I’m calling this time we are all living in, the storm before the calm.

No, I haven’t got it backwards.

It would have been (and I guess it was) logical for the media and traders to anticipate that Hurricane Ida would be a repeat of the event 16 years ago, when Katrina hit the Gulf and shut down 20% of the U.S. refining industry, and pump prices jumped 25 cents per gallon overnight – from Houston to New York and into Eastern Canada.

Yes, Ida hit the coast hard, but the price spikes have yet to happen.

This is surprising as 1.6 million bpd of refining capacity is still offline, which, by the way, is the entire refining capacity of Canada.

In fact, instead of pump prices increasing, they are going the other way and now falling along with the price of crude.

Crude oil is in a period of “backwardation,” a word I am not making up to beef up my lexicon. It means that crude oil futures prices are higher than today’s spot prices; whereas not too long-ago, the opposite was the rule of thumb.

This would indicate that the feeling on Wall Street is that we are entering a period of deceleration in the volatility of prices for crude and all refined products.

Recent upward pressure on prices was due to real, or fantasized, increases in demand figures. That 60-degree upward curve is now moving sideways.

Over the short-term (meaning the next three months), price pressure due to demand will be neutralized by a mobility crimp. The vaccine mandates issued by various forms of government will limit those opting (assuming there is a choice) to return to the office environment, thereby reducing demand for all transportation fuels.

As for crude oil, I can only see a calming of the pricing waters there as well, with OPEC adding more production.

The economic recovery is a delicate operation and OPEC will be willing to nurse it along to pacify a beleaguered U.S. president, while at the same time blocking any intent by the shale oil industry to fight with them on market share.

So, enjoy the upcoming pricing lull. But keep one eye open and two fingers crossed.

– Roger McKnight – B.Sc., Senior Petroleum Analyst

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