FRANKFURT, Germany (AP) — Natural gas and electricity prices in Europe have plunged from summer peaks thanks to mild weather and a monthslong scramble to fill gas storage ahead of winter and replace Russian supplies during the war in Ukraine. It’s a welcome respite after Russia slashed natural gas flows, triggering an energy crisis that has fueled record inflation and a looming recession.

Yet experts warn it’s too soon to exhale, even as European governments roll out relief packages for people struggling with high utility bills and work on longer-term ways to contain volatile gas and electricity prices that have shrunk household budgets and forced some businesses to shut down.

Uncertainties include not only the weather but how responsive people will be to appeals to turn down their heating and how much demand there will be from Asian economies for scarce energy supplies. And the war a few hours east is a cauldron of possible unpleasant surprises that could cut energy supplies needed for electricity, heating and factory work and send prices sharply higher.

Persistent unknowns are leaving energy-intensive businesses jittery. They are appealing to governments to help them and their customers weather the energy storm so that disruptions in supplies of everything from glass to plastics to clean hospital sheets do not cascade through the economy.

“We must remember that we are still in a tense situation — an economic war between the European Union and Russia in which Russia has weaponized energy supplies,” said Agata Loskot-Strachota, an energy policy expert at the Center for Eastern Studies in Warsaw, Poland.

The good news is natural gas prices on Europe’s TTF benchmark fell on Monday below 100 euros (dollars) per megawatt-hour for the first time since June, a 70% drop from late August highs of nearly 350 euros per megawatt-hour. Electricity prices also fell.

While analysts say lower gas prices are allowing European fertilizer producers to restart operations, there’s no sense of relief for business owners like Sven Paar. His commercial laundry in the German town of Wallduern will use around 30,000 euros worth of natural gas this year to run 12 heavy-duty machines that can wash eight tons of hospital and hotel bedsheets and restaurant tablecloths each day.

His local utility says the bill is rising to 165,000 euros next year. On top of that, Paar says he’s unsettled by a lack of clarity from the German government on whether laundries like his would be considered essential to the economy and spared cutbacks in case of state-imposed rationing. Reports that the utility regulator is working on sorting out the question aren’t enough.

“The problem is, everyone has heard something, and just hearing something doesn’t bring me any planning security,” he said. A letter he sent to the regulator went unanswered.

“That’s the problem, you hope every day that you don’t get a call from someone that says, ‘Tomorrow you aren’t getting any gas,’” he said.

Germany’s hospital association has taken up the issue on behalf of laundries like his, saying hospitals have mostly outsourced their laundry services and would run out of sheets and surgical drapes within a few days without them.

The German government is working to roll out plans to cap gas prices for hard-hit businesses. The association representing smaller businesses says its understanding is that the government would focus any possible rationing on the 2,500 largest gas users in Germany and mostly spare businesses the size of Paar’s.

Helping ease the possibility of rationing is Europe’s underground storage getting filled to 94%, compared with 77% at this time last year, which energy expert Loskot-Strachota called “quite a success.” A big assist has come from mild weather across Europe, with Warsaw, for example, a relatively balmy 18 degrees Celsius (64 degrees Fahrenheit) on Monday.

Germany, once heavily dependent on Russian gas, has filled storage to 97% of capacity, France to 99% and Belgium and Portugal both to 100%. That was achieved by importing record quantities of liquefied natural gas, or LNG, which comes by ship from the U.S. and Qatar instead of by pipeline from Russia, and by increasing pipeline supplies from Norway and Azerbaijan.

The scramble to line up more LNG has led to a backup of tankers off the coast of Spain, a major processor, as orders collide with reduced demand and limited capacity at the country’s import terminals, which turn boatloads of supercooled LNG back into gas that then flows to homes and businesses.

Spanish gas company Enagas warned last week that it may have to delay or stop tankers from unloading LNG because its storage was almost full. Vessel positioning maps showed at least seven LNG tankers anchored close to Spanish shores Tuesday, though it wasn’t clear how many were waiting to unload.

Despite an abundance of LNG and falling prices, Loskot-Strachota said the energy situation remains volatile. She warns that prices for gas to be delivered in December and the 2023 winter months are higher than prices now.

Russian gas has dwindled to a trickle through pipelines in Ukraine and under the Black Sea to Turkey, but losing even the small amount that remains could roil markets. Moscow has blamed the reductions on technical reasons or a refusal to pay in rubles, while European leaders call it blackmail for supporting Ukraine.

EU governments also have been working on proposals including buying gas as a bloc or limiting price swings to ease the energy crisis, although the measures would largely affect next year’s purchases.

Gas use is down 15% in Europe, but that is mostly from factories simply abandoning production that has become unprofitable.

“This is dangerous — this hurts the economy, this hurts Europe,” Loskot-Strachota said.

Whether households will join businesses in cutting back by lowering thermostats and turning off lights cannot be determined until the cold weather comes in earnest. Russia’s willingness to destroy Ukrainian heating and electrical plans shows that Russia is ready to escalate despite battlefield defeats.

The market also is less flexible because gas reserves will be increasingly used as day-to-day base fuel for heating and generating electricity, rather than as a “swing” fuel during times of peak demand such as cold snaps.

“Every event, every problem, weather problem, Russia problem, becomes a factor which sends prices very very high,” Loskot-Strachota said. “I’m very happy that we’re in a calm situation now, but it is nothing that will last for the whole winter.”

___

Raquel Redondo contributed from Madrid.

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President Joe Biden on Wednesday called on U.S. oil refiners to produce more gasoline and diesel, saying their profits have tripled during a time of war between Russia and Ukraine as Americans struggle with record high prices at the pump.

“The crunch that families are facing deserves immediate action,” Biden wrote in a letter to seven oil refiners. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.”

Gas prices nationwide are averaging roughly $5 a gallon, an economic burden for many Americans and a political threat for the president’s fellow Democrats going into the midterm elections. Broader inflation began to rise last year as the U.S. economy recovered from the coronavirus pandemic, but it accelerated in recent months as energy and food prices climbed after Russia invaded Ukraine in February and disrupted global commodity markets.

The government reported on Friday that consumer prices had jumped 8.6% from a year ago, the worst increase in more than 40 years.

The letter notes that gas prices were averaging $4.25 a gallon when oil was last near the current price of $120 a barrel in March. That 75-cent difference in average gas prices in a matter of just a few months reflects both a shortage of refinery capacity and profits that “are currently at their highest levels ever recorded,” the letter states.

The American Petroleum Institute, which represents the industry, said in a statement that capacity has been diminished as the Biden administration has sought to move away from fossil fuels as part of its climate change agenda.

“While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” API CEO Mike Sommers said in a statement.

Sommers added, “I reinforced in a letter to President Biden and his Cabinet yesterday ten meaningful policy actions to ultimately alleviate pain at the pump and strengthen national security, including approving critical energy infrastructure, increasing access to capital, holding energy lease sales, among other urgent priorities.”

The letter is unlikely to start a chain of events that would boost supplies. Refineries have gone through unprecedented, unplanned maintenance globally in the last three months and there is an extreme shortage being felt across the globe, said Claudio Galimberti, senior vice president at Rystad Energy. China’s decision to limit its exports of oil products also contributed to the problem, he said.

“U.S. refiners cannot increase capacity beyond current levels,” Galimberti said. “If they could, they would have done it already.”

As Biden sees it, refineries are capitalizing on the uncertainties caused by “a time of war.” His message that corporate greed is contributing to higher prices has been controversial among many economists, yet the claim may have some resonance with voters.

Some liberal lawmakers have proposed cracking down on corporate profits amid the higher inflation. Sen. Bernie Sanders, a Vermont independent, in March proposed a 95% tax on profits in excess of companies’ pre-pandemic averages.

The president has harshly criticized what he views as profiteering amid a global crisis that could potentially push Europe and other parts of the world into a recession, saying after a speech Friday that ExxonMobil “made more money than God this year.” ExxonMobil responded by saying it has already informed the administration of its planned investments to increase oil production and refining capacity.

“There is no question that (Russian President) Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing,” Biden’s letter says. “But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain.”

The letter says the administration is ready to “use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied.” It notes that Biden has already released oil from the U.S. strategic reserve and increased ethanol blending standards, though neither action put a lasting downward pressure on prices.

There’s little the government can do to lower prices, other than release oil from the strategic reserve, and that’s already been done, said Jim Burkhard, vice president at IHS Markit. If Biden had not done that, prices would be even higher today, he added.

“No government can simply conjure up new supply,” Burkhard said. “One thing that may help would be to have a more constructive relationship with the U.S. oil industry, because it’s been somewhat antagonistic so far.”

The president sent the letter to Marathon Petroleum, Valero Energy, ExxonMobil, Phillips 66, Chevron, BP and Shell.

He also has directed Energy Secretary Jennifer Granholm to convene an emergency meeting and consult with the National Petroleum Council, a federal advisory group that is drawn from the energy sector.

Biden is asking each company to explain to Granholm any drop in refining capacity since 2020, when the pandemic began. He also wants the companies to provide “any concrete ideas that would address the immediate inventory, price, and refining capacity issues in the coming months — including transportation measures to get refined product to market.”

There may be limits on how much more capacity can be added. The U.S. Energy Information Administration on Friday released estimates that “refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain.”

The letter says that roughly 3 million barrels a day of refining capacity around the world have gone offline since the pandemic began. In the U.S., refining capacity fell by more than 800,000 barrels a day in 2020.

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Premium vs Regular gas…does it matter?

Greetings from the Hemet Car Guy.

As I watch my 401k, I’ve noticed that gasoline stocks continue to decline. Even as stocks tighten, the demand will continue to increase as we head into the holidays.

Lately low crude prices have helped to push down pump prices. As of a week ago, the national average for unleaded regular gasoline had decreased by two cents to $2.67/gallon.   Unfortunately, in California the statewide average for a gallon of regular gasoline is still a hefty $4.13, according to fuel pricing website GasBuddy.com.

These prices are the highest they’ve been since July 11, 2014. It’s also by far the most expensive in the U.S., with the current average almost $1.50 above the national average.

Even though gas prices are top-most in the minds of U.S. drivers, most realize that, unfortunately, due  to many factors, pricing is not in control of the consumer, except, that is, when they make smart decisions at the pump.

Do vehicles designed to run on regular gas benefit from premium?

If you’re one of the 16.5 million U.S. drivers who has used premium fuel despite the vehicle manufacturer’s recommendation, press that 87 octane button and save yourself some money. In past articles we discussed the non-benefit of using premium fuel in vehicles designed to run on regular gas or that which is recommend.

AAA tested regular and premium gasoline in vehicles designed to operate on regular-grade fuel. The laboratory testing found no significant improvement in horsepower, fuel economy or emissions, suggesting the practice of using premium gasoline when it’s not required for the vehicle offers no advantage.

The costs add up quickly: drivers unnecessarily used premium gasoline in their vehicles more than 270 million times in the past year, at a cost of $2.1 billion. A better option, according to AAA’s studies, would be to use a fuel that meets TOP TIER™ standards, which results in 19 times fewer engine deposits. Such deposits decrease vehicle performance and reduce fuel economy.

Do vehicles that recommend, but do not require, premium benefit from the higher-octane fuel?

Since 2010, the price gap between premium and regular-grade gasolines has risen steadily. Drivers of vehicles that recommend, but do not require premium gasoline should look at their driving habits and weigh the potential benefits against the increased costs of choosing premium-grade gasoline.

Vehicles tested by AAA in partnership with the Automobile Club of Southern California found modest improvements in both fuel economy and performance when simulating extreme driving scenarios such as towing, hauling and rapid acceleration. However, there was less of a benefit in typical city or highway driving situations.

Some high-performance engines are specifically designed to operate on premium fuel and need the higher octane. Vehicles designed to run on regular gasoline cannot take advantage of the higher octane rating, nor can they produce more horsepower using premium fuel.

The safest strategy is to follow the manufacturer’s recommendations found in your owner’s manual.

Hope this helps

The Hemet Car Guy

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The days when oil companies could credibly deny they gouge California drivers in fairly regular cycles should now be over. Just three years ago, reports from the Consumer Watchdog advocacy group thoroughly documented how record profits for gasoline refiners like Chevron and Valero coincided with record-high pump prices throughout this state.

The quarterly profit statements for this spring are not in for the same firms and other, smaller refiners, but it’s almost certain they will once again be near or above past records. That’s because gas pump prices jumped this spring into ranges well above $4 per gallon for unleaded regular, without much visible causation.Even after prices subsided slightly in late May and early June, money continued to roll into oil company coffers.

All this still remains a mystery to some. Governor Gavin Newsom ordered the state Energy Commission to investigate why California gas prices rose to levels more than $1 dollar a gallon higher than averages elsewhere in America except isolated Hawaii, where oil and
gas arrives by ocean-going tankers rather than pipelines. The preliminary conclusion: market manipulation may have played a role. You don’t say.

Some politicians regularly blame the state’s high gas taxes, which rose almost two years ago by 12 cents per gallon to help pay for highway, environmental and greenhouse-gas-related improvements. But that 12 cents doesn’t even begin to account for the far larger differential between California prices and those almost everywhere else.

Newsom’s complaint somehow makes this seem like a new problem. It’s not, but the fact of a governor investigating is new. In fact, two years ago, the state’s Petroleum Market advisory Committee found California has had a “continuous and significant unexplained differential compared to the rest of the country.” Oh, but it’s not unexplained at all. Reality is this is purely the result of price gouging by an industry that has long had California in a difficult spot.

Never mind that some so-called experts at UC Berkeley have called the entire scene a “mystery,” noting that California’s higher taxes account for no more than 70 percent of its gas price differential.

Consolidation of the refining industry into essentially three corporate hands – Chevron, Valero and Phillips 66 – has allowed the companies to keep this state’s reserve stocks lower than anywhere else in the lower 48 states.

As far back as six years ago, Consumer Watchdog reported that the rest of the continental U.S. has about 24 days supply of gasoline on hand at any given time, while California averages between 10 days and 13 days. Shorter reserves mean that anytime there’s even a slight glitch, the refiners can claim an impending shortage and raise their prices. A refinery fire that’s put out quickly, with repairs made within a few days, can therefore cause price increases to reverberate for months.

Said Consumer Watchdog, “It’s happened before and will happen again and again because the California refinery owners can make more money by making less gasoline.”

How long do these things last? In 2015, a refinery blaze in a Torrance refinery sent prices upward. They never reverted to pre-fire levels, despite reconstruction and repairs.

Now Newsom has ordered the Energy Commission to investigate possible “inappropriate industry practices.” That’s a very appropriate demand of that commission. The question: Will Newsom let his order be either ignored or procrastinated on, with inaction the result?

Yes, whenever gas prices skyrocket, the Western States Petroleum Association invariably says it’s a one-off event and that “dynamics of supply and demand are responsible…” That last part is certainly true… but it leaves out the fact that the refiners control gasoline supply, while demand is very predictable, seasonal travel habits a major part of the picture.

At UC Berkeley, they call the extra money collected during gasoline price surges an “unexplained surcharge.” But the explanation has been clear for years, even if state authorities are just beginning to realize it: This is the result of oil company manipulation and profiteering.

One thing California plainly needs: a new law forcing disclosure of all California refiners’ profits, with complete transparency the goal. If the Legislature won’t create such a law, the people should, via a ballot initiative.

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