

DOE

• Crude -8.945mm (-3.38mm exp) - biggest draw since Sept 2016


• Cushing +678k (+700k exp) - biggest build since March


• Gasoline +22k (-450k exp)


• Distillates +702k (-250k exp)

Last week"s surprise build in gasoline (confirmed by API) and big draw in crude (also confirmed by API overnight) remains the big focus and DOE data confirmed it with the biggest crude draw since Sept 2016 but builds in products and at Cushing...

While the builds in produst were modest, they were nevertheless a surprise shift in trend from draws to builds...

Imports from Saudi Arabia jumped 47 percent to 813,000 barrels a day, but remain well under the 1-million barrel figure exceeded through much of the first two quarters of this year.

As Bloomberg"s David Marino notes, the total stockpile draw of 7.32 million barrels brings inventories to the lowest since January 2016, but still more than 200 million barrels above November 2014, when the glut really started building up. A lot of work still to do, as OPEC well knows.

Some more details, courtesy of Reuters: total commercial stocks fell -8.9 million bbl to 466 million bbl in the week to Aug 11 (much faster than normal at this time of year).

Total stocks are now -25 million bbl below 2016 level but... +134 million bbl over 10-yr average.

Stocks are now down -13 million bbl since start of year compared with +40 million rise in 2016 and 10-yr avg of +25 million, as the rebalancing appears to be taking shape.

Meanwhile, refinery throughput unchanged last week"s record 17.6 million b/d.

One number which the market was closely watching were gasoline stocks, which disappointed the bulls by rising fractionally by 22kb, and basically unchanged at 231 million bbl, despite an expectation of a 1mm decline.

As a result, gasoline stocks are now 2.3mm bbl below similar levels last year, but are 19 mm bbls above the 10 year average.

Finally, while domestic production increased again, so did imports, which accelerated by +364,000 b/d to 8.1 million b/d in the week to Aug 11

While rig count growth has stabilized, crude production continues to rise in the Lower 48 (though had dropped in Alaska for 3 straight weeks) but both saw a rise this week (total production up 79k) as Lower 48 production hit its highest since July 2015...

Bloomberg notes that U.S. oil production from major shale plays is set to hit another record at 6.15 million barrels a day next month, according to the EIA. It"s not just the Permian that"s growing, as the agency sees higher output across the board.

WTI Crude prices barely budged from last night"s API print heading into the DOE data, spiked higher on the crude draw but slipped back lower on product builds and production surge...

Heading into the print, "the size of a potential draw in crude inventories is “going to be the most material” aspect of the report, Brad Hunnewell, senior equity analyst at Rockefeller & Co., says, adding that "investors also expect to see a rise in gasoline demand."

However, as Bloomberg Intelligence energy analyst Vince Piazza notes:

No change to our bearish view: long road to recovery still ahead. We still see mid $50-$60s as the threshold for acceleration of U.S output. Commentary from exploration and production company conference calls implies drilling efficiencies are aiding productivity.

Elevated refining utilization has helped deplete bloated inventories across the petroleum value chain during the key seasonal driving period, and exports have helped as well. However, the market is seeing the end to summer, with runs traditionally declining in early fall.

North Korea's Fuel Prices Soar After China Suspends Exports

Authored by Tsvetana Paraskova via OilPrice.com,

Diesel and gasoline prices in North Korea have jumped since China National Petroleum Corp (CNPC) halted sales of fuel to Pyongyang, Reuters reported on Monday, citing data on prices collected by North Korean defectors. 

At the end of last month, reports emerged that CNPC, the main supplier of diesel and gasoline to North Korea, has suspended fuel sales to North Korea because it is worried that it may not receive payments.

North Korea imports all the oil and oil products it consumes - mostly from China - and a prolonged suspension by CNPC would choke out supplies at a time when the international community is increasing pressure on North Korea to stop its nuclear and missile ambitions, and is intensifying checks over Chinese business relations with Pyongyang.

According to a Reuters analysis of data by the Daily NK website - which is run by North Korean defectors who collect price data via phone calls with fuel traders in North Korea - private dealers in the north were selling gasoline at US$2.18 per kilogram, or US$2.92 per liter, as of July 5, a 50-percent surge compared to US$1.46 per kg on June 21. Gasoline prices fell slightly to US$2.05 per kg by July 12, but still, they were more than double compared to prices at the beginning of the year, Reuters’ analysis of the data shows. 

Diesel prices jumped by 20 percent in the three weeks to July 12. After the initial price surges in early July, prices of both diesel and gasoline have stabilized, probably because North Korea has encouraged fuel smuggling across the Chinese border, according to defector Kang Mi-jin who is in communication with traders in North Korea.

“After North Korea’s frequent missile tests including its very first ICBM test, the international community has vowed to tighten sanctions and China simply cannot exclude itself from the recent movement, although it probably does not want to indefinitely cut off fuel sales to the North,” Kang told Reuters.

China said in February that it was suspending until the end of this year all imports of coal from North Korea as part of its effort to implement United Nations Security Council sanctions aimed at stopping the country’s nuclear weapons and ballistic-missile program.

In April, gas prices in North Korea jumped on reports that China may be mulling an oil embargo.

BofA Stunned By Drop In Gasoline Demand: "Where Is Driving Season?"

Exactly six months ago, when oil bulls still held on to some fleeting hope that OPEC may somehow stabilize the crash in oil prices despite the shift in marginal oil production from low-cost OPEC producers to US shale (a hope which is now gone as the just disclosed letter from Andy Hall demonstrates), Goldman noticed something troubling: an unprecedented collapse in gasoline demand. As the firm"s energy analyst Damien Courvalin said on February 8, when discussing the 6% fall in US gasoline demand, such a plunge "would require a US recession" and add that "implied demand data points to US gasoline demand in January declining 460 kb/d or 5.2% year-on-year. In the absence of a base effect, such a decline has only occurred in four periods since 1960 during which time PCE contracted."

Now, 6 months later, the situation is very much different: with the US now inside peak summer driving season, the cyclical drivers behind gasoline supply and demand are vastly different, and yet something has remained the same: gasoline demand in the US simply refuses to rebound, surprising analysts by how weak it is. So weak, in fact, that Bank of America has released a note which, like Goldman half a year ago, reveals confusion about why - if the economy is indeed strong -  demand hasn"t kept up and has prompted BofA"s energy analyst Francisco Blanch to ask "where is the driving season?" and, more specifically, "is this year"s driving season over before it began?"

Here"s why some of the biggest banks continue to be amazed at the relentless failure of gasoline demand to validate an economic recovery, courtesy of BofA:

Gasoline demand is extremely price-elastic

In a U-turn from the last two years, when demand growth for gasoline was running at phenomenal speed, gasoline consumption in the Atlantic Basin has fallen by 1% on last year. In the US, lower demand growth seems largely a function of higher retail gasoline prices, underscoring how extremely price elastic oil demand is (Chart 1). Annual growth in miles driven has slowed to 1.5% from 3.4% in the same period last year. Higher prices are turning people back on to smaller and more fuel-efficient cars, reviving the well-established trend prior to 2015. Sales growth for SUVs, which averaged 7% YoY in 2016, has now slowed to 2%, allowing fuel efficiency gains in the US fleet to come through more forcefully (Chart 2). More recently, slowing employment growth, as well as a slowdown in construction activity, may have also played a marginal role.

 

Is this year"s summer driving season over before it began?

But the latest weekly data is somewhat disconcerting. Despite a sequential pick-up, gasoline demand is 180 thousand b/d, or 1.8%, down on the same four-week period last year. Gasoline demand in the US tends to reach a peak around the July 4th weekend, when Americans drive for pleasure, and then declines sharply between mid-August and late September, which is what creates the seasonality in the gasoline futures curve. But, increasingly, one has to wonder whether the summer driving season is already over before it has even begun (Chart 3)? Indeed, RBOB gasoline relative to US diesel prices has collapsed in recent weeks and is now trading near parity (Chart 4).

In other words, while the reasons may be different, the structural gasoline demand malaise that was first observed in the start of the year has persisted half a year later. Who knows: maybe, just maybe the failure of oil prices to stage any rebound just might have something to do with this lack of end demand.

Big picture considerations aside, Bank of America sees little - if anything - to be excited about in gasoline"s near-term and no to near-term future, mostly as a result of gasoline demand weakening not only in the US, but also globally, with distillates close behind:

While the gasoline market may find some temporary support on a demand improvement, elevated exports and inventory declines, we still see little structural tightness ahead. This year has seen a number of gasoline-geared refinery expansions in Asia, which is supporting gasoline supply. At the same time, the price-driven boost to demand is disappearing, with gasoline demand weakening globally, while distillate demand growth may play catch up. On our estimates, global gasoline refinery utilization rates are set to fall quite sharply this year and in 2018, likely taking the wind out of the sails behind gasoline cracks (Chart 26). In our view, winter gasoline cracks are likely to see further downside. True, crack timespreads currently stand at the bottom of the range, but should weaken post summer (Chart 27). Gasoline cracks are likely to see further downside and we expect diesel to reclaim a more typical pronounced premium to gasoline this winter.

The bad news is not over, however, as "any mid-to-late-summer rally in gasoline, if it materializes, is unlikely to be sustainable. Simply because there is a lot of work left in draining gasoline inventories before the end of the driving season. Contrary to common wisdom, gasoline stocks are anything but tight in the Atlantic Basin, even relative to both demand and exports. Flagging refinery utilization rates in places like LatAm or Africa have increased demand on other regions to run harder, in part explaining why US crude runs recently pushed to a record level, while European runs are also elevated. After the summer, gasoline cracks are likely to see further downside and we expect diesel to reclaim a more typical pronounced premium to gasoline this winter."

And while the future for RBOB is certainly not bright - especially now that even the biggest crude bulls have thrown in the towel - with a new deflationary wave likely imminent and set to spoil the central banks" reflationary party yet again, a bigger question, as both Goldman and now BofA pose, is what is going on with gasoline demand: is it more efficient cars, is it a reduction in miles driven, or is it simply that the US consumer continues to contract, between declining real wages and deteriorating labor market conditions, with gasoline demand just one of the very few undoctored indicators giving a glimpse into the true state of US consumption?

Whatever the answer, the same stagnant demand that stunned Goldman in February is now "shocking" Bank of America. At what point will these, and other banks, finally connect the dots that this is not some "one-time, non-recurring" event.

Largest East Coast Pipeline Reveals Demand For Gasoline Is Crashing

There"s a reason this week"s EIA survey showing gasoline and oil supplies declining has failed to stop RBOB prices from collapsing to 7-month lows: The start of the summer has done nothing to revive sluggish demand. That"s because despite what the EIA survey said, little has been done to reduce record fuel inventories.

The squeeze has gotten so bad, Northeast Colonial Pipeline Co., the operator of the biggest US fuel pipeline system, said that demand to transport gasoline to the country"s populous northeast is the weakest in six years, the latest symptom of a global oil market grappling with oversupply. It’s notable that this peak has arrived despite the advent of the summer driving season, which has seen gasoline demand pull back from last year"s record highs, according to Reuters.

Because of the oversupply in the northeast, “line space”… the cost of renting “space” on the pipeline to assure one’s ability to get supplies of gasoline when necessary… has gone negative, according to Reuters. What can be more exemplary of excess inventories and of reduced demand for gasoline than this?

Refiners are in part to blame for the problem - they have continued to pump motor fuel at record levels for the second year in a row, worsening the oversupply problem, for fear of losing access to pipeline capacity. 

More broadly, attempts by large producers to reduce global supplies have failed to meaningfully raise the price of oil.  And with good reason: Traders have been skeptical of an agreement between OPEC and non-OPEC producers, including Russia, to extend last year"s supply cut, and already they"re concerns are being validated: Iraq has said it plans to increase production later this year despite the agreement.

The existence of negative capacity is a reversal of the typical dynamic, where refiners are forced to supplement their deliveries with tanker shipments or imports.

"The only reason [the pipelines] wouldn"t be full is clearly that inventory levels are high enough that there is no incentive to move product to New York," said Sandy Fielder, director of oil and products research, Morningstar in Austin, Texas.

"The situation is quite unusual," he said.

Even when high inventories make it unprofitable to do so, refiners typically keep pumping full volumes just to ensure they keep their rights to the line space, said Fielden.

But it appears as if refiners have finally reached the point where the financial pain outweighs the necessity of keepig their lease on some pipeline space - after all, Colonial has capacity to spare right now.

"It"s purely economic - why ship into a negative arb(itrage) for that long," one trader said.

Colonial connects Gulf Coast refineries with markets across the southern and eastern United States through more than 5,500 miles (8,850 km) of pipelines, delivering gasoline, diesel, jet fuel and other refined products. Colonial indicated it did not expect demand to exceed capacity for the next five-day cycle through the line, and informed shippers it would therefore not follow the typical process for rationing space.

Oil traders who insist on staying long can hold out hope that production shutdowns related to Tropical Storm Cindy could lift the price of oil for a short period. It"s also worth noting that  Dennis Gartman, who recently said oil wouldn"t rise above $44 a barrel again in his lifetime, just turned bullish folllowing a wave of downgrades from energy analyst. That could be good news...or maybe not.

While the cause of the supply is obvious, whatever has caused demand to fall off is less clear. Barclays has suggested that President Donald Trump"s immigrant crackdown has made millions of illegal immigrants living in the US afraid to get behind the wheel for fear of being detained and deported. If this is true, that means Trump is to thank for gasoline prices falling to their lowest levels since February, despite the start of the summer driving season?

WTI Tumbles To $42, Brent Below $45 As Credit Crashes

High yield energy credit markets are in trouble again, with risk now at its highest level in 7 months.

Despite this morning"s Iran-hyped OPEC bullshit and a small draw in Gasoline, it appears the reality of surging US shale production and lagging demand is weighing down oil (and gasoline) markets...

Since OPEC announced its production cut extension, the crude curve has crashed at the front-end...

Macquarie"s head ofoil & gas research warns...

• "A WHILE" BEFORE OPEC TAKES BACK CONTROL OF MARKET


• "HUGE WAVE" OF U.S. SHALE OFFSETTING OPEC CUTS

Brent crude extends drop falling below $45/bbl for the first time since November 15.