It isn't always a perfect match in a given area every week. Notice that Ohio's prices fell faster than the national average. Also, neither climbed as fast as oil so it won't fall as fast either.
Posted on 08/14/2008 9:32:40 PM PDT by bruinbirdman
Opec last month pushed its production to the highest level in its 48-year history even as demand was slipping in the US and Europe, the International Energy Agency (IEA) said on Tuesday.
The combination of surplus supply and weaker demand has pushed oil prices to $113.50 a barrel, down 24 per cent in the past month and the lowest level since late April.
The effort was led by Saudi Arabia, which had come under increasing pressure for doing too little to compensate for lower supplies from countries outside Opec, where growth has been lacklustre as fields have aged in countries such as the UK and Mexico.
In mid-June, as oil inventories were running low, King Abdullah called a high-level international meeting in Jeddah and pledged to help reduce record prices by increasing Saudi production from 9.4m barrels a day to 9.7m b/d, the highest level in 30 years.
The market brushed aside the pledge, sceptical of whether the kingdom would make good on its promise and instead worried about supply outages in Nigeria. The oil price steadily climbed from just below $140 a barrel on the day of the meeting to $147.27 in July.
Tuesday’s preliminary data of Saudi shipments proved sceptics were both right and wrong. According to the IEA, Saudi Arabia did increase its production but not to the degree promised. In July, despite Saudi officials worrying about the impact the slowing economy and high petrol prices were already having on US driving habits, Saudi Arabia increased its output to 9.55m b/d, up 100,000, Tuesday’s report said.
The Saudi increase, which could still prove to have been more generous as new shipping data are collected, coupled with higher volumes from Iran, helped push the 13-member group’s total output to 32.8m barrels a day and the oil price to $114 a barrel.
Opec’s output in July was about 1m b/d higher than in April and significantly higher than the 31.1m b/d in the same month of last year.
Whether Saudi Arabia and Opec will continue to work to reduce prices, or revert to keeping supplies off the market now that prices have fallen, will become clearer at the cartel’s next meeting on September 9 in Vienna.
Opec’s production increase was not the only reason oil prices fell; demand curtailed by economic slowdown and high oil prices had also played a critical role, the IEA said.
The IEA cut its global oil demand growth to 790,000 barrels a day, down from July’s estimate of 890,000 b/d. Some of the demand in rich countries will be lost for ever, it noted, saying: “Even if retail prices ease, it seems unlikely that motorists who have purchased smaller cars will revert to gas-guzzling vehicles.”
But demand growth in emerging countries remained strong, with Chinese consumption rising above 8m b/d for the first time in June, hitting 8.3m b/d.
The market is split about the direction of crude oil prices, but the previous general bullish sentiment is cracking.
The IEA called it “too early to cite definitively a sea change in the market”.
The retailers have no choice but to follow the true market prices. Gas will go down. It just always goes down WAY slower than it goes up. They are all reluctant to lower prices and only do so kicking and screaming. But then somebody else in the food chain realizes that if they undercut their competitors a bit, they will steal business and increase profits. They only get away with this for a brief while, because competitors soon know they are undercut and respond in kind.
Eventually, gas finds its market price. It will go back down.
Domestic utilities have enough trouble charging rates that guarantee investors a reasonable return on equity. This means they have trouble maintaining infrastructure.
In the 70s utility companies were trying to diversify into businesses they knew nothing about in an attempt to boost returns/dividends.
States were telling utilities they had monopolies and shouldn't be able to pay dividends that competed with non-utility companies.
Utilities said, "OK we quit the monopoly part. Let anyone who produces electricity bring it in on our lines (just pay us for what we have) and sell it for what they want. We will just be responsible for infrastructure maintenance and growth and billing.
That's what led to Enron.
yitbos
Saudi Aramco ships more oil than any other company or country, 10% of the world's oil. Half of it's oil goes to the Far East.
Not only are they the biggest player in OPEC but they dominate the refining of oil and manipulate the price. Here's how the hustle works:
Saudi Aramco has an excess refining capability of 2 million barrels a day, that they don't use. The world's largest refineries (Khursaniyah and Shaybah) largely sit idle. They can come completely on-line in little over a month.
No company dares spend billions/years on a new refinery, when the Saudis can threaten to go on-line with 20% more refining and undercut the cost of processing at will and bankrupt anyone that tries to compete.
The Saudis control and monopolize refining. That's why Iran, is now building their FIRST refinery.
Example:
In 1990, Iraq invaded Kuwait, 3 million barrels/day went out of production, oil prices doubled to $40/barrel. Within 4 months Saudi Aramco increased production 60%, made up 75% of the lost production and in one year the price went back down to $20/barrel.
Who can compete with that? No one, and no one ever will. The Saudis can trump anyone and send the price anywhere.
So now the Saudis increase production only .3 million barrels/day and the spot price drops 24% in one month. They have 6 times that capacity UNUSED.
The Saudis are solely responsible for the price of oil.
BTW, the Saudis are discovering more oil each year than they pump. They ain't goin' away.
We can thank our own NY Mercantile Exchange for putting oil on their commodities market in 1983, creating oil futures. In 1986 the Saudis linked their oil price to the spot market.
Every time there's a hiccup in the middle east, a highly volatile futures market (that we created) panics, price skyrockets, and the Saudis never let it go down. Except when we come a beggin' for political cover.
Foreign oil must end if we want our freedom and stability.
In 1970, when the Saudis wanted to buy out 25% of Aramco, they doubled production in three years and did it.
The NEXT year they increased their share to 60%. In five more years, 1980, they owned 100%.
Five years later, 1985, they CUT production 70% to puff up the price.
Our robber barons were rank amateurs in comparison.
Riveting lesson. Thank you.
We could see oil back below 50, where a lot of alternative oil production would still be profitable.
In order for OPEC to crush solar, wind, oil sands, deep ocean and conservation, oil would have to go to below 30.
I’m taking credit for all this.
Going back to my 36 mpg Saturn has crushed oil demand.
It isn't always a perfect match in a given area every week. Notice that Ohio's prices fell faster than the national average. Also, neither climbed as fast as oil so it won't fall as fast either.
Iran already has nine refineries in Tehran , Tabriz , Isfahan , Abadan , Kermanshah , Shiraz , Bandar Abbas , Arak and Lavan Island. They just don't meet the countries demand.
Then why are billions of dollars currently being spent on refinery expansion projects?
http://www.ogj.com/category/online_subcategory.cfm?p=7&cat=Prong&maxrows=38
There is also the 'Cheating' factor. The higher the per barrel price the more likely individual OPEC members are to overpump their quota. When the cheating becomes widespread...
Do the people of Alaska realize they are sitting on a TRILLION DOLLARS worth of oil? Why aren’t they making any noise?
Thank you. Please do not, under any circumstances, BUY A HUMMER! lol.
Iran does have refineries, but none are primarily for the production of gasoline.
Abadan, in 2012 will be their first. Iran mainly does heavy crude processing. They import most of their gasoline as they couldn't justify building their own refineries for what they could buy gas from the Saudis, that was my point.
However, now, the world demand for gas has increased to the point that Iran can't out bid the rest of the world and imports of gas are limited, they are rationing and they are the second largest oil producers in the world.
All because the Saudis are the masters of refining.
The Saudis have screwed up by letting the spot price of oil get so high that others can now justify alternative fuels and new refineries.
The Saudis, in pumping oil, produce a lot of natural gas. So do a lot of countries, like Canada. So the Saudis are not competitive in that market.
What to do with that gas that the Saudis don't want to sell?
THEY USED TO BURN IT.
The equivalent of 1.3 million barrels a day.
The entire US uses 10 million barrels a day: They used to BURN OFF 13% of what our national oil imports are.
Then the Saudis realized they needed fuel themselves for electricity and harnessed the natural gas. So they wouldn't be themselves so dependent on oil and could hold more oil refinery capacity in reserve, a bigger hammer.
The Saudis know that when gas gets to $4/gallon, ethanol is competitive and corn farmers will go to the bank instead of them.
That is why the Saudis are manipulating the price of oil/gasoline. To make it hover at the profitability of our "moonshine gas".
That way the Saudis maximize income and the profitability of ethanol is iffy and we will spend years hesitating.
That is why we need to set a MINIMUM price of oil. That way, our domestic oil refiners and pumpers will have the confidence to build refineries and our corn farmers can offer a competitive alternative. And all of us will have the political will to develop alternative solar, wind, and nuclear power.
It is a rigged game if you play with the Saudis. We can only break their monopoly by rigging it even further.
Refining is the answer, at least temporarily, to stop the Saudi strangle-hold.
The refineries need to be built near where the oil is drilled, that is the problem with ANWAR, it's oil will be much less competitive as crude is expensive to ship.
Off shore oil is, BY FAR, the most competitive oil we can find, and where we should put our political energy.
Again, we need minimum price support to encourage competition. Then lay an energy tax on that domestic oil and give the money to alternative energy development.
No, refineries produce multiple products. They need to be more centered where the products are consumed, either industrial facilities or distribution networks.
it's oil will be much less competitive as crude is expensive to ship
Why do you think it is cheaper to separately ship: gasoline, Aviation Gasoline, diesel, kerosene, Jet Fuel, residual fuel oil, Ethane, Ethylene, Propane, Propylene, Butane, Butylene, Isobutane, Isobutylene, Lubricants, Waxes, Petroleum Coke, Asphalt and Road Oil as compared to Crude Oil? Modern refineries produce all of these and also need inputs of methane, natural gas liquids, hydrogen and others.
Heavy crude processing refineries are needed near the sources to do a rough breakdown so that sweet crude and heavy crude are separated. The problem is cheaply separating out the sulphur in pumped crude.
Each type has a different consumer/usage and value, and needs to go to different locations more efficiently. Road and roof tar have a different distribution system than gasoline and vehicle oils.
If we had offshore oil, fed by pipeline, to on-shore heavy crude refinery processing, then to multi-fuel refineries as you named, all distributed by our domestic oil companies, we would have the most competitive system.
That would keep our wealth here, that could be taxed for alternative fuel development.
If we could solve the sulphur problem, our coal, oil-shale, and tar-sand would make us completely energy independent in a few years at best.
Are you confusing an upgrader plant like what is used in conjunction with oil sands development with a refinery?
There is no reason to separate sulfur from crude away from the market for sulfur. It only makes another product to handle and transport to the same industrial market.
Heavy/light is a completely different topic than sweet/sour. There are plenty of light, sour crudes and there are heavy sweet crudes.
Heavy crudes are not separated to make make light crudes. Initial distillation of any crude produces multiple products.
Heavy versus light only produces the same products in different ratios. Heavier products get more processing to more closely match product demand.
In addition, there are other pre-distillation process that go on like a de-salter. There is little advantage to adding additional upstream processing beside oil/natural gas/water separation.
Each type has a different consumer/usage and value, and needs to go to different locations more efficiently. Road and roof tar have a different distribution system than gasoline and vehicle oils.
Those distribution networks and industrial customers are already in place around our existing refineries. Why would we want to move processing away from them.
That would keep our wealth here, that could be taxed for alternative fuel development.
What? Moving refining capabilities from the West Coast to Alaska doesn't make any domestic change. And since most of our oil is imported, what you suggest would move more jobs overseas instead of keeping them domestic. Most of our imports are heavy crude and we have no problem continuing to build and operate hydrotreaters for sulfur removal.
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