Posted on 05/03/2006 7:38:25 AM PDT by kellynla
Oil prices fall on surprise inventory build. Gasoline inventories rise 2.1 million barrels. Crude oil stocks up 1.7 million barrels.
(Excerpt) Read more at money.cnn.com ...
This just in:
"Gay week at Disney World causes high demand for petroleum jelly. Crude prices rose 42 cents to $76.48 on the news."
The question is how much do these shadowy futres market people make? The example I gave was the Saudi's producing a barrel of crude for six bucks and selling it for $75.00.
Who rakes in the difference between cost and artificially raised market price?
Wetumpka, Alabama was at $2.68 since last Thursday.... Now down to $2.55!
You too can be one of the shadowy market traders. Just contact your broker and buy some options.
How much it costs to produce has very little to do with it. Go to your local theatre and buy some popcorn and a Coke. They will probably make more off you than those evil Saudis ever will.
"How much it costs to produce has very little to do with it"
Yes it does...the entire industry is claiming a small percentage of profit citing Crude at $74 a barrel being a "Cost". If in reality the "cost" is $10 and $64 is an additional level of profit, they are being deceitful by not addressing the additional, massive profit.
There's nothing wrong with making money hand over fist...just be honest about it.
Now... who gets the delta between the cost and price of crude?
The producer?, the trader? the oil companies?
Thanks.
All of the above. You can too if you buy some oil futures. Or you may lose just like the other futures traders.
Do you think it costs the gold miners $600/oz to mine gold? Do you think it costs Coke $6/gal to make Coke?
Sure the Saudis could sell their oil for $1/bll and lose money if they wished. Or they can sell it on the free market and get whatever the seller is willing to pay. Apparently Exxon is willing to pay them $70 and refine it into gas and make a profit. Just like Kelloggs buys that corn at $2-$3/bushel and sells you corn flakes at $2-$3/ box.
Can you tell us what two or three entities control a large enough percentage of refined product to drive price?
Try controlling the information, not just the product. In a tight market, it can be the difference between the perception that inventories are shrinking versus inventories are increasing.
I've answered 3 of your questions already without any thanks...
Not necessarily. Perhaps people are driving less and the reduced purchase of gasoline by retail customers affected the stocks in the supply chain. That's not as much fun as assuming a vast oil conspiracy, but far more likely.
You said -- "But ... but ... but ... I thought there was a severe SHORTAGE of gasoline. What gives?"
Shortage comes from two factors supply and demand (actual buying demand). So, the forecasted shortage comes from running the refineries at capacity (give or take a few going offline and/or coming online) -- plus the normal buying patterns for gasoline.
Now, as prices go up, there should be a pattern developing that shows usage going down. However, I don't think that's been as prevalent a pattern as it could have been. It appears that many people were driving just as much as before prices went up and simply "biting the bullet" on the prices.
HOWEVER, it also appears now -- that a significant number of people may have reached a "breaking point" and have cut back drastically, reducing their driving to essentials and/or modifying their driving to combine several things in one trip.
This appears to have happened like a rubber band "snapping" after it's stretched too far. I think the buying public just *snapped*.
So, a lot of people drastically cutting back would throw the forecasters for a loop -- because the buying public has maintained their "drunken binge" on gasoline -- and the forecasters were depending on that.
Well, the drunken public is getting a headache now -- hence -- they've cut back drastically.
Regards,
Star Traveler
P.S. -- I've heard from many different sources where people are making big cut-backs now. I know I've cut back my usage by 50% (from the last 6 months usage) by cutting back out-of-town trips that I was making. I'll wait until later and make a few less.
..."while closely watched gasoline inventories swelled by 2.1 million barrels..."
The average daily gasoline consumption in the US is roughly 320,500,000 gallons. A swelling of 2.1 million barrels or roughly 88 million gallons of gasoline only constitutes a quarter of our daily use. The media is trying to fool us into thinking there is a swelling of inventory when there isn't.
First of all, analysts already factor that in. Second, the price dropped slightly last week. Third, use would have had to have dropped about five percent in one week - that's a lot.
I don't even see it as a conspiracy theory. I think we are seeing some traders in a tight market tweaking information to shift perceptions to where a shortage is present where there may not be one. That's as old as trading in such situations. But it still is not market forces working on accurate information.
Since hundredes of individual entities all report their inventories into one central point, are you accusing the DoE Energy Information Administration of cooking the books?
And what makes you assume that the 5% change in inventory must show a conspiracy? You do understqand that there are two components to inventory -- production and demand. Have you considered that $3+ pump prices can and has depressed demand?
Depends on what industry you are talking about. Production companies (and national oil companies in OPEC countries) sell crude. Refiners buy crude and make gasolin (and other products). Retail marketers sell gasoline to peeps. Tranportation & Distribution firms move it all. There are varying degrees of integration in the industry.
In other words,, there isn't one simple answer to the question.
Once again, industry analysts predicted a drop. And it rose. And for the inventory to rise that much, it means that there was a fair amount of excess refining capacity that was not expected.
No, I am saying that making minor adjustments to the reporting of inventory levels by a few players can be used to manipulate a tight market.
And what makes you assume that the 5% change in inventory must show a conspiracy? You do understqand that there are two components to inventory -- production and demand. Have you considered that $3+ pump prices can and has depressed demand?
Have you considered that industry analysts probably have fairly sophisticated models to track price versus demand? And it isn't like we didn't hit this price before - it was higher during Katrina, so they have some experience modelling this level. And they were still off by a fair margin.
You asked -- "Why where they off 2.8 million barrels in one week?"
The buying public was on a "drunken binge" of buying gasoline, far beyond what their budgets would allow. It went up and then back down (a few more swings in between) -- and then, now -- back up big-time.
Well, it's like a rubber band -- it got stretched too tight and it *popped*. People cut back drastically.
Now, there is "pent-up demand" in the buying public -- if they manage to go on another drunken binge again and get *desentized* to the new higher prices (which may happen). But, for now -- they cut back big-time. This is *OBVIOUS* that the public did that -- by the numbers which are shown. The numbers tell it. The public *CUT BACK* big time.
So, if the prices dropp a little and the pent-up demand kicks in again, the inventories will swing drastically the other way, too.
We'll see...
Regards,
Star Traveler
You said -- "Once again, please come up with a rational explanation of how the analysts can be so far off as to inventory levels for gasoline in the course of one week."
Well, the analysts thought they were still dealing with a "drunk". But, the buying public came off their "drunken binge" and started sobering up. And it was a "jolt". They quit buying.
Now, the analysts are going to have to factor in more "sober" drivers.
Regards,
Star Travelers
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