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5/25/22 Capitalist Times Live Chat
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AvatarRoger Conrad
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Hello everyone and welcome to our May live webchat. Thank you for  taking the time to join us today. We do appreciate your business. And speaking for both myself and Elliott, we really do get a lot out of answering your questions and listening to your feedback.
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As always, there is no audio. Just type in your question and Elliott and I will get to them as soon as we possibly can in a comprehensive and concise way. We will have a complete transcript of all the Q&A to share will you after we sign off, which will be when the queue is empty.
We're going to start with some answers to questions we received prior to the chat.
Q. Hi Roger. Attached is a current article which foreshadows black outs this summer in Michigan due to a shortage of electrical supply capacity as a result of too many conventional plants shutting down in the Midwest. The article fails to mention the recent shut down of Entergy's Palisades nuclear plant in Michigan. It is as if the politicians are endeavoring to commit economic suicide for the sake of solar and wind power in closing coal, gas, and nuclear facilities. Do you think my dividends in DTE Energy (NYSE: DTE) and CMS Energy (NYSE: CMS) are safe whether or not the lights stay on in Michigan?
 
About a month ago, Consolidated Edison (NYSE: ED) announced a 10 to 12% increase in electric rates in their New York service area. Notably ED does not generate power any longer; they only deliver it as I understand. So the increase in power costs is due to a shortage of capacity
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within the New York grid. You might recall that the last Indian Point nuclear plant was shut down in April '21. So replacing the lost power from this now shuttered nuclear plant seems quite costly to the ratepayers. How did closing Indian Point make any sense in light of the consequences?

Consider the situation in California, which is already very short of power. The politicians there are pushing to prohibit the sale of gas and diesel powered vehicles by 2030. Closing Diablo Canyon is also on the table. Where is all the electricity going to come from to charge all those electric vehicles?
 
I would appreciate your thinking as to how to mitigate investment risk given that articles such as I have provided here are becoming more frequent in the press. I'm concerned that green policies in place are begging for an event bigger than what occurred in Texas in the previous winter. I doubt the politicians will indemnify the power companies should such an adverse event occur due to the failure of the sun to shine or
the wind to blow. Kind regards—Jim C.
 
A. Hi Jim. Thank you for that thoughtful question. Starting out with the Michigan question, I think to some extent you have to consider the sources in this article, which appear to be political—not to say they don’t have a point, but they also have an axe to grind.
 
Utilities like CMS and DTE are building wind and solar as part of long-term plans approved by state regulators. They also plan to shut down their coal—CMS’ current plan is to close its remaining 1,785 megawatts of capacity by 2025 and to replace it by growing solar capacity to 8 gigawatts with related storage. But they’re also proposing to purchase four natural gas powered plants with 2,180 MW, for the stated purpose of having “dispatchable” power—which solar and wind will not be unless/until there’s adequate and economic electricity storage capability.
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During the earnings call, CMS’ CEO addressed the situation with the Palisades nuclear plant. The gist was he supports the Michigan governor’s recent push to keep the plant open. But he also pointed out the power purchase agreement with owner Entergy Corp (NYSE: ETR) expiring at the end of this month is “expensive” relative to other available power supplies, and that the company would want to negotiate a lower price. That didn’t appear to be anything Entergy wanted to pursue—as its stated goal the past several years has been to exit nuclear generation, except in its home service territory. That company has now shut the facility and the license has transferred to Holtec International for decommissioning.
 
To date, both CMS and DTE have maintained they have the generating capacity to meet demand this summer. I believe the metrics of their respective systems support those claims, barring some truly extreme temperatures. Rather, the risk is a big fuel cost pass through to customers--if sufficient and economic
supplies of natural gas are not locked in and adequate to meet potential demand spikes. Remember that lack of gas supplies—and power generators’ need to pay any price for what was available—is why the Texas electricity system broke down during Winter Storm Uri last year. And the more dependent systems become on gas, the greater the risk something similar will happen in future.
 
Turning to New York, you’re correct that Consolidated Edison has not produced electricity since the 1990s—when the state adopted deregulation. But residents of that state can thank the relentless efforts of former Governor Cuomo for shutting down Indian Point, which has left the city more dependent than ever on natural gas-fired generation—and therefore exposed to spikes in natural gas prices such as we’ve seen this year. There are New Yorkers who are happy Indian Point is being decommissioned—mostly people deeply concerned about the possibility of an accident. But the closure is most certainly affecting everyone with much higher
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utility bills.
 
As for California, Governor Newsom is pushing for ways to keep Diablo Canyon running beyond the slated 2025 closure date. That includes lobbying the US Energy Department to clarify available credits under last year’s federal $550 billion Infrastructure bill. Predictably, nuclear power opponents have swung into action. But considering the state’s lack of options for affordable and reliable base load electricity, I think there’s at least a 60-40 chance it stays open longer.
 
The best way to mitigate risk when it comes to investing in utilities has always been to keep careful tabs on what’s happening in the states. Right now, companies and regulators are still mostly on the same page regarding spending on grid efficiency and safety, electrification of transport and affordable decarbonization of power supply. The spiking price of natural gas has created some strain. But so far, regulators are allowing pass through of costs—including through securitization, which stretches out the payment.
 
The
longer gas prices stay high, the greater the odds politicians in more states will turn to utility bashing as a handy scapegoat, as for example they have in Arizona. If that happens, we’re going to want to move on to companies in other states. But this point, utility spending and balance sheets for utilities I’ve recommended in Conrad’s Utility Investor are still being supported—and so long as that’s the case their stocks will have a compelling value proposition of high yields and very reliable long-term dividend growth.
 
 
Q. Dear Roger. I know that you do not cover the real estate investment trust Life Storage Inc (NYSE: LSI). I am a subscriber to the REIT Sheet, CUI Plus, and the Conrad’s Utility Investor and would like to know your opinion as I inherited this position. Buy, Sell, or Hold ? I wish that you would consider covering this REIT. Gratefully--Aaron S.
 
A. Hi Aaron. First thank for being a member of our advisories. Second, I will definitely
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put LSI on my list for adding to the REIT Sheet databank. And I want to say once again that this advisory is a work in progress and I do welcome suggestions for additions to the coverage universe.
 
Life operates in the self storage business, which weathered the pandemic year (2020) and has seen a strong recovery since. Q1 results were quite strong, with FFO increasing 33.3 percent per share on a combination of aggressive development and strong numbers at facilities owned more than one year (same store net operating income up 21.9 percent). The REIT seems to be enjoying success in all of its principal markets, including completing $351.5 mil of acquisitions in Q1. And the boost in 2022 guidance earlier this month indicates business momentum is continuing. 
 
Shares were somewhat expensive as recently as late April but have come down to what appears to be a reasonable entry point. I’m going to start my coverage as a hold. But look for a deeper analysis in the June
REIT Sheet, which will include the databank. And again, thanks for the suggestion.
 
 
Q. Thank you Roger for these chats. Great information! I’m new to Energy and Income Advisor. I have a small position in Enviva (NYSE: EVA). Noticed that you rate it a "hold". The stock shot up after purchasing until the negative earnings (Revenue down 3.3% vs a year ago). Guidance is good with $3.62/sh div for 2022 and $10 million in net Income. Next earnings are not until late July. Wanted to get your input. Also I understand that the company is now a corporation- not MLP. Does this mean there won't be a K-1? Thank you very much!!--Pam M.
 
A. Hi Pam. Thank you for coming to EIA. I met the management of biomass fuel producer Enviva at an MLP conference back in the previous decade. And I’ve been repeatedly impressed in the years since with the company’s
ability to consistently meet or beat management guidance for growth. That continues to this year, with the company reaching two new long-term agreements with German customers.
 
As you pointed out, Q1 earnings took a hit from labor-related pressures at its facilities as well as transportation providers. On the other hand, it’s a seasonally weak period. And the company does appears able to pass through costs into new supply agreements, as demand remains robust in Europe and Asia—both from mixing biomass into coal stack and from using it as a standalone fuel. Enviva’s supply is also basically wastewood, which remains in abundant supply at a low cost.
 
In my view, the share price basically got too far ahead of itself earlier this year and has since come back to a more reasonable valuation. The 5.2 percent sequential dividend increase earlier this month is most definitely a
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vote of confidence—and up 15.2 percent year-over-year it’s well covered with distributable cash flow. You are correct the company is now organized as a C-Corp rather than an MLP—than means no K-1. It also appears the corporate conversion was structured in such a way as to be non-taxable to unitholders, which is a major plus.
 
 
 
Q. Hercules Capital (NYSE: HTGC) stock has taken a big drop in last month, as have many other stocks. Is a good time to be picking up shares in an income portfolio and does it have potential future in your income portfolio? It pays a dividend close to 10 percent.—Monroe J.
 
A. Hi Monroe. Hercules is a business development company, meaning it provides financing to mostly private capital firms in a variety of ways. Their margin—hence earnings and ability to pay dividends—is basically return on investment less cost of capital. The first is heavily impacted by the healthy
healthy of the economy and the second by the level of interest rates.
 
I like the fact that Hercules specializes in life sciences and technology companies. Both areas have proven a certain resilience to economic downturns. But at the end of the day, investor returns going forward will depend on how well management navigates what’s shaping up as a much more difficult environment than anything it’s faced in recent years—including much higher borrowing costs and pressure on economic growth.
 
The fact that the company has paid a “special dividend” in recent quarters does provide more security for the “regular cash” dividend in my opinion. And Fitch rates the balance sheet investment grade (BBB-) with a stable outlook, which indicates a strong balance sheet and the likelihood the recent drop in the share price is overdone. On the other hand, higher costs and the potential for a recession in the US mean Hercules is right now swimming
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upstream to some extent. So while I would rate it as a hold, that would be only for more aggressive investors.
 
 
 
Q. Hi Roger: Quick question about MPLX LP (NYSE: MPLX) and Magellan Midstream Partners (NYSE: MMP). Their yields look about the same. MPLX seems to have traded consistently in the 4-year period (2016-2020) pre Covid between $30–35 per share. MMP seems to have traded consistently in the $60-70 per share range during that 4-year period (2016-2020).  Therefore, could MMP have more of a run up based upon where each is right now? Because it appears to have a history of reaching higher values than MPLX, would that be at all a reason for an investor to prioritize MMP over MPLX? I know at one time you wrote MMP could be a take-over candidate. Are both equally conservative? Roger--you are welcome to use this question on a webchat if you think it has any value for other readers.
Thank you.—Barry J.
 
A. Thanks Barry. The first thing I’d say is the period 2016-2020 pre-Covid was still basically a bear
market for pretty much all things energy. Mainly, the price cycle was heading lower as supplies of oil and gas were consistently running ahead of demand following an investment boom. As best in class companies, both Magellan and MPLX continued to conservatively grow assets and increase dividends. But the price ranges they traded in were steadily depressed because of where we were in the energy cycle. That’s why I think a better forecaster of future share price ranges is where they traded during the previous boom, which peaked in the 2013-14 timeframe.
 
It’s going to take a real recovery in North American midstream volumes for these stocks to reach that level of price again. And that’s only going to happen when producers start devoting more of their mountain of free cash flow to boosting output, rather than cutting debt, buying back stock and raising dividends as they’re doing now.
 
We think that’s the next logical stage of this cycle. But in the meantime, both Magellan and MPLX are posting strong returns.
We highlighted Q1 results and guidance for both in the current issue of Energy and Income Advisor, which posted last week. Bottom line: Both of these are great stocks paying big dividends and should head a lot higher the next few years.
 
 
Q. Hi Roger. I enjoyed your May 13 CUI and CUI Plus issues. Thank you. My second quick question is about “best in class” definitions. I know how you feel about Enterprise Products Partners (NYSE: EPD), NextEra Energy Partners (NYSE: NEP), Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM). You have advised us readers over the years that you believe they are “best in class”. What sentiments do you have for Brookfield Renewable (TSX: BEP-U, NYSE: BEP), MPLX LP (NYSE: MPLX), Magellan Midstream Partners (NYSE: MMP) and Algonquin Power & Utilities (TSX: AQN, NYSE: AQN)?
I contemplate only deploying fresh money mostly for “best in class” stocks over the next 2 years during the pending bear market and possible recession in 2023 (as believed by Elliott). Therefore, I want to make sure
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I do not put funds in companies that you do not consider “best in class” or which are actually higher risk like Plains GP Holdings (NYSE: PAGP). Thanks.--Barry J.
 
A. I do consider Algonquin, Brookfield, MPLX and Magellan as best in class companies suitable for income investors. They’re in somewhat different businesses: Algonquin is a combination utility/contract power producer, Brookfield is a pure contract power producer focused on hydro and wind, MPLX is natural gas-focused as basically a unit of refiner Marathon Petroleum (NYSE: MPC) and Magellan is an oil and refined products pipeline company. But each has performed well as a business for many years, steadily expanding assets and growing dividends. And there’s every sign that will continue in the years ahead. I think they’re precisely the kind of stocks that people can be confident holding in a bear market/recession, though prices will be affected by market ups and downs in the near term.
 
 
Q. Hi Guys. In your last newsletter you had pretty optimistic
predictions for the future prices of some midstream MLPs and some producers. I don't understand how this is going to come about. If producers’ output does not increase that much, and the price of oil decreases from current levels in the next few years (as experts predict), how would the exploration and production companies be valued more? Also, how will the value of the midstream companies increase beyond pre-pandemic levels when oil and gas production does not increase that much? Thanks—Jack A.
 
A. Hi Jack. Our view is North American producers will increasingly find it worth their while to raise output, which in turn will bring about that volumes recovery for midstream companies that will drive share prices higher. This is what has happened in every previous energy price cycle.
 
I’m not sure what “experts” you’re citing on oil prices. It’s likely energy prices would cool off a bit if the economy hits a recession. But our view is any retreat would be temporary. That’s because the real driver of oil and gas
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prices in the two years since the April 2020 bottom has been the supply side. Mainly, investment is now lagging well behind where it’s been at a similar stage of previous cycles. That’s the primary reason why prices are as high as they are now. A recession would bring down prices but also likely depress investment further, which would ultimately drive prices even higher when demand rebounded.
 
That’s why we believe prices of our favorite midstream companies will at least return to the neighborhood of where they were in 2013-14 at the peak of the previous cycle.
 
 
Q. Hi Roger. Glad you are recovering and happy to see you back. I see in the recent CUI+ report that BHP Group (NYSE: BHP) will be giving us 47 shares of Woodside Petroleum (ASX: WDS, OTC: WOPEY) and we might hold them for a few months. Do we want to pick up extra? You also mentioned you were looking for another pick. Anything we should be looking out for? Thanks--Sandy 
 
A. Hi Sandy. Thanks for the well wishes. My recent brush with coronavirus
was thankfully mild and brief. And I sincerely wish the same for everyone else who’s exposed to it.
 
Regarding the shares of Woodside, my view is they’re extremely undervalued as we wait for the June 1 close of the merger with the spun off oil and gas operations of BHP. Woodside already has a new ASX symbol “WDS,” and it plans to list its American Depositary Receipts (WOPEY) on the NYSE at that time, which will make what we receive a lot easier to trade. And should we hold until the next ex-dividend date in August, we’re going to be in line for a dividend that’s now expected to be more than triple the year ago payout, as the company benefits from surging energy prices and merger synergies.
 
We already do have a large position in this portfolio in an oil and gas producer—TotalEnergies (Paris: TTE, NYSE: TTE). It’s a sector I like a lot going forward and I might increase exposure to with a bigger piece of Woodside. On the other hand, I’m also looking at adding a defense industry
company after the recent selloff, using the cash and possibly taking some money off the table in one of our bigger winners. Bottom line—look for more in the next portfolio update, probably around the end of next week.
 
 
 
Q. Roger/Elliott---do you have an opinion on the closed end fund Adams Natural Resoures (NYSE: PEO)? It pays a nice dividend and is trading at a discount to net asset value of about 15%. Thank you for the great help that you have given me and my family for many years. Sincerely--Don C.
 
A. Thanks Don. Adams is a fund we used to recommend some years ago when it traded under another name, Petroleum & Resources. It’s had a steady history, continuing to pay at least some dividends through the energy downcycle of the previous decade. And the quarterly payout appears to be on the rise once again.
 
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In this sector, I prefer closed end fund Kayne Anderson (NYSE: KYN) because it’s focused on midstream, rather than producers as Adams is. That gives Kayne a much higher yield and arguably a better play on what we believe will be the next phase of the energy price cycle—higher production and more midstream volumes. I would also point out that Adams is 17.4% in ExxonMobil and 15% in Chevron—both are great companies but why not just own them individually and have the control yourself? Kayne also trades at roughly the same discount to net asset value (14%).
 
Bottom line is Adams is a good fund. We just believe there are better alternatives for your energy sector investment dollars.
 
 
Q. Dear Folks, Thank you once again for hosting these always informative chats. I have 3 questions regarding 3 different sectors. First up, ARC Resources (TSX: ARX, OTC: AETUF). 
Is this one of the high flying energy stocks that we should consider taking some profits from? It's up a lot since you recommended it a while ago (Thank you). Does it still have room to run? You don't often comment on it, so I am concerned I might not get an "alert" when it's time to let some of it go. Second, Slate REIT (TSX; SGR-U, OTC: SRRTF). Will its grocery store emphasis soften a decline during a recession, enough to preserve its dividend? Are you concerned about external management? Third, 3M (NYSE: MMM). I can't recall you ever discussing this stock. Have you thought much about its prospects?  Many, many thanks. Jeffrey H.
 
A. Hi Jeffrey. I strongly believe ARC’s best days for this cycle are ahead of it. Shares are still trading at less than half their peak during the previous cycle. And the company is arguably in much better shape than then, having built a strong position in low cost natural gas and NGLs production in western Canada—just as that country starts to open up exports to Asia. Earlier
this month, for example, the company signed a long-term supply agreement with LNG exporter Cheniere Energy (NYSE: LNG) that could well be the harbinger of many more to come. Shares are currently trading a couple of dollars above my highest recommended entry point of USD12. But with dividends now double where they were a couple years ago, I think this is a good one to hold onto. Note that while ARC is not in the portfolio, we do cover it in our Canada/Australia coverage universe on the EIA website—and I wrote it up in a recent issue of EIA as well along with other Canadian recommendations.
 
I’ve picked up Slate REIT in the REIT Sheet—the next full databank will be posted in the June issue. But in the meantime, I can say that Q1 results solidly backed the current dividend, including 100% anchor space occupancy with 97% of the portfolio secured by net leases that shield margins from inflation
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. The REIT’s basis is also a 47% discount to current new build prices, providing a strong incentive for tenants to renew leases. The adjusted FFO payout ratio is high at 97.5% for Q1, but still down substantially from 110.7% last year. That’s actually solid protection for the payout, though I would not expect to see increases.
 
As for 3M, it’s not one I currently follow closely, though the 4% plus yield after the stock’s recent pounding is outwardly attractive. The challenge here is basically what’s outside the company’s control—which is supply chain issues and inflation pressure on costs. That’s what was behind management’s reduction of 2022 guidance and these will almost certainly remain headwinds the rest of the year.
This is a company with strong long-term prospects but I prefer Cisco Systems (NSDQ: CSCO) as value tech play.
 
 
Q. Roger/Elliott: Can you provide an overview of the financing for Southern Company's (NYSE: SO) Vogtle units 3 and 4. I am aware they are including some costs in current rates and have been doing so since construction began. What portion of the costs will have been paid in advance when the units go online and how much will need to be included in a new rate increase. If the new units were being paid off during construction, why did SO have to sell Gulf Power to raise cash for the construction costs? Thanks.—James C.
 
A. Hi James. Selling its Gulf Power unit to NextEra Energy (NYSE: NEE) did help Southern’s balance sheet and equity needs as it has ramped up capital spending elsewhere. I don’t know if it’s fair to say they were forced to sell it to fund Vogtle construction. But the sale was certainly a very low cost source of funds for finance.
 
Under the terms of its initial approval by Georgia
regulators, the Vogtle project agreed to file regular rate increases for recovery of costs during construction. It’s well documented how costs of what’s essentially a first mover project have exceeded initial estimates—with the most recent $27 billion (Southern’s $10.4 bil) comparing to an initial $14 billion. But the impact of those higher costs on rates has been dramatically offset by a far lower cost of debt finance than what was initially anticipated—so the final increases have stayed in the expected range, which is extraordinary given the Westinghouse bankruptcy.
 
The remaining schedule for starting up both reactors is Unit 3 by early Q1 2023 and Unit 4 by Q4 2023. And based on recent results of testing, permitting etc, that’s pretty much stayed on track this spring. Construction at Unit 4 is now 94% complete and accelerating, now that Unit 3 is purely in a startup and testing phase. And the NRC no longer has the project under heightened scrutiny.
 
As for costs and future rate increases to pay for
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Vogtle, Southern took another large writeoff of costs that were above its estimates this spring. But my information is more than 90 percent of costs it can recover are already in rates. And the bulk of what remains is basically agreed on.
 
If there are further delays, costs will rise and the utility will have to write off more. And the risk of them is why I haven’t raised my highest recommended entry point for Southern above 65. But at this point, there’s no chance of a 1970s-80s style rate case of reckoning. And so long as the company can stick to this schedule, there should be no further disputes or writeoffs. Notably, the company’s partners in the project all affirmed the latest financing agreement this spring.
 
 
Q. I have been a subscriber to CUI for several years and have a portfolio mainly of your conservative stock fund and have had good results over the years. I hope to turn 85 yrs of age in a few months and I want to become more involved in fixed income while at the same time keep following your
essential services stock advice. Do you have any advice on where to find good information on fixed income securities? I am not interested in bond funds, but perhaps build a laddered maturity schedule of my own. Any help is appreciated! Thanks—Ronald A.
 
A. Hi Ronald. I think the best way to seek out good fixed income is basically the same way you look for individual stocks to buy. Mainly, you want companies that are getting stronger as businesses, and that therefore could earn higher credit ratings. Improving credit will offset the negative impact of a rising interest rate environment, particularly if you stick to bonds maturing in 5 years or less.
 
I wrote a piece in the April issue on high yield opportunities. Since then, the bond market has retreated further, so available returns have risen a bit as well. I’m still not 100% convinced this bond market rout is over, with inflation pressure where it is. But I think you can expect more recommendations going forward from me—though I will always prefer the
dividend growth power of stocks.
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Ok that's it for the pre-chat questions. Thanks again to everyone who sent them in.
Gary
2:08
Do you still feel that oil and gas exploration companies and pipelines will do well even as we face the possibilities of an economic downturn or recession?
AvatarRoger Conrad
2:08
Hi Gary. No stock sector emerges completely unscathed from a real bear market. But the S&P 500 Energy Index is at this point about 180 degrees from anything resembling one, having returned better than 55% year to date. The Alerian MLP Index has returned 24% plus and the oil services index is up over 50%. Fallout from Russia's Ukraine invasion has obviously  has an impact on energy prices. But the real driver for the now two-year plus old upcycle in oil and gas is an investment deficit that's now lagging well behind demand and is far larger than what we've seen in previous cycles. A recession would depress demand and likely take prices lower near term. But if anything it would worsen the investment deficit, leaving supply even further behind demand when prices recover. We've taken some money off the table in Energy and Income Advisor in names we think could lose ground near term in such a shift. But we still look for our favorites to move well beyond even their 2013-14 highs of the previous cycle.
Aaron
2:11
Dear Roger, I hope that you are feeling better. I am a subscriber of the CUI Plus, the Utility Investor, and The Reit Sheet. I recently inherited a position in LSI  Inc. (Life Storage Inc.) With reit prices at or near 52 week lows is now a possible good time to add to my position? Buy,sell, or Hold at what price? It would be nice if you would consider covering this reit in your reit sheet. Keep up the fine work and stay healthy !!!
AvatarRoger Conrad
2:11
Hi Aaron. Thanks again for the suggestion to cover Life Storage in the REIT Sheet. As I indicated answering your question above, I'm starting it as a hold but will consider an upgrade in the coming weeks. Expect to see it in the REIT Sheet databank in the June issue.
Quint D.
2:16
Hi Roger
I find your REIT sheet informative and profitable.
What do you think of BXMT?
Thank you
AvatarRoger Conrad
2:16
Thank you Quint. I've begun covering it in the REIT Sheet databank and the current advice is a buy at 32 or lower. I am pretty cautious on most financial REITs at this time due to the rising interest rate environment and the possibility of a recession/credit event in the coming months as supply chain disruption and inflation disrupt the economy. The exceptions are niche-focused firms like Hannon Armstrong (NYSE: HASI) and a couple backed by large private capital entities like KKR Real Estate (NYSE: KREF) and Blackstone Mortgage Trust (NYSE: BXMT). I'm not looking for dividend growth at either KREF or BXMT. But yields are high and appear protected, based on Q1 results and guidance.
Kerry T
2:16
I remember oil prices being over $100 per barrel for long periods but I don't remember gasoline getting much above $4 per gallon. I live in California (and have my entire life) and regular (87 octane) gasoline is now almost $6 per gallon.  Why is gasoline up so much more than oil? 
I do remember gasoline getting very high for a short time because of hurricane Katrina but that was explained by the storm damage.

regards
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