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17966
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8/15/2006
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Central, TX
US
Edited Date/Time
1/26/2012 8:44pm
Youre in the oil biz, can you explain something for me?
Over and over all we hear is that the USA doesnt pump much oil into the system, and even if we were to do more exploration it wouldnt amount to much in the big picture. If this is true, explain something if you can.
Each time we have a hint of a hurricane in the Gulf, the local-yocal gas stations are raising the price at the pump - YET on the news each night Im seeing the cost for Crude going down. Isnt that gouging by definition? If we dont make enough Crude to amount to anything, (thats what everyone keeps saying) who gives a rats ass if a few oil rigs in the Gulf go offline, right?. It shouldnt make much difference anyway.
And since Crude is getting close to $100 a barrel - how come gasoline isnt anywhere near what it cost last time it was $100 a barrel? If the cost per barrel goes up - even a few dollars a barrel the local-yocal stations were moving up their prices daily - by leaps & bounds! But now that the price per barrel has been steadily falling, those station owners are REALLY reluctant to lower anything - and even then only a few pennies here and there.
When a big storm gets into the gulf, there's a chance for serious damage to big oil production platforms that can take them out of service for a long time - cutting into world oil supply by a million bbl/d or so. The problem isn't so much a two day interruption, but the potential for long term disruption. Obviously, that makes the price go up, and that makes some sense. Any potential reduction in world supply at this point is critical, because we've found in recent years that world supply with everything in the world running WFO is about balanced with world demand, and when that situation exists, even minor disruptions in supply cause disproportionate price swings. Now, the part that doesn't make much sense is the instantaneous relationship between oil pricing and gas pricing. That seems to be a bit of a slinky dog deal - you pull the dog's head down the street for a while and then its hind end catches up. I've never tried to relate the cost of gasoline to the cost of oil based on time and see if they tend to correlate, or whether gas prices jump when oil prices go up a little and take a lot longer to drop when oil goes down. It seems like it goes that way, though. Whether that's price gouging or not is anyone's guess - I kind of doubt there's any collusion going on among oil companies, but I could be wrong.
There are a few reasons people say increasing US production by one million bbl/d in 5 to 10 years via increased exploration won't make much difference in price. First, US oil production is always decreasing and this oil would just replace the current production. Second, one million bbl/d isn't much oil when you're pushing it into a world market of 86 million bbl/d. Third, the reality of the world oil situation is it's not a pure suppy and demand relationship, because OPEC can manipulate the price. If we brought another million bbl/d on and that had a significant affect on prices, OPEC would just decrease their production by one million bbl/d.
On a more fundamental level, there's a strong suspicion that we've learned a few things about the energy world in the last couple of years. First, Americans will stop driving if they have to pay $4/gallon. Second, those Saudi boasts that they can increase production at will are BS, like a lot of energy professionals have been saying for a long time. If the Saudis could have increased production when oil was $125+, they'd have done it, because the one thing OPEC doesn't want to see is an American energy policy. They want prices to be as high as they can get them but not so high that Americans start conserving and switching from oil to other sources of energy.
The problem isn't so much a two day interruption, but the potential for long term disruption
Thats just it - the price of crude was unaffected by the potential for distruption, its still went down for the day. So apparently the traders werent worried about Ike - but the local gas stations ARE raising thier prices. Do you see my point? I understand the slinky dog allusion - but its not a equal slinky. The dog always works in favor of the energy producer/retailer, and people are starting to smell a skunk. All the BS excuses are starting to wear off and folks are waking up.
Any potential reduction in world supply at this point is critical
Well if even the threat of the Gulf being offline kicks off concern, doesnt that mean that the oil we are producing locally matters? My point being, everytime Pickens and others say we need more exploration at home, I keep hearing other folks hollering, "It wont make enough difference to matter." BUT, when there is a threat of those precious few Rigs in the Gulf going offline, alluva sudden there is a disruption in supply enough to matter? I know Im not smart, but which is it? Does our local production matter - or doesnt it matter? Apparently what we produce locally matters bigtime,, even if it is a small amount.
To me, a lay person, this is proof positive we need to drill more locally and do more local production at home. Apparently what we are doing here is indeed a big deal. I mean, just the threat of our teeny production going offline literally raises prices at the pump, the VERY next day - regardless if the price of crude even changes.
I've never tried to relate the cost of gasoline to the cost of oil based on time and see if they tend to correlate, or whether gas prices jump when oil prices go up a little and take a lot longer to drop when oil goes down. It seems like it goes that way, though.
Well even a layperson can see the correlation if they watch the News nightly when they announce the daily price per barrel - then the next morning drive by the local-yocal gas station and see how much the price went up overnight. I know its not scientific in nature, but every time the price of crude was announced higher on the evening news, the locals jack their price up proportionately. Guaranteed. And same with hurricane threats - if the path is headed over the Gulf - boom - they jack the prices. Even when the price of crude is falling !! It doesnt take a economist or energy strategist to see the correlation. Difference being, they are nowhere near going down the same as they went up. Not even close.
Thanks for the input, I know you have way more saavy on this stuff the rest of us.
Post a reply to: Whknuckle