Skip to comments.There's No Justification for Crude Oil Prices in the Stratosphere
Posted on 06/09/2014 5:07:51 AM PDT by ckilmer
NEW YORK (TheStreet) --Speculation for crude has been rampant over the past six months. Despite the fact that we are merely one month and 0.03% away from making an all-time high in crude oil supplies, we're seeing WTI crude at $102.76. If the price was based purely on a supply/demand theory, we should be in the low $80s.
We've all heard market pundits mention the U.S. should repeal all the laws prohibiting the exportation of crude oil. What they don't mention is these laws have not prevented these companies from exporting all forms of refined products. We have doubled our exports of gasoline in the past five years. Despite this, people are paying about $4 per gallon at the pump. Regardless of what you feel about fracking, it has produced huge amounts of oil.
Recently, U.S. refineries decreased production to about 9.5 million barrels a day. Despite this decrease we saw an uptick in the surplus of gasoline by 0.2 million barrels. This shows us the demand is slightly down while prices continue to climb.
Why? Well there have been several reasons over the last six months to believe that crude may spike. Russia, a major producer, was playing a risky game of geopolitics with Ukraine and the rest of Europe. Things were tense and worries were high that the supply they gave Europe could be turned off. Libya, a very minor producer in the global landscape, had a revolt where rebels stormed the capital. They were already only running on a fraction of capacity. Iran, another major player, had been hit with major sanctions limiting its output.
For the most part, all of these political fears have been resolved. Putin appears to be playing nice, and is even telling Ukraine it has more time to pay its natural gas bills. Libya has calmed down to a whimper. Iran not only had been ignoring earlier sanctions, the U.S. gave it the green light to go ahead and produce as much as it wanted as long as it discontinued the nuclear program. T
This all has happened while Canada realized the oil sands in Alberta, in addition to not drying up, were yielding much more than originally thought. Just for this area alone Canada is realizing there will be an increase of 72,000 barrels a day than originally expected.
Due to the invention of fracking, U.S. production was up 14% in 2012 and 15% higher in 2013. Just since January of this year crude production is up roughly 12% again. North Dakota and Texas are responsible for the vast majority of this production, but it is only a matter of time until they find another hot spot somewhere in the U.S.
We are literally at the point where we are running out of storage room for our crude and companies are distilling it for export.
What's the point? There's no longer any excuse for us to be paying more than $3 per gallon at the pump. We're all for using cleaner energy and getting rid of crude, but in the meanwhile prices should be much lower. The entire 25% difference would be going directly to GDP in the long run.
Speculators, wake up! With all the geopolitical issues resolving themselves... crude isn't worth $103 per barrel.
Since demand keeps dropping.
On the one hand its best for frackers to have oil at these prices. On the other other hand its nicer to pay 3.00 at the pump than 3.60 or so. On the third hand, I saw an article the other day about the majors saying they needed oil at about 120@barrel to do the arctic drilling and other speculative—big cost up front— drilling.
We get reports here in FR about how much oil we're producing and how we are rapidly approaching the world's largest producer/refiner and yet .. we have gasoline pushing 4 dollars.
I have the same question ...
Pigs get fat.
Hogs get slaughtered.
See the chart posted above. Global consumption is climbing. We still continue to import significant amounts of oil, not much less than we produce ourselves.
Our production has been climbing due to the relatively high prices. Otherwise we would not see the climb in production and more of our dollars would be going to OPEC rather than staying in the US.
Actually there is a great excuse, perhaps the greatest ever.
The Democrats must be defeated, trashed, destroyed in November.
To give them the advantage of lower gas prices would be counter productive, even tragic.
American business has decided that the end to the Obama tyranny can be forced by concerted action. American business has taken all it will take and is using the weapons at hand to fight back.
The high gas prices are the answer to the question. “Do we depose the President by coup d’état or by using our business capabilities to destroy him?”
This all makes a lot more sense if you look at it from the other direction.
Thanks to years of deficit spending and money printing the US fiat dollar is now worth only 1/3 of a gallon of gas, or 1/1200 of an ounce of gold. If this country doesn’t change course immediately I would expect the US dollar to shortly be worth only 1/10th of a gallon of gas or 1/5000th of an ounce of gold, or perhaps far less.
Why? Because we are paying based on world supply/demand, regardless of local supply/demand.
Forget OPEC, we are being reamed by our own oil industry.
Never mind the fact that it is cheaper drill/refine/sell it here, as opposed to shipping it across the world. You are paying the world price.
You think it is cheaper to produce from our tight shale formations than the massive flow from Saudi’s Ghawar?
Subtract the terrorism and shipping, yes.
More people around the world are using oil and the refined products from that oil.
Millions more Chinese, Russians, Indians, etc. own cars than they did just a few years ago and they are willing to pay the price to drive them.
China has also been stockpiling.
If you think the election of a Republican in 2016 would result in significantly lower gas prices then you're fooling yourself.
This is a much better way to compare commodity prices.
$USD is like pricing in Charmin these days (except for Venezuela).