Heating oil is at an all time high of 1.304, and natural gas has turned around the price slide of the last few months to be up 0.80 or about 16% over the last 3 days. Both of these rises seem to have a lot to do with Hurricane Ivan which disrupted production in GOM.
In particular, the price rise of heating oil is fascinating. At this time of year, refineries should be building stocks, closing for maintainence, and changing runs from gasoline to heating oil. As gasoline prices haven't followed crude up, it seems that some refineries have continued to produce gasoline later in the season than they normally would, presumably, to capitalise on the greater price spread. Hence also the run down in stocks in last weeks data, which surprised the market.
Now, when Hurricane Ivan cuts into refining capacity (and crude deliveries), it cuts directly into what would have been badly needed heating oil. The supply which would have already been getting stocked later in the year than normal gets even further delayed.
The end point is that now, both heating oil and natural gas are up heavily, and there's not even a cold spell in sight. Could be a rough winter... Better hope that global warming lives up to its name...
... that's a bad joke, I know
). We aren't going to reach the peak in the next 3 years, but we are seeing the early effects of extended high energy costs. The airlines are the canary in the coal mine. When they struggle, it means that long distance transportation is becoming more expensive. When transportation costs go up, the cost of goods increases or the profit margin thins. Watch the airlines over the next few years. If Southwest becomes unprofitable, we are in trouble.
