Oil Price Outlook
I think most of you are aware of the precipitous drop in oil prices last year, and their subsequent recovery in the second quarter of this year. Although forecasting is a tricky business, we're expecting a slow but steady increase in the average price and demand over the next 20 years. The cost of raw materials to refiners will certainly go up and down, as the price of crude fluctuates, but long term crude oil prices should help keep motor fuel prices both competitive and attractive to motorists. You aren't especially interested in the absolute price of crude oil, you're just interested in price stability. Unfortunately, the price over the last year or so has been anything but stable.

Oil Demand Outlook
Most of the new demand driving growth is expected to come from Asia, even though Asia's recent economic slowdown was the primary reason for the oil surplus that drove down crude oil prices. Reports of 25 years ago predicted that we would be in a severe supply crunch by the end of the century. A prediction that obviously didn't pan out. Between new discoveries and advancements in production tech, we are confident that we will meet the world's supply needs for decades to come.

Oil Imports Outlook
We bring in over half our crude oil supply today, and even more tomorrow. By 2010, we'll be importing about two-thirds of our supply. The good news is that the imports will come from a wide variety of countries, including our neighbors, we get over half our total imports from Canada, Mexico and Venezuela. So while it is true that the U.S. refining industry will be more import dependent, America will be buying its oil from a lot of different and willing sellers who need the oil income as badly as we need the oil supplies. Put all these facts together and what you get is diversified sources that help off-set the risk of short supplies. That helps to ensure competitive prices at the same time, not total energy security, but not bad either!

Refining Review
Everybody knows the number of US Refineries is lower today because competition and government requirements has driven out the poor performers. The remaining refineries have invested in new capacity, plus improved their ability to make more gasoline, and running at record efficiency levels. The API reported August last year that the average US refinery utilization rate was 99.2%. This is extraordinary performance but the efficiency boom couldn't last forever. Today, to put it simply, things are tight in the US refining sector. In Oil & Gas Journal said that US refined product demand is outrunning capacity.

Putting a Premium on Reliability
Because refining capacity is tight, it puts a premium on running refineries reliably. West Coast gasoline inventories for most of 1998 stayed above 28 million barrels. However, earlier this year, Tosco and Chevron both had refinery problems, which resulted in a run on inventories that quickly sent prices soaring. Inventories are so low in the West Coast right now, that Chevron recently asked for an exemption to import and sell conventional gasoline in California as opposed to the state required Reformulated gasoline. California demanded a 15 cent a gallon penalty if normal conventional gas was imported. The low inventories and import restrictions have caused spot prices for gasoline to rise dramatically, a fact I'm sure you are aware of. In spite of tight supplies, we appear to have avoided industry-wide run-outs this summer.

Oxygenated Fuel Begins November 1, 1999

Jackson County and Grants Pass are again under the clean air act to require oxygenated gasoline with ethanol. If you would like to fill up your storage tanks with clear gasoline please call. Clear gas works best in older car engines, small engines such as generators, chainsaws, etc. Now is the time to fill up before the oxygenated fuel starts flowing about October 15 (to meet the November 1 deadline) as we need to move this clear fuel out of our tanks!! The oxy Zone is November 1,1999 through February 28, 2000.