Posted on 03/14/2015 1:29:35 AM PDT by Berlin_Freeper
Just as the oil market appeared to be stabilizing, the price of crude resumed its descent on Friday.
The drop, of about 4 percent, came after a report from the International Energy Agency warning that oil pouring into tank farms in the United States might “soon test storage capacity limits.”
The agency, whose reports are closely monitored by oil traders, said that overflowing storage “would inevitably lead to renewed price weakness.” American production of oil continues to increase despite recently announced cutbacks in new drilling by producers.
(Excerpt) Read more at nytimes.com ...
At the same time, Russian exports have been rising,Ha-ha-ha...
Cheaper gasoline prices is a problem.?...
What some people smoke is amazing...
Crude prices are back to where they were in early 2009 when Obama took office. Average pump prices are still higher. National average was $1.84 per gallon for regular when Obama was sworn in. This week the average price for regular is $2.44.
If the oil companies could make money in 2009 with lower retail prices, they’ll do okay today.
Consider the pros of the current glut -
- Lower prices = more money in consumers hands
- Lower demand and oversupply = less imported oil. Improved balance of payments for the USA and less money in the hands of Saudi billionaires funding Islamic terrorism. Less money for Putin.
The big negative is the potential for a significant hike in the federal gas tax to put more money in the highway trust fund. The rationale will be the people can afford a 50 cent or more hike in gas taxes because of the sharp decline. Some Republicans have already made noises about being willing to sign onto a gas tax hike.
Just how long will it take before we see the reflect of gas prices at the pump? Gasoline prices jumps about $0.05 per increase but drop only $0.01 cent when prices fall.
Glut or not, it will take some time before the consumer gains anything from the oil price drop.
“Glut or not, it will take some time before the consumer gains anything from the oil price drop.”
There are a few things that make prices “sticky” at the pump when the cost of gasoline is declining.
1) Retailers and other middlemen are slow to take prices down. They try to squeeze a few extra cents of margin by lower prices at less than their costs are declining. However, if prices remain down, natural competitive forces take place as one station tries to take market share by lowering its prices, only to be matched by others.
2) Regulation has increased the cost of refining product. While the price of a barrel of crude may be the same as 2009, the cost of transporting it, refining it, and distributing it is higher. Therefore prices at the pump are not at 2009 levels.
3) Gasoline taxes in many states have been raised since 2009. Those taxes raise the price at the pump.
There are many hands in the process between the wellhead and the consumer. When raw material prices decline dramatically, as crude oil prices have done over the past year, the more players the longer it takes for prices at the consumer level to reach optimum.
OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004
...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
2001
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
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