Posted on 08/23/2007 3:36:50 PM PDT by saganite
Rocky Mountain oil producers are still smarting from an 18-month supply glut that has left their petroleum priced well below national averages.
Rising imports of oil from Canadian tar sands, increased domestic production and a series of refinery shutdowns have left the Rockies awash in crude.
At the peak of the oil surplus in February 2006, some Rocky Mountain producers were forced to sell their crude for $34 a barrel - a gap of nearly $26 from the prevailing national price then of about $60.
"The most obvious answer for this (price) decline has been an increase in Canadian crude that has been able to come down to the Rockies," said John Kingston, global director of oil for research firm Platts.
The difference between national prices and a typical regional price in Wyoming has since diminished to $8 a barrel. But the margin remains a sore point and a topic of discussion for Western oil producers, particularly in the northern Rockies and Plains, where prices were the lowest.
"We encountered the problem, and it really caught us by surprise," said Steve Frazier, Denver-based vice president of Klabzuba Oil & Gas Inc., a firm that operates mostly in Wyoming and Montana.
"It was a perfect storm that came together and really sent prices down," said Frazier, who also serves as a Montana representative for the Independent Petroleum Association of Mountain States. "Everyone pretty much had to grit their teeth and deal with it."
(Excerpt) Read more at denverpost.com ...
ping
Dang!That sneaky old supply and demand devil again.
Cheapest gas where I live (just S.E. of Denver) is ~$2.75/gal.
From what I understand that is OVER the national average.
It hasn’t caused a decrease in the prices at the pump though.
Cheapest gas I can find in Houston is $2.54/gallon. If you use a credit card from Valero, you can get gas for $2.49/gallon.
I must not be smarter than a fifth grader, because it makes no sense to me why Colorado oil would be trading at such a discount to the world price.
Can anyone enlighten me?
In a perfectly competitive world that law would apply. The oil industry in the US West is accelerating and mostly small companies are involved. Hence, a lack of infrastructure. Too few pipelines and too little refining capacitiy, all of which is currently controlled by the majors. They can pay a discount for the oil because those producers have nowhere else to go at the moment.
From what I understand that is OVER the national average.
Gas and oil are not the same thing.
post #9
As Reagan put it, an economist is someone who sees what works in practice and then wonders if it works in theory.
That’s because the supply from those western fields still represents a small portion of our overall demand.
$3.00 in michigan. Your getting a bargain. Findley, OH is under water and that is where we get our gas from. They have refineries.
http://www.speedway.com/FindUs/StoreLocator/GasPriceSearch.aspx?State=michigan
ping
tks
Colorado Springs = $2.639
1) Local refineries are shut down.
2) Local oil is continuing to flow, thus piling up in storage facilities.
You have to sell in order to keep you storage tanks from overflowing. Refineries elsewhere in the US have already paid for oil delivered to their facility at the market rate. You have to sell so you have to accept their terms since you need them to buy your product more than the need it from you. Best price you can get is $26 below market.
By the by, even if it is, I don’t object. Business is business.
There’s a report coming out next year that should spur investment in pipelines and hopefully refining capacity in the region. Reportedly, there’s 200-400 billion barrels of oil in Montana and N Dakota.
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