Posted on 08/13/2004 11:50:27 AM PDT by Jomini
Oil prices kept climbing Friday on concerns about vulnerable and stretched supplies. Energy analysts said the uncertainty could be adding as much as $8 a barrel to prices, pointing to a continuing insurgency in U.S.-occupied Iraq, suspicions terrorists could again strike Saudi Arabia's production facilities, and unrest elsewhere.
Crude oil for September delivery rose 30 cents to $45.80 a barrel in midday trading Friday on the New York Mercantile Exchange, past the fresh record struck Thursday of $45.50. September Brent crude rose 23 cents to $42.52 on London's International Petroleum Exchange, threatening the previous day's record high - not adjusted for inflation - of $42.29 per barrel.
"The sentiment in the market is that there are more bad things going to happen to the market than good things," said Sam Dale, bureau chief at Energy Intelligence in Singapore.
"By 'bad things' we mean supply restrictions: Speculators are looking at things like an attack on Saudi Arabia, more disruption of exports from Iraq, civil unrest in Nigeria, strikes and civil unrest in Venezuela," Dale added.
Also, Russian oil giant Yukos is locked in a battle against bankruptcy in that country's courts over a disputed $3.5 billion back-tax bill.
"If any of those (bad events) happen, they take crude off the market," said Dale. "The problem with that is ... where is the extra oil going to come from?"
Oil prices have risen about 3.5 percent over the past week, pushing to a series of new highs. However, when adjusted for inflation, oil still costs about $12 a barrel less than it did leading up to the first Gulf war.
Heavy fighting in southern Iraq renewed fears of a disruption of Iraq's vital oil supplies, and traders said the tense situation would help keep crude prices high. Iraq exports 1.7 million barrels a day of oil, or about 2 percent of daily global consumption.
U.S. and Iraqi forces pressed on Friday with an offensive on the Iraqi city of Najaf to quell an uprising by militiamen loyal to Shiite cleric Muqtada al-Sadr.
Al-Sadr loyalists have threatened to blow up oil pipelines and port infrastructure if an offensive is launched on the city's Imam Ali shrine.
So the prices of gas will be quite a bit higher in September and October?
Why now? Probably because 1) The cost of security for shipping oil is significantly higher 2) Risk to shipping is much higher 3) We are filling the SPR because of 1&2 (good idea) 4) world demand is higher because economies are recovering.
As for gasoline prices, I suspect the summer production ramp is done and refineries have switched over to heating oil. That is why oil is going up but gasoline prices don't seem to. Probably need to look at heating oil cost to gauge the impact of current oil prices. Considering this summer has been very cool in most of the lower 48, a cold winter could have a negative impact on the US growth rate. Maybe we should lobby for some global warming? Hello Gore?
Yes, or at least they will be unless something else manages to put a lid on the price of refined gas (and usually the only thing would be a crash in demand, which would only be likely if something rather ugly is happening elsewhere in the global economy). The current crude prices should become fully reflected in the price at the pump sometime around the last couple weeks of September or so, maybe the first week of October.
This simply could not come at a worse time. People who pay little attention to politics til election time will see gas prices above 2.00 in October and will hear Kerry say something about prices being too high and how he will fix that problem and they will say time to vote for a change...sigh...remember, most foreign leaders want a wimp for prez and are probably doing what they can to push the prices up...
First, an admission. In addition to being a player of horses, I am also in the retail gasoline business.
With that said, I can speak only to the demand in the Houston market. It is not only up, it is way the hell up. We are wearing out our pumps trying to meet that demand.
As for production being ahead of projections, I find that hard to believe since we have built not one single new refinery in this country in the past 28 years. Our existing refineries are, and have been for quite some time, running at over 95% of their capacity.
One last admission before I go. My price for regular unleaded went from $1.68 to $1.75 this morning. Why? Demand! My supply cost was up a bit also, but it was far south of a 7 cent increase. My gallons of gasoline sold for the first eight hours of business today was not down one iota as a result of the price increase.
God, I love capitalism. But before anyone rips into me with a vengeance, let me add that my beloved capitalistic society has afforded me the opportunity to bleed like a stuck hog on many occasions also. Such is life.
Still over $2 /gal. in Los Angeles...
But it is also about 33% our fault for not building any new refinery or drilling capacity. You can't have 1M SUV's being sold and no new production or refining. This is like California and the electrical problem 2 years ago - an incredibly tight market and no surplus capacity allows any one big player to screw everybody down the pipeline. And I would bet my life that if you could start subpeona'ing some of the major contract buyers, you would find some shady, shady people and some illegal market manipulations.
I'm all for free markets but I'm for transparent markets and this one is as murky as a crawfish pond.
Bottled water climbs to $600 per barrel.
Good news in a way. This will enforce energy conservation in a manner that no amount of being yelled at by government nannies could possibly achieve, and open up the quest for alternative forms of energy.
Mine the continental shelf for deposits of methane hydrate, extract the methane from the amorphous crystals, compress the methane to liquified natural gas, and transport this fuel source to ports. Automobiles will run perfectly well on methane, and if in liquified form when it is used to fill the storage tank, could be a satisfactory substitute for gasoline or Diesel fuel. Clean-burning, very low CO2 emissions, easy starting under all weather conditions and with relatively high energy content per pound of fuel.
It does take a considerable amount of energy to compress natural gas to liquid form, and refueling would at first seem to be a serious limitation. But swapping out of tanks at a refueling station, similar to what is done for propane tanks for something like a gas grill, should be a feasible technique. How much energy does it take to refine petroleum into its fractions? How complicated is the transport of the crude and refined products? Technology solved those problems, it can solve these problems.
Some day we may use hydrogen fuel cells to drive our personal transportation vehicles. Until that day comes, this makes a good interim engineering solution.
$50 ........ anybody ?
And the US$ downgraded as a B+ junk bond...
You have, in this old country boy's opinion, defined the problem in a nutshell with this statement.
As for your argument concerning the traders, I would point out that those traders only try to successfully predict the market. They by no means control it. Whether we in America choose to believe it or not, the price of gasoline at the pump, in spite of OPEC, continues to be driven by simple supply and demand economics. Every time we take actions that limit supply, and Lord knows we are the best in the world at that, we had better be prepared to pay through the nose for those limitations, because demand for gasoline is sky-rocketing.
Which party has the best plan and intentions for dealing with this problem? I choose to believe that it is the party of our current President. Dubya's energy bill was by no means perfect, but it did focus on the supply side of the equation. The other party's leaders simply say that everyone but them should drive smaller cars and drive less. That ain't gonna happen, trust me.
>Still over $2 /gal. in Los Angeles...<
Taxes and State EPA restrictions we don't have.
>As for production being ahead of projections, I find that hard to believe since we have built not one single new refinery in this country in the past 28 years. Our existing refineries are, and have been for quite some time, running at over 95% of their capacity.<
I seem to remember a couple of refineries were down for several months in late spring and early summer.I remember hearing in the last week that gasoline purchases were lower than projected this summer but i do not have source.
I grew up in my father's service station back when we had gas wars at $.25 per gallon.My dad always said we would get a price war about 10 days after a snow storm up north.(Need to keep pipeline moving.)
I have been a vender to "C stores for 20 years and understand the margin problem fully.You guys need to get the margins up where you can buy and sell more candy for me.
Time to start using the "C" word.
Bovine excrement!
LLS
False on both accounts.
I'm doing my best to help you out, Blessed. Got M&M's on sale through the end of the month. Had to raise my price on Marlboro's to cover my losses on the M&M's. If the Marlboro sales hold strong, I plan to put all Hershey products on sale next month.
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