NOT GOOD NEWS FOR GASOLINE PRICES; A CLASSIC "SHORT SQUEEZE" COULD HAPPEN

The pros give reasons for high gasoline prices (Later info is above)
1, Discount SoCal AZ broken pipeline, that is over and prices will be OK by Wednesday
2. The blackout back east knocked refineries down for almost a week.
3. The literally insane variety of gasoline mixtures required by local govenments make it dam near impossible to have supplies on hand once they run short.

While foreign gasoline is available, it either doesn't arrive in time for the Nymex September delivery or doesn't meet the fall specifications, which allow for higher vapor pressure, said Tom Kloza, chief oil analyst at the Oil Price Information Service, a provider of gasoline commentary.

Translation: Foreigners won't reformulate gasoline for us so they sell regualr gasoline to now recovering Asia.
4. Because all future gasoline is traded at the NYMEX and contracts are standardized

"So with just five days of trading left in the Nymex contract, there are real worries about everyone performing as required for the September futures delivery," he said. The September contract for unleaded gasoline expires at the end of Friday's trading session.

Translation here: prices could go much higher because there isn't enough gasoline to deliver against the contract. Local enviro regs are screwing all of us. There is no gasoline that meet all the regs.
5. Problems in oil producing countries

Additionally, "Iraq is slow to develop, Nigeria is trying to suppress fighting in the south, and Venezuela's political problems could resurface again at anytime"

6. Oil production traditionally falls during September, with no environmental give by our conservative administration in Washington, and with demand on the rise, don't look for lower gasoline prices soon. Bad news for the economy

The SHORT SQUEEZE: Here's what happens when supplies run low. Imagine you are a person who buys gasoline on the open market for delivery to others later. What you always do is sell it "in the future", meaning if you buy it in June and expect to deliver the end August (called the September contract). BUT YOU USUALLY SELL IT BEFORE YOU HAVE IT. Most likely in April or May. You have taken the money. This means you MUST deliver. In the language of the trade you are "short" gasoline. OK, September rolls around and you DON'T HAVE the gasoline because you sold it months ago at fifty cents and were unable to actually buy gasoline for less than that price. Now the price is seventy five cents and you have been "waiting" for prices to drop----along with a thousand other gasoline operators. ALL of you, one thousand of you, are "SHORT" gasoline and the people with whom you signed contracts are "squeezing" you for product. You now have to scramble on the open market and pay any price to deliver. The government would have to act NOW but they are sleeping in Crawford TX, or other vacation spots and paying no attention. When August 29th rolls around (the delivery date on the September contract) you could see gasoline prices at almost anything. This is what can happen when government doesn't intervene in markets. The strategic reserve could, and should, have been made available weeks ago. If there is one thing these guys in the administration understand completely it is oil, the oil business, and energy. They won't release the reserve, if they ever do, until after prices get crazy. Get ready. Watch your financial section under September Unleaded Gasoline. This could be bad for stocks no matter what the jobs number is on September 5. Later add: The meaningless but much reported Consumer Confidence number is up big; New Home sales are through the roof. It looks like everyone but the Democratic Left knows the economy is roaring. Consumer Confidence report from a prior posting

CONSUMER CONFIDENCE: Again the most useless stat there is. It's done by the University of Michigan and all they survey is the labor force, the most uninformed segment of the society. They get their info from network TV and don't read at all (The Globe and Enquirer don't count). There is another poll HERE that measures both the labor force and the investor class. This is the only poll that is accurate. He measures both the investor class (45%) and the labor force (55%) and he does it every day and measures it against a month ago each day. His figures have been rising for quite a while. Keep in mind that the investor class gets their news from cable news, the web, the Journal, IBD, and the major daily newspapers. This class is well informed and usually ahead of the curve.

The markets won't do much this week, people are on vacation and trading is thin. I personally think that the Indexes are once again in a trading range; gasoline prices a major negative.