Chapter 1: What are the current challenges in the global energy market?
Welcome to the New York City Traffic Report for Finding Hotels. You're listening to American Power. I'm Nat Towson, your host, stand-up comedian, writer, all sorts of writer, speech writer, article writer, and most importantly, and likely to outlast me, podcast host. I am here with my panel of experts, as always, our expert on both the military policy and so many other things. Chad Scott.
Chad, how you doing?
I'm doing well, Nat. Glad to be here. Good to see you guys.
Good to see you too, man. And joining us as always, of course, our expert on oil, renewable energy, the energy sector as a whole, Mr. Global, Matt Randolph. Matt, how you doing?
Great. How are you?
I am full of energy, excited to talk about our rapidly declining world.
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Chapter 2: How are rising fuel prices impacting the U.S. economy?
I was hoping on that note that, Matt, we could start with you. We are recording this a little early. It's the afternoon of Monday, April 27th, as we're speaking right now. And the global energy markets are unsurprisingly in flux once again. And Mr. Global, I was hoping you could give us a big picture look at what's going on in the world of energy right now.
Well, I think most importantly here at home, wholesale fuel prices have risen to their highest levels since June of 2022. If you remember 2022, fuel was really high. Now we haven't reached those levels, but it's the highest since then. So. A lot of this is due to the huge increase in exports out of the United States. Everyone's celebrating the tankers coming. We're going to have a parade.
Those tankers are leaving with our gas and our diesel, and that makes it significantly more expensive for us. So... Even though oil prices are about $25 a barrel cheaper than they were a month ago, gas prices are going to surpass where they were a month ago easily.
Chapter 3: What factors contribute to the rising gas prices despite falling oil costs?
Average price of gas today was $4.11. Diesel is somewhere like $5.45. Those are going to start increasing more and more. They're up about 15 cents from a week ago. It takes a few days for these wholesale prices to sort of bleed into the retail market. Another thing that Opus is reporting, and Opus is a paid subscription service that oil companies use to track oil and gas.
Is that an acronym?
Oil Production Information Services. Yes. A gentleman named Tom Kloza is the founder. They are reporting that. that margins at the convenience store or wherever you buy your gas are about a third of what they typically are. And that's a bad sign. What that means is that gas stations themselves are pushing down gas prices by taking less profit. You know, a lot of people think that they're gouging.
Chapter 4: Why are U.S. fuel inventories nearing operational minimums?
They're actually not. So nationwide, on average, They're making about 11 cents a gallon right now is what a typical gas station is making on a gallon of gas. That's normally somewhere between 30, 35 cents.
And why are they reducing those prices in this specific moment?
To keep traffic, mostly to keep traffic from coming into their stores or to keep traffic coming into their stores. That's where they really make their money. They don't make a ton of money on gas. And they're afraid of demand destruction. They're afraid of people buying less gas, and that means less people coming in the store.
So you're talking about specific point of sale with gas stations like consumer facing gas. And what I'm understanding is that these run on something of the comedy club model where the comedy is not actually what makes money. It's the booze and bad hamburgers that you sell that are actually the profit driver.
So similarly, I'm learning now for the first time that sit go is making a profit off Slim Jim's and, you know, old hot dogs. Just enough monster energy drink to kill a toddler versus the oil itself, which is what gets people in the door.
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Chapter 5: What is the significance of the negotiations with Iran?
Yeah, that's where they make all their money in the store.
Slightly more relatable might be the popcorn at a movie theater, but I've spent a lot of time in comedy clubs.
Yeah. Interesting factoid. If you go to a convenience store and you fill up your gas tank and you buy a Snickers bar, they make more money on that Snickers bar than that entire $70 worth of gas you bought. Wow. Yeah, because they just don't make that much on gas.
But this reduction in profit margin at the station, at the point of sale, like you're talking about, that almost always drops in times like this where you see big oil price jumps, but they always recover. And the amount to which they bounce back and recover is usually relative to how far they drop. And so they're concerned because they dropped farther than they normally do.
So what they're saying is we could see a 30 or 40 cent increase in gas prices, even if oil prices don't move anymore. And then when you stack on top of that declining inventories, when they say by July. Our commercial inventories in the United States will be below the operational minimums, which is really bad. So not looking good.
Wait, what?
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Chapter 6: How do cultural differences affect U.S.-Iran negotiations?
Explain what that means to me below the operational minimum, as in like we will have too little surplus to function as usual.
So basically, you know, the EIA says, based on how much fuel you use in a day, every country needs to have an operational minimum amount of fuel in storage to run their country. Right. And once you get to that, you should probably stop exporting. Right.
But we're not going to do that. Logical to be a non-oil expert. Yes.
Yeah. So for the United States, it's 200 million barrels is our operational minimum. If we get below that, I don't think we'll stop exporting, but we will reduce the additional exports that are currently, because our exports have increased by one and a half million barrels a day.
I think that'll get reduced because we will have to maintain operational minimums or the prices will just go parabolic from wherever they are then. So that's a really bad spot to be in when the industry is talking about hitting operational minimums for commercial, you know, diesel and gasoline inventories.
That's a really bad thing.
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Chapter 7: What is the role of military power in the U.S.-Iran relationship?
You don't ever want to hear that.
You don't want to get close.
No, you don't want to get.
So if I'm processing this correctly, the closing of the Strait of Hormuz has made oil scarce in such a way that's driven up the cost per barrel. So U.S. stores of oil are being sold more. They're being exported more now because there's a higher profit margin, thus depleting local reserves of oil and driving up prices domestically, causing gas stations to make less profit as well. Is that correct?
Or am I getting the cause of that there?
Pretty much sums it up. And there's not a lot we can do about it because we're refining at maximum capacity. So we can't, you know, they're like within the U.S.
we're refining. OK, yeah.
So when I talk about increasing oil production or selling oil out of the strategic reserve, it doesn't matter because we are refining.
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Chapter 8: How can the U.S. approach future negotiations with Iran?
We cannot make any more gas and diesel and jet fuel than we're making, no matter how much oil we have.
And when inventory levels get as low as... We literally can't get it out of the ground faster than we're currently... We can produce it.
We just can't refine it.
Oh, sorry. I shouldn't say get it out of the ground. We can't prepare the crude fast enough.
Exactly. So what we're going to see, I predicted this last week, you might see crude inventories actually rise while inventories of distillates. So distillates are diesel for the people that don't know. That's your diesel and your home heating oil.
And your inventories for gasoline and jet fuel are all going to be dropping as crude levels rise because we can't refine any more than we currently are. We're maxed out. And if we lose a refinery, holy shit. This would be the worst time to lose a refinery. Sorry, what's that, Chad? How could that happen? Well, they blow up all the time. You know, anything can happen.
Yeah. So you're saying... Especially when the fall hurricane season comes along. Oh, yeah.
Hurricanes. Oh, my God.
Yeah. So if any of the regularly occurring reasons that a refinery could fail were to happen right now, we would be in a particularly vulnerable moment.
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