Replies

I think two things are in play re. retail gasoline and fuels in general here in the US. I'm not a marketing specialist but some bits of info I read suggest some things. West TX and North Sea benchmarks for fuel have increased several percent but not enormously. Saudi Arabia is squeezing the oil market down via high production to reduce the current glut of oil in storage.

The amount of oil in storage is mind boggling. In Europe for example, land storage is completely full and oil tankers are on charter to simply swing at anchor as floating storage. I understand that oil storage at Cushing, OK has started to draw down, which coincides with the D coronation.

Crude oil and refined products in the US generally flow from the gulf coast to the Midwest and East Coast via pipeline, river barge and Jones Act shipping. I imagine that the cold weather and snow stuff disrupted this transportation.

Don't have sources for this aspect so rate it as a SWAG on my part. Sometime in the not too distant future, the stars are aligning for a damn large increase in $$$ for fuels, petrochemicals and steel. The D squeeze on oil & gas production is going cascade through the base industries then hit consumers in the pocketbook from multiple directions. Kaboom.

My opinions...

Interesting article here:

https://www.worldoil.com/news/2021/2/19/saudi-arabia-and-russia-at-odds-before-crucial-opec-meeting

Checking on Gas Buddy, it appears gasoline prices in the Midwest have increased around 50 cents / gal in the last 3 months, with a bit of a spike this last week likely due to the supply disruptions. The spike is at least so far not as bad as I might have thought, however, likely due to the abundant storage you describe...

Something has always puzzled me about OPEC's internal pricing wars:

I assume the effect of decreasing supply (Saudi and allies) is to drive up prices at least as much as supply goes down, and in the effort also drive competitors with higher production costs (but perhaps less government "appetite" for the money) out of the market. Neglecting the fact that competition always returns, meaning that all the Saudis accomplish is to buy some time, we have also other OPEC producers squawking because they say this strategy decreases their overall oil revenues. From that I take it that the higher prices the other producers also sell for do NOT cover their lost quantity of sales.

So, is Saudi then counting on their low production cost to improve their relative position, and fill the revenue gap at home with their currency reserve, hoping to then capitalize during high demand price surges to refill their currency reserves? I must be wrong, because this strategy seems untenable in the long run.