 |
MTBE SETTLEMENT SURPRISES MARKETERS
Independent petroleum marketers were
surprised to learn that several oil refiners
have decided to pay $422 million to settle a
multi-district MTBE lawsuit brought by 153
public water companies.
Contributing to the settlement was: BP
Amoco, Atlantic Richfield, Chevron,
ConocoPhillips, Shell, Marathon, Valero,
CITGO, Sunoco, Hess, Flint Hills, El Paso
Merchant Energy, and Tesoro. It is
significant to note that ExxonMobil decided
to not join the settlement.
PMAA will be consulting our legal counsel,
Bassman, Mitchell and Alfano, to determine
how this settlement might impact independent
marketers.
GERRY RAMM TO TESTIFY ON FUTURES MARKET AND OIL
PRICES
PMAA officer Gerry Ramm of Inland Oil Company
in Ephrata, WA, will testify next Thursday, May
15, before the House Committee on Agriculture’s
Subcommittee on General Farm Commodities and
Risk Management. The purpose of the hearing is
to review recent trading activity in the
commodity futures markets and the relationship
to higher fuel prices. PMAA believes the energy
markets have disconnected from the physical
fundamentals and futures market reforms are
needed.
The hearing, which will take place during the
PMAA conference “Day on the Hill” will begin at
10:00 a.m. in Room 1300 Longworth House Office
Building and will feature representatives from
the CFTC and agriculture and energy industry
representatives and consumers. This forum
will provide yet another opportunity for the
industry to highlight the need for Congress
to combat excessive speculation and the
investment bank dominance of energy futures
markets.
23 SENATE REPUBLICANS PROPOSE WAIVING THE RENEWABLE FUEL MANDATE
Twenty-three Senate Republicans, including Republican presidential
nominee, Senator John McCain (R-AZ), sent a letter on May 2 to EPA
Administrator Stephen Johnson, asking him to consider waiving the
ethanol mandate due to the consequences the food-to-fuel mandates have
had on food prices. The Energy Independence and Security Act, H.R. 6,
requires nine billion gallons of corn-based ethanol or other renewable
fuel to be blended with gasoline in 2008 and 36 billion gallons by 2022.
However, H.R. 6 allows the EPA Administrator to waive the renewable fuel
requirements. Senate Republicans argue that 30 percent of the natural
corn crop and vegetable oils will have to be diverted for fuel supplies
which would significantly increase food prices. Last week, Texas
Governor Rick Perry (R) asked the EPA to cut the 2008 requirement of
nine billion gallons in half. Under the law established in H.R. 6, the
EPA has 90 days to respond to Governor Perry’s request. While the
sentiment for waiving the ethanol mandate picks up momentum in the House
and Senate, Senators Charles Grassley (R-IA) and Tim Johnson (D-SD) sent
a letter asking their colleagues to sign a letter to the EPA to oppose
waiving the mandate. The letter stated that the RFS has only a three
percent effect in the increase on global food prices which would not
justify a complete or partial waiver of the mandate.
Meanwhile, the House Energy and Commerce Subcommittee on Energy and Air
Quality considered rolling back the renewable fuel mandate. Full
committee ranking member Joe Barton (R-TX) considered returning the
renewable fuels standard to the levels established in the Energy Policy
Act of 2005 which would set a standard of 7.5 billion gallons by 2012.
Several members of the committee stressed the need for coal-to-liquid (CTL)
production which was not included in H.R. 6 due to increased carbon
emissions concerns. The EPA stated that it would consider new energy
proposals on a case-by-case basis.
DEMOCRATS ASKED THE PRESIDENT TO CREATE A NEW FEDERAL TASK FORCE TO INVESTIGATE SPECULATORS
As energy prices continue to skyrocket, Democratic Senators Jack Reed
(D-RI) and Carl Levin (D-MI) called on President Bush to establish an
energy task force to investigate whether speculators are driving energy
prices to historic levels. Various energy experts are pinning the recent
energy price run-up on excessive speculation suggesting that it adds
anywhere up to 25 percent. The letter requested that the President pull
together several high ranking government officials including the
Secretary of the Treasury and Chairmen of the Securities and Exchange
Commission, Commodity Futures Trading Commission, Federal Trade
Commission, Federal Energy Regulatory Commission, and the U.S. Attorney
General to examine energy markets and its effect on prices at the pump.
The Energy Information Agency released its energy outlook for the next
six months and projected world oil consumption to grow by 1.2 million
barrels per day and gas prices to hover near $3.52 per gallon.
PMAA SIGNS ONTO LETTER THAT WOULD ADDRESS THE
"INFORMATION REPORTING FOR ELECTRONIC PAYMENTS"
PMAA, along with 16 other trade associations
known as The Coalition for Fairness in Tax
Compliance, sent a letter to the Senate
Committee on Finance, to address the
committee’s draft proposal on “Information
Reporting for Electronic Payments.” The
proposal known as a “payment facilitator”
would provide the Internal Revenue Service
(IRS) and the merchant with an annual
aggregate total of the gross receipts of
individual merchant processed by the payment
facilitator. The proposal states that this
would allow the IRS to develop trends and
reporting profiles on merchants.
The proposal would place an administrative
burden on retailers because they would
receive an annual information return form
from the payment facilitator and then would
have to reconcile their books and records
before filing their tax return for the year.
They could later be audited and found to
have understated receipts. The proposal
would also increase costs for small
businesses to comply and there is no clear
evidence that the IRS would be able to use
the information to identify merchants who
are underreporting their electronic
payments. Finally, the “Information
Reporting for Electronic Payments” would
require that the merchant card processor
verify the Taxpayer Identification Number
(TIN) of the merchant. If the processor
fails to verify the TIN or has an incorrect
TIN, the processor is required to withhold
28 percent. This would severely affect
honest small business owners who do not have
a large amount of cash on hand to absorb the
time it would require to obtain the money
withheld from them due to a simple mistake
by the merchant or government.
FARM BILL CONFEREES AGREE ON A FINAL DEAL
Lawmakers announced late May 7 that they
have completed their conference report for
the Farm bill (H.R. 2419), clearing the way
for floor consideration during the week of
May 12. Over the last few weeks, Farm bill
conferees have been going back and forth
with the Bush Administration over funding
limits. According to conferees, they have
agreed on every section in the farm bill
including the Senate Amendment Title XIII
known as the Commodity Exchange Act
Reauthorization of 2008. However, PMAA has
yet to see the complete details. The
President has signed (2) two week extensions
since the previous Farm bill authorization
expired to give lawmakers time to settle
differences. The House and Senate are
expected to consider the conference report
May 14 which should pass each chamber.
However, the White House has said it is
unlikely to satisfy the President. If a veto
should occur, the Senate is expected to have
the necessary votes to override a veto.
SENATE DEMOCRATS RELEASE THEIR PLAN TO REDUCE ENERGY PRICES
Earlier this week, Senate Democrats released
their energy plan that would reduce futures
market price speculation by increasing
margins (or collateral a trader has to
provide) and would stop traders from routing
their transactions to offshore accounts in
order to increase transparency and
accountability. The bill would also create a
25 percent windfall profits tax on major oil
companies that do not reinvest their profits
for renewable fuel technologies in order to
establish a new Energy Independence and
Security Trust Fund. The Consumer-First
Energy Act (S. 2991) would also repeal the
manufacturing tax credit which would raise
$17 billion that would be redirected into
the trust fund. The House is focusing
efforts to extend billions of dollars in
expiring tax credits for renewable fuels. A
price gouging provision is also included in
the Democrat energy plan which would give
President Bush the authority to declare an
energy emergency that results in supply
disruption or shortage. The energy proposal
would also allow the U.S. Attorney General
to bring enforcement action against OPEC or
against any county colluding to set the
price of oil or any petroleum product.
Republicans argue that the Democrat proposal
will do nothing to alleviate prices but
rather increase prices down the road and
force jobs overseas. Last week, Republicans
offered their “supply side proposal” known
as the “American Energy Production Act of
2008” (S. 2958) which would increase
domestic drilling, refining capacity,
coal-to-liquid production, and suspend the
filling of the Strategic Petroleum Reserve (SPR)
for six months. Both Democrats and
Republicans differ enormously on how to
alleviate prices at the pump. The only area
where Democrats and Republicans do agree is
on suspending shipments to the SPR, however,
President Bush disagrees. The Senate is
expected to vote on the Republican and
Democrat energy proposal next Monday.
Other Members of Congress are looking for
ways to reduce fuel prices. Representative
Mark Udall (D-CO) unveiled his proposal on
Wednesday. His six-point plan includes an
immediate suspension of purchase for the
Strategic Petroleum Reserve, regulation of
the oil futures market, a possible
suspension of the ethanol import tariff and
increased domestic production. PMAA will
continue to monitor all proposals, but it’s
very unlikely that any of the existing
proposals will muster enough bipartisan
support to pass both chambers.
TSA DELAYS COMPLIANCE DEADLINE FOR DRIVER
TWIC IDENTIFICATION ENROLLMENT
The Transportation Security Administration (TSA)
announced an extension of the final
compliance date by which drivers must obtain
a Transportation Worker Identification
Credential (TWIC) in order to enter certain
port facilities located around the country.
The TWIC deadline was originally set for
September 25, 2008, but has now been pushed
back to April 15, 2009. The seven-month
extension is required due to a backlog of
applications and driver background checks
that are waiting to be processed.
TWIC was established in the Maritime
Transportation Security Act and the SAFE
Port Act to serve as an identification
program for all drivers requiring unescorted
access to secure areas within a port. The
program is on track to complete enrollment
for a number of jurisdictions by the end of
2008, and several ports will be required to
comply with TWIC regulations this year.
Owners and operators of facilities located
within Captain of the Port Zones Boston,
Northern New England, and Southeastern New
England will need to comply by October 15,
2008. Additional compliance dates for select
ports will be announced in the coming weeks,
and the Coast Guard will provide at least 90
days notice prior to enforcement.
Since October 2007, approximately 250,000
personnel have enrolled in the TWIC program
at more than 100 fixed enrollment centers
and dozens of mobile sites nationwide.
Enrollment is currently underway for the
ports of Galveston and Freeport, Texas. The
TSA is urging drivers to pre-enroll online
where they can provide essential
biographical information and schedule an
in-person interview. Pre-enrollment
eliminates delays at enrollment centers and
reduces total enrollment time for each
driver. Although the compliance date has
been extended seven months, workers are
encouraged to enroll as soon as possible.
Additional information can be found on the
U.S. Coast Guard’s Homeport site,
http://homeport.uscg.mil, and on the
Transportation Security Administration’s web
site at
www.tsa.gov/twic.
FTC SEEKS ADVANCE COMMENTS
ON NEW PROPOSED RULE ON MARKET MANIPULATION
This week the Federal Trade Commission (FTC) officially announced that
it is soliciting comments on a rule to prevent possible market
manipulation in the petroleum industry. Two sections of the 2007 Energy
Bill give the FTC new authority to promulgate more comprehensive
petroleum market oversight regulations. The FTC expects to complete the
rulemaking process by the end of the year.
PMAA will be submitting formal comments to the FTC on the rule and
PMAA’s Board of Directors will discuss the issues next week when they
meet in Washington, D.C.
A copy of the proposed rule is available
here.
2008 UCR
REGISTRATION LETTERS SENT TO ALL ACTIVE DOT
NUMBER HOLDERS
The U.S. Federal
Motor Carrier Safety Administration (FMCSA)
announced last week that 2008 registration
letters for the new federal Unified Carrier
Registration (UCR) program should be
reaching petroleum marketers any day now.
Congress created the UCR in 2005 as part of
the five-year federal hazardous material
reauthorization bill. The new UCR program
replaces the former Single State
Registration System that applied only to
for-hire interstate motor carriers. The UCR
registration letter is being sent to all
current U.S. DOT number holders who operate
in interstate commerce. Petroleum
marketers with commercial vehicles that
travel across state lines and either weighs
over 10,000 lbs GVW or is required to have a
U.S. DOT HAZMAT placard, must register with
the UCR by June 1, 2008 and pay a fee based
on the number of trucks the fleet.
UCR registration may
be done online at
http://www.ucr.in.gov/. The following
UCR fee schedule applies:
Fleet Size
Fee Per Company
0-2
$39.00
3-5
$116.00
21-100
$806.00
101-1000
$3,840.00
In addition, each
state has the authority to further expand
the UCR registration program to
intrastate transporters including
for-hire and private petroleum transporters
who never cross a state line. Intrastate
transporters who must register will receive
UCR letters from their state DOT office. The
FMCSA is giving a grace period until June 1,
2008 to those interstate transporters who
did not register and pay a fee during the
abbreviated 2007 registration year. No
credential is issued under UCR. Instead,
enforcement authorities will look through
the federal UCR database to check for
compliance.
Marketers who did not
receive the 2007 and or 2008 UCR
registration forms in the mail should
download the registration packet from
http://www.ucr.in.gov/. (NOTE: This is
an Indiana State government website
contracted to operate the federal UCR
registration program). To ensure that the
registration material is sent to the correct
business address, interstate petroleum
marketers should check and/or update their
motor carrier information in the FMCSA
database at
www.safer.fmcsa.dot.gov. Petroleum
marketers should refer to their registration
letters for additional information.
DOT PROPOSES INCREASE IN
ANNUAL HAZARDOUS MATERIAL REGISTRATION
The Department of Transportation’s Pipeline and Hazardous Material
Safety Administration (PHMSA) has proposed to raise annual HAZMAT
registration fees. Small business petroleum marketers with
transportation operations are currently required to register and pay a
$275 fee each year in return for a certificate of registration, a copy
of which must be kept in the cab of all vehicles that transport
petroleum products. HAZMAT fees are based on business size. Current
HAZMAT fees are set at $275 for small businesses and $1,000 for large
businesses. PHMSA is proposing to increase the fee that a large business
must pay from $1,000 to $3,000 for registration year 2009-2010 and
beyond. The fee for small businesses and not-for-profit organizations
will remain at $275. Most petroleum marketers qualify for the small
business annual fee.
Under the HAZMAT regulations, registrants are allowed to designate the
size of their business according to U.S. Small Business Association size
categories for purposes of paying the fee. The fee increase is necessary
because Congress increased the amount that PHMSA may collect each year
in HAZMAT fees from $14 million to $28 million. The fees are used to
fund the Hazardous Materials Emergency Preparedness Grants Program that
provides money to emergency responders nationwide to develop, improve,
and implement emergency plans, train public sector HAZMAT emergency
response employees, determine flow patterns of hazmat and determine the
need for regional response teams. PMAA will file comments opposing any
hike in fees for by petroleum marketers. The proposed rule may be viewed
at
http://edocket.access.gpo.gov/2008/pdf/E8-9815.pdf.
SILENT AUCTION
CONTRIBUTIONS CONTINUE TO GROW
California Independent Oil Marketers Association (CIOMA) members have
generously contributed even more to the PMAA SBC PAC Silent Auction!
Andy Thweat of SKS, Inc provided 2000 Clos du Marquis and 2005 Chateau
Gruaud Larose Saint Julien. These exquisite bottles of wines are both
Bordeaux from the Saint-Juliean appellation of France. Both wines are
considered “classic vintages” and some say they may be the best two
vintages in 50 years. The Clos du Marquis 2000 was listed as #14 on the
list of the Best Bordeaux of 2000.
Furthermore, CIOMA member Jeff Irvin of ITL Incorporated has contributed
a tremendous value of 3 nights at Palm Valley Country Club, located near
Palm Desert! The club provides access to tennis, spa, and a health club.
Bob Bassman of Bassman, Mitchell & Alfano provided a gold gild framed
Jack Nicklaus photo and Nicklaus signed Special Edition Scottish Pound
of the golf legend. Jack Nicklaus is one the most famous golfers in the
world and is considered partly responsible for making golf become a
popular spectator sport. Jack Nicklaus’s career in the pro golf world
has spanned four decades. Nicklaus won the Masters and the PGA
Championship plus the Seattle Open, the Portland Open, the Tournament of
Champions and several other victories. Jack Nicklaus also became the
first person to carry the Masters Tournament victory in successive years
between 1965 and 1966. In 1974, Jack Nicklaus was inducted into the
World Golf Hall of Fame as one of the original set of thirteen.
A big thanks goes to Frank Lester of RJ Reynolds who has contributed a
lightweight Sun Mountain golf bag suitable for any golf outing. Rugged
yet able to more than accommodate any golfer's full arsenal of clubs.
Frank also contributed a Reynolds American leather duffel bag. The bag
has generous pockets and ample space and is easy to roll. RJ Reynolds
also contributed a Sony Dream Machine clock/radio. It has all the
features you have come to expect including AM/FM, CD and MP3 capability.
RJ Reynolds is also sponsoring the Welcome Reception.
The Auction will take place in conjunction with PMAA’s Washington
Conference on May 14 during the welcome reception. PMAA SBC PAC
Co-Chairs Wes Loflin and Ronna Alexander urge your contributions and
participation in the Silent Auction. If you have items that you would
like to contribute for the Auction, please contact Sabrina Pitcher at
703-351-8000, or spitcher@pmaa.org.
PMAA MEMBER SERVICES
SPOTLIGHT FEATURING: LABORCHEX
What Happens if Your Job Applicant Has a Criminal Record?
Each month LABORCHEX completes thousands of criminal record checks for
our clients nationwide. And every day we see criminal histories that we
know are troubling to our clients. However, they use the information we
provide in different ways.
For example, one client might look at a five year old felony conviction
for writing a bad check as nothing serious, especially if the applicant
hasn’t committed any criminal acts since. Another client may have a
policy that will not permit anyone with a felony conviction to be
employed in any manner.
LABORCHEX can check criminal records anywhere in the U.S. and around the
world. Please note though that we advise all clients to work with their
legal counsel before placing orders with us as your company needs to
establish exactly how you will use the information we supply.
LABORCHEX provides employment background screening services to PMAA
members nationwide at discounted pricing. For more info,
click here or contact Steven
J. Austin at 800.880.0366 or at
suastin@laborchex.com.
FACTORS BEHIND HIGH
DISTILLATE PRICES MORE COMPLEX THAN GASOLINE
With gasoline and diesel fuel prices continuing to rise at the retail
pump, many consumers may be feeling they are taking a bath on fuel
expenses. This feeling may be well-placed as a bathtub provides a good
analogy for the supply-demand balance that affects petroleum product
prices.
Imagine a partially-filled bathtub. Now imagine turning on the faucet,
which represents your supply. The drain represents consumption. If the
faucet (supply) is adding more water than the drain removes, the water
in the tub (inventory) will rise, and vice versa. Changes in stock
levels reflect the balance between supply and consumption in any given
time period. Consumption is met by refinery production, imports, and
stock drawdowns. If consumption is greater than supply, inventories will
be drawn down to fill the gap.
Gasoline inventories built to unusually high levels in early 2008,
indicate an excess of supply relative to consumption. In the U.S., this
excess supply is partially the result of gasoline use declining 0.8
percent in the early months of 2008 (January through the middle of
March) over the same time in 2007. While this surplus dampened the price
of wholesale gasoline relative to crude oil, resulting in relatively low
gasoline margins so far this year, crude prices have risen to record
levels driven by tight global oil markets. The surge in crude oil prices
has resulted in consumers paying record high gasoline prices.
In recent weeks, gasoline inventories have fallen sharply even though
imports have remained relatively steady while demand has increased
seasonally. This is mostly due to inventories being used as refiners
undergo maintenance and reduce their capacity utilization in the face of
low gasoline margins. A contributing factor has been the transition from
winter to summer grade gasoline, encouraged by significant price
discounts to move winter gasoline out of primary storage to make room
for summer grade fuel. This is the typical seasonal pattern, but the
drawdown occurred several weeks later than usual this year. While
gasoline inventories are currently still in the upper half of the
five-year average range for this time of year, refinery margins have
increased from very low levels in recent weeks. Even if the gasoline
balance as reflected in inventory levels remains in the normal range
this summer, high retail prices will continue to be driven largely by
tight and expensive crude oil supplies.
Unlike gasoline, distillate has maintained a high price margin relative
to crude oil so far this year. While distillate stocks are now near the
bottom of the five-year average range, they were near the top of the
average range at the beginning of February. So why have distillate
wholesale prices been so high relative to crude oil for most of the
winter? The answer lies in world distillate markets which have been
unusually tight this year, placing extra pressure on U.S. diesel and
heating oil prices over and above the high price of crude oil. High
exports of distillate in January and February to help meet unusual needs
in Latin American and Europe contributed to the drawdown. Yet the weekly
distillate stock draws from the beginning of January through the second
week in March (nearing the end of the heating season) were actually
smaller this year than those in four out of the five previous years.
Inventories continued to fall in ensuing weeks, reflecting the continued
drain of inventories resulting from persistent winter weather in the
Northeast combined with a relatively low inflow of distillate product
from domestic refiners.
While weaker U.S. demand growth for distillates may slow the drain on
domestic stock levels, strong world demand is expected to maintain tight
distillate supply-demand balances, thereby limiting U.S. imports and
potentially encouraging more exports. This could slow re-stocking ahead
of the 2008-2009 winter season, as well. Hence, distillate prices may
remain high due to both high crude oil prices and high wholesale prices
relative to crude oil.
FROM THE ENERGY INFORMATION ADMINISTRATION
U.S. Average Gasoline Prices - For the fifth consecutive week,
the U.S. average retail price for regular gasoline moved higher,
reaching yet another all-time high price of 360.3 cents per gallon. The
average price has spiked 21.4 cents since April 14. On a regional basis,
while prices increased throughout the country, they did so at a somewhat
slower pace than was the case during the previous week. The largest
increase occurred on the East Coast where the average price jumped by
11.7 cents to 360.1 cents per gallon. This was the only region of the
country to experience an increase greater than ten cents. The price in
the Midwest increased 9.8 cents to 356.8 cents per gallon up by 64.3
cents from a year earlier. The average price in the Gulf Coast was up
9.4 cents to 350.5 cents per gallon. The average price in the Rocky
Mountains, the lowest of any region, rose to 347.8 cents per gallon up
6.2 cents from the previous week. Once again, the West Coast average
price increased the least of any region moving up by 5.2 cents to 378.6
cents per gallon. Nonetheless, despite the relatively small increase,
the average price was the highest of any region. The average price in
California increased by 4.6 cents to hit 389.2 cents per gallon.
U.S. Average Diesel Fuel Prices - For the third week in a row,
the U.S. average diesel price reached a new record high increasing 3.4
cents to 417.7 cents per gallon, 136.6 cents above a year ago. Although
prices moved higher in all major regions, the pace of the increase
slowed rising by 3.4 cents. East Coast prices increased 2.3 cents to
423.0 cents per gallon tallying the smallest increase for any of the
five principal regions but still 143 cents above last year. (Prices were
unchanged in New England, increased by 0.6 cent in the Central Atlantic
and grew by 3.1 cents in the Lower Atlantic). In the Midwest, the price
moved up 3.5 cents to 413.3 cents per gallon. The price in the Gulf
Coast increased 3.6 cents to 411.3 cents per gallon remaining the lowest
of any region. The price in the Rocky Mountains moved up by 3 cents to
414.1 cents per gallon, 115.3 cents higher than a year earlier. On the
West Coast, the average price went up the most of any region increasing
by 5.7 cents to 431.2 cents per gallon, 136 cents higher than last year.
In California, the average price increased by 7.3 cents to 439.0 cents
per gallon.
***PLEASE NOTE THE WEEKLY REVIEW WILL NOT BE PUBLISHED NEXT WEEK DUE
TO THE WASHINGTON CONFERENCE.***
|
|
