Ban Ki-moon, the United Nations secretary general, says Saudi Arabia's King Abdullah has agreed to produce an extra 200,000 barrels of oil per day in July. And so, New York futures for light sweet crude oil fell 77 cents for July, to $134.09 per barrel after a North Sea oil fire pushed it up to $139.89 per barrel earlier in the day. Hey. It's something.
July $140 calls, which are bets that oil prices would fall below that price, were the most actively traded options on the futures market Monday, according to Bloomberg. It's not just futures speculation, it's betting on what futures speculation will do to prices. By now, it should be clear that this year's rise in gasoline and diesel prices have nothing to do with U.S. consumption, which was down nearly 475,000 barrels per day in the first quarter versus last year.
Still, that take rate on $140 calls is a glass-half-full story of some sort.
What's hurting us at the pump is the value of the dollar (worth about 0.65 euro, 0.51 pounds sterling or $1.02 Canadian, Monday) and this suddenly hot futures market that's guessing that demand will continue to pressure supply.
Demand from the emerging third-world, primarily China and India, is putting pressure on gas prices. Ironically, the Chinese market that has helped brands like Buick survive isn't doing any favors for the Buick Lucerne here. And whereas the Chinese in big cities like Shanghai and Beijing have given up their bicycles for cars, in the United States, bike stores are running low on inventory while new cars and trucks crowd dealership overflow lots.
Detroit's automakers might not have been able to predict today's $4 to $5 per-gallon gasoline and diesel prices, but sales of truck-based SUVs have been sliding for the past three or four years. In its heyday, Ford sold something like 450,000 Explorers per year. Last year, it was about 179,000. Last month, Ford sold 8,122 Explorers, which is an annual rate of about 97,000 units. I'm guessing it won't sell as many as 8k Explorers this month.
SUV sales have dropped so much that CNW Research's Art Spinella says finance companies (I'm looking at you, GMAC), banks, credit unions and independent lessors will lose billions on leased truck-based sport/utilities returned over the next few years because they won't meet their residual values. The tab, he says, will approach $4.9 billion in 2008, $5.24 billion in '09 and $4.74 billion in '10, thanks to residual values off by more than $6,000 per SUV. That means General Motors, which owns 49 percent of GMAC, will continue to lose money on its non-automotive operations. It also will affect Chrysler's private equity owners, Cerberus, which owns the other 51 percent.
Spinella promises more details and his guess on what the "natural floor" for SUVs and full-size pickup trucks will be, Tuesday. I can see it for trucks, but is there a "natural floor" for SUV sales?