Can Anyone Paint a clear Oil Picture

[GTKeeper]

I just read this article:

http://uk.reuters.com/article/.../idUKN0325640920080703

I don't know how oil is bought and sold, but common sense to me would be that exproting 1.6 million barrels a DAY probably increases costs somewhat since it takes fuel to transport fuel.

Now, it would not surprise me if oil companies are doing everything they can within legal means to keep oil prices high. Thats standard corporate operating procedure.

What I don't understand is why no one, and I mean no one can paint a picture that goes like this:

Here is this months demand:
Here is this months supply:
Hence here is the expected price.

I just don't get it. If there is a true shortage of oil (as the price per barrell indicates) why the hell are we exporting so much of it?

I guess one more point: If exports increased by .4 million barrels a day, does that mean we have that much more 'extra' oil?

 

[StageLeft]

A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter; I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

 

[GTKeeper]

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter; I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

I hope so! Otherwise this looks REALLY dumb.

 

[dmcowen674]

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter;

I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

Here come the apologists already.

Any business that "messed up" as you put it should be shut down and taken over immediately.

 

[Queasy]

Read the second and third pages of that article. It explains it.

 

[mshan]

This is mutual fund manager Brian Barish's thesis on "peak oil": http://www.cambiar.com/cms_images/file_162.pdf (peak oil thesis starts on page 4)

I didn't read the above article, but I would guess you need to factor in currency exchange rates in determining where a country can get it's oil most cheaply, and where it can sell it for the most money.

This article about how global supply chains, which used to make sense when oil was cheap, are no longer as economical and manufactuers are starting to place supply chains closer to actual end market.

Also, weren't Nintendo Wiis in very short supply in the U. S. for quite some time, because it was more profitable to sell them in Europe (?). I remember reading that that market was becoming saturated, so more supply was going to be redirected to the U. S.

 

[EagleKeeper]

Originally posted by: dmcowen674

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter;

I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

Here come the apologists already.

Any business that "messed up" as you put it should be shut down and taken over immediately.

socialism at its finest.

When does the government do anything more efficiently?

Look at the passenger railroad system.
Look at the shipping ports and the extra costs that the government allows.

 

[tk149]

Originally posted by: Queasy
Read the second and third pages of that article. It explains it.

Not entirely. The article suggests that some of the exported fuel is not compliant with US emission standards (and therefore can't be sold in the US), and that the US (unlike some other countries) does not subsidize its consumers, which means that the global market is driving up fuel prices in the US.

My understanding of the article is that the oil companies are selling refined fuel to the highest bidder, which is driving up prices at home.

The next question in my mind is,

Should the US government:
1) subsidize US consumers fuel purchases by either limiting fuel exports (which would cut oil company profits) or directly subsidizing fuel purchases (which would require higher taxes on something...like, y'know, gasoline), or

2) do nothing, and let the global market dictate fuel prices in the US?

I personally don't like either option, but in some way, it just seems wrong that we're importing crude oil and exporting gasoline while the US economy is taking a beating which is partially related to soaring transportation costs.

Anyway, none of this really addresses the OP's question (and I have the same exact question):

What I don't understand is why no one, and I mean no one can paint a picture that goes like this:

Here is this months demand:
Here is this months supply:
Hence here is the expected price.

I know emerging countries are increasing there demand for fuel, but gas prices have doubled in the last 3 years. Has world demand doubled, or has crude oil supply decreased by a factor of 2 to 1? I doubt it, which means something else is going on here.

 

[mshan]

Read the link I provided above.

I think spot prices are based upon demand for that last marginal barrel of oil, so huge run up in oil prices may have had some fundamental basis in the recognition that spare capacity in the system was disappearing.

Some of decline in oil price could be due to recognition by the markets that the global subprime credit crunch is going to eventually affect Asia too (i.e. worldwide global slowdown).

(More new drilling may not be the answer, because someone on non-cable tv news said it wouldn't produce a drop of oil for 10 years)

 

[Moonbeam]

I believe most of the great masterpieces hanging in museums were painted in oil.

 

[DealMonkey]

Originally posted by: Common Courtesy

Originally posted by: dmcowen674

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter;

I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

Here come the apologists already.

Any business that "messed up" as you put it should be shut down and taken over immediately.

socialism at its finest.

When does the government do anything more efficiently?

Look at the passenger railroad system.
Look at the shipping ports and the extra costs that the government allows.

While I don't like socialism, let me rebut your point by mentioning the following four words: United States Postal Service. No private company can deliver a letter for $0.42 across the country in two days.

 

[SleepWalkerX]

Originally posted by: DealMonkey

Originally posted by: Common Courtesy

Originally posted by: dmcowen674

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter;

I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

Here come the apologists already.

Any business that "messed up" as you put it should be shut down and taken over immediately.

socialism at its finest.

When does the government do anything more efficiently?

Look at the passenger railroad system.
Look at the shipping ports and the extra costs that the government allows.

While I don't like socialism, let me rebut your point by mentioning the following four words: United States Postal Service. No private company can deliver a letter for $0.42 across the country in two days.

They jacked their rates up despite doubling their volume. Sound like efficiency to you?

There is no reason to keep USPS a monopoly at this time and age.

 

[Dman877]

If oil companies competed against each other, perhaps the anti-socialists would have a point. Competing industries typically do a better job of whatever it is they're doing than a government would. However, oil companies don't actually compete with each other. The price of oil is set by the Saudis and when they cut supply and prices go up, the oil companies get a piece of that action. It comes from deals they have with OPEC and from the fact that their reserves are now worth more.

That's why the neocons wanted to go into Iraq, to bust up Saudi control of the oil market. Guess who stopped them? The oil companies.

 

[GTKeeper]

Originally posted by: Dman877
If oil companies competed against each other, perhaps the anti-socialists would have a point. Competing industries typically do a better job of whatever it is they're doing than a government would. However, oil companies don't actually compete with each other. The price of oil is set by the Saudis and when they cut supply and prices go up, the oil companies get a piece of that action. It comes from deals they have with OPEC and from the fact that their reserves are now worth more.

That's why the neocons wanted to go into Iraq, to bust up Saudi control of the oil market. Guess who stopped them? The oil companies.

Interesting thought.... how did the oil companies stop them?

 

[Fern]

Originally posted by: GTKeeper
-snip-
What I don't understand is why no one, and I mean no one can paint a picture that goes like this:

Here is this months demand:
Here is this months supply:
Hence here is the expected price.

While I'm sure many experts here stand ready to answer your question and clear up the whole pricing thing, the fact of the matter is those people who actually know aren't posting here.

They're analysts working on Wall Street (or Chicago where some moved after 9-11) and too busy making a bazillion $'s.

I'm pretty sure it's a fairly complicated excercise including analyzing trends and projected future demand/supply etc that all goes into their *secret stew*, and they ain't talking, at least not much.

If it was easy and common knowledge we'd all know when to go long or short, and the big firms wouldn't go backrupt trying to guess (as one recently did).

Fern

 

[Throckmorton]

Originally posted by: SleepWalkerX

Originally posted by: DealMonkey

Originally posted by: Common Courtesy

Originally posted by: dmcowen674

Originally posted by: Skoorb
A country would be stupid to import a net of a certain crude and export some of the same, so in this case it must be the specifics of the oil or the refining and I think it's the latter;

I believe that the US imports gasoline and exports diesel, at least on some level or for some price benefit, because the UK and possibly other nations have their refining mix messed up such that they need more diesel and we need more gas, so we trade.

Here come the apologists already.

Any business that "messed up" as you put it should be shut down and taken over immediately.

socialism at its finest.

When does the government do anything more efficiently?

Look at the passenger railroad system.
Look at the shipping ports and the extra costs that the government allows.

While I don't like socialism, let me rebut your point by mentioning the following four words: United States Postal Service. No private company can deliver a letter for $0.42 across the country in two days.

They jacked their rates up despite doubling their volume. Sound like efficiency to you?

There is no reason to keep USPS a monopoly at this time and age.

You're right. Oh how I long for an alternative to USPS!

:roll:

 

[JS80]

Originally posted by: Fern

Originally posted by: GTKeeper
-snip-
What I don't understand is why no one, and I mean no one can paint a picture that goes like this:

Here is this months demand:
Here is this months supply:
Hence here is the expected price.

While I'm sure many experts here stand ready to answer your question and clear up the whole pricing thing, the fact of the matter is those people who actually know aren't posting here.

They're analysts working on Wall Street (or Chicago where some moved after 9-11) and too busy making a bazillion $'s.

I'm pretty sure it's a fairly complicated excercise including analyzing trends and projected future demand/supply etc that all goes into their *secret stew*, and they ain't talking, at least not much.

If it was easy and common knowledge we'd all know when to go long or short, and the big firms wouldn't go backrupt trying to guess (as one recently did).

Fern

:roll: bazillion my ass, more like a gazillion.

 

[Rainsford]

Originally posted by: Fern

Originally posted by: GTKeeper
-snip-
What I don't understand is why no one, and I mean no one can paint a picture that goes like this:

Here is this months demand:
Here is this months supply:
Hence here is the expected price.

While I'm sure many experts here stand ready to answer your question and clear up the whole pricing thing, the fact of the matter is those people who actually know aren't posting here.

They're analysts working on Wall Street (or Chicago where some moved after 9-11) and too busy making a bazillion $'s.

I'm pretty sure it's a fairly complicated excercise including analyzing trends and projected future demand/supply etc that all goes into their *secret stew*, and they ain't talking, at least not much.

If it was easy and common knowledge we'd all know when to go long or short, and the big firms wouldn't go backrupt trying to guess (as one recently did).

Fern

But like most Wall Street issues, this problem exists almost within the sphere of Wall Street and financial districts in cities around the world. Sure, there are consumer market forces involved, but the big reason it's difficult to analyze pricing trends is because analysts are busy buying and selling while trying to predict pricing trends. And the big financial companies are able to buy and sell so much that they affect the overall market. In other words, Wall Street largely creates the very market it's trying to analyze.

Without the commodities market, I think pricing of oil would be MUCH more stable. Actual usage based demand should be far easier to predict than demand based on a market that has no intention of using a single drop of the oil being bought up.

 

[charrison]

Originally posted by: Rainsford
Without the commodities market, I think pricing of oil would be MUCH more stable. Actual usage based demand should be far easier to predict than demand based on a market that has no intention of using a single drop of the oil being bought up.

The only problem with that is that most commodities are this point haev gone way up, even if they are not traded in futures markets. Iron ore is one such commodity that is not traded in futures market and it has pretty much followed the same upward curve as other traded commodities.

 

[Brovane]

Didn't we already talk about this several weeks ago? Looking over the data most of the export is finished petroleum products. I see a lot of fuel oil being exported and petroleum coke. For example a refinery that makes fuel oil might not have much demand during the summer months and it is difficult to change a refinery mix so you can export fuel oil during the summer when demand is low.

 

[Dman877]

Originally posted by: GTKeeper

Originally posted by: Dman877
If oil companies competed against each other, perhaps the anti-socialists would have a point. Competing industries typically do a better job of whatever it is they're doing than a government would. However, oil companies don't actually compete with each other. The price of oil is set by the Saudis and when they cut supply and prices go up, the oil companies get a piece of that action. It comes from deals they have with OPEC and from the fact that their reserves are now worth more.

That's why the neocons wanted to go into Iraq, to bust up Saudi control of the oil market. Guess who stopped them? The oil companies.

Interesting thought.... how did the oil companies stop them?

It came down to state vs private ownership of the oil fields there. Cheney made the call and the state got them. So instead of private companies pumping all they could from the second largest oil reserve in OPEC, the oil is state controlled and capped by OPEC at an insignificant amount. Iraq has a lot more oil than Iran but Iraq's output is capped by OPEC at the same level as Iran can produce. Supposedly this is to prevent war between them.

 

[shira]

Originally posted by: Queasy
Read the second and third pages of that article. It explains it.

Your posts make you appear to be an apologist for the oil industry. The article, in fact, did NOT "explain it" to my satisfaction:

However, both the EIA and API admitted they did not know why daily U.S. gasoline exports to Canada skyrocketed to 41,000 barrels in January-April this year from 9,000 barrels in 2007.

 

[heyheybooboo]

Originally posted by: Brovane
Didn't we already talk about this several weeks ago? Looking over the data most of the export is finished petroleum products. I see a lot of fuel oil being exported and petroleum coke. For example a refinery that makes fuel oil might not have much demand during the summer months and it is difficult to change a refinery mix so you can export fuel oil during the summer when demand is low.

I'm not really paying attention but to answer your question: Yes - a portion of the 'exports' are finished petroleum products.

There is also a substantial 'crude' export. And as you noted there are operational and technical reasons for that as well.

And to 'kind of' answer the OP: As noted in the 'crude' comment above sometimes it is easier from a logistics standpoint to export to a refinery and re-import the finished product.

Valero Energy (our largest refiner) has a number of facilities throughout the Caribbean. Lookee here for one example.

Maybe that's why Aruba has some of the highest CO2 emissions per capita in the world

 

[heyheybooboo]

Originally posted by: Dman877

Originally posted by: GTKeeper

Originally posted by: Dman877
If oil companies competed against each other, perhaps the anti-socialists would have a point. Competing industries typically do a better job of whatever it is they're doing than a government would. However, oil companies don't actually compete with each other. The price of oil is set by the Saudis and when they cut supply and prices go up, the oil companies get a piece of that action. It comes from deals they have with OPEC and from the fact that their reserves are now worth more.

That's why the neocons wanted to go into Iraq, to bust up Saudi control of the oil market. Guess who stopped them? The oil companies.

Interesting thought.... how did the oil companies stop them?

It came down to state vs private ownership of the oil fields there. Cheney made the call and the state got them. So instead of private companies pumping all they could from the second largest oil reserve in OPEC, the oil is state controlled and capped by OPEC at an insignificant amount. Iraq has a lot more oil than Iran but Iraq's output is capped by OPEC at the same level as Iran can produce. Supposedly this is to prevent war between them.

You guys are dancing around one key fact: Iran and Iraq have more excess capacity than anyone else in the world to produce crude oil and refined products - even more than the Saudis.

We've been messin' around over there for over 20 years. In that timeframe oil exports from Iran and Iraq have been reduced over 40%.

 

[GTKeeper]

Originally posted by: heyheybooboo

Originally posted by: Dman877

Originally posted by: GTKeeper

Originally posted by: Dman877
If oil companies competed against each other, perhaps the anti-socialists would have a point. Competing industries typically do a better job of whatever it is they're doing than a government would. However, oil companies don't actually compete with each other. The price of oil is set by the Saudis and when they cut supply and prices go up, the oil companies get a piece of that action. It comes from deals they have with OPEC and from the fact that their reserves are now worth more.

That's why the neocons wanted to go into Iraq, to bust up Saudi control of the oil market. Guess who stopped them? The oil companies.

Interesting thought.... how did the oil companies stop them?

It came down to state vs private ownership of the oil fields there. Cheney made the call and the state got them. So instead of private companies pumping all they could from the second largest oil reserve in OPEC, the oil is state controlled and capped by OPEC at an insignificant amount. Iraq has a lot more oil than Iran but Iraq's output is capped by OPEC at the same level as Iran can produce. Supposedly this is to prevent war between them.

You guys are dancing around one key fact: Iran and Iraq have more excess capacity than anyone else in the world to produce crude oil and refined products - even more than the Saudis.

We've been messin' around over there for over 20 years. In that timeframe oil exports from Iran and Iraq have been reduced over 40%.

I think it will be interesting how this whole thing plays out....

What I mean is, obviously the powers that be are intentionally constraining supply or the appearance of it to drive prices up. I think if oil prices stay too high for too long, long enough for viable alternative fuels to be developed, I wonder if we will enter a situation where:

1) Alternative fules have a fair share of the overall market (maybe in the US at first, then Europe)

2) We end up with a bunch of unused oil in the ground because alternative fuels caught up.

It would be especially interesting, if alt. fuels would become so much cheaper than oil, that it wouldn't even be worth it to get the oil out of the ground in the first place. Essentially making oil semi-worthless.

This might be an extreme example, but its something that is viable I think. Especially if you look at the rate of recent advancement in cars/solar/wind power. Who bought hybrids 10 years ago? No-one.