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.
Actually there is a great excuse, perhaps the greatest ever.
The Democrats must be defeated, trashed, destroyed in November.
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You probably have the right take on the article writers politics. The guy wants lower oil prices to benefit dems.
Since demand keeps dropping.
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Its overseas demand that drives prices.
As others have pointed out, it is a global market and the price of oil is largely driven by demand for gasoline.
Demand for gasoline in the US peaked, has fallen, and will continue to fall because of the rising CAFE standards.
OTOH, around the world, there is a rise in income, increasing middle class, reductions in poverty. More and more people buying cars and the gasoline to fuel their cars.
So the price of oil and price of gasoline is being driven by consumers in China and other Asian nations, and consumers in Mexico, Brazil, and Latin America.
US exports of gasoline and diesel are at record levels, the most since WW2.
It is legal for US oil producers to export oil only to Canada and Mexico. Mexico doesn't need US oil, but we are exporting record amounts of oil to Canada because The eastern Canadian refiners are set up for the sweet light Brent crude oil and they want the sweet light shale oil produced in the US(Bakken-Eagle Ford) to replace the Brent crude.
As you probably have noticed, US oil producers are agitating, for Obama, Congress, or both to relax oil exports regulations to allow them to export oil to nations other than Canada/Mexico.
And the refiners are agitating to get the Keystone pipeline completed to get more of the Alberta heavy crude down to the refiners on the gulf coast.
Rather than thinking of the US in terms of importing and exporting oil, refined product, natural gas, energy. Think of the US as a Trader of these products.
Traders, whatever they are trading, always benefit monetarily more than the producers and consumers.
Why don’t we see refineries being built nearer to the oil fields to reduce the cost of transportation of the product??
“..The guy wants lower oil prices to benefit dems...”
OK I am not well versed in oil politics - that’s a given.
However, the way I see it lower costs at the pumps benefits all Americans - from the over the road truckers, air lines, manufacturers, etc. to my greatest daily expense - the price I pay for gasoline.
Light distillates are the fastest-growing refined product category
Because it is cheaper to move crude oil the distance than to build new refineries, tear down old refineries, then build new product pipelines and other transportation for gasoline, diesel, jet fuel, heavy fuel oil, chemicals feedstocks, sulfur, petroleum coke, and all the other products that come out of a refinery.
Oil is converted to different grades of gasoline, diesel, kerosene, jet fuel, solvents, heating oil, precursors for synthetic chemicals/plastics, paint, ink, tar for roads and roofs, shingles, petroleum coke which is burned to produce electricity, condoms & combs, to name a few.
NIMBY. Have you ever smelled the effluent that a refinery produces?
The modern refineries typically release cooling water cleaner than the water they take in, if they have any release at all.
I was mainly referring to the smell.
My Grocery bill agrees with your analysis.
News update says oil is surging, up today more than $1, above $104/bbl.
“The modern refineries typically release cooling water cleaner than the water they take in, if they have any release at all.”
Nope.
Industrial cooling tower water systems constantly release a percentage of the circulated water as purge. The purge controls the build up of contaminants in the closed system.
That’s exactly what you do to your car glycol cooling system. The “purge” is intermittent every thousands or miles or number of years, recommended by the manufacturer. Draining, flushing and replacing with fresh 50% glycol fill.
Some plants use potable water for cooling tower systems. No way that the cooling water will come out cleaner. IOW, good for human consumption as the same potable water used to fill cooling systems.
http://www.ecy.wa.gov/programs/air/pdfs/cooling3.pdf
Once-through cooling water systems such as river water and seawater are different animals.
I’ve seen several refineries and Chem plants that had to significantly clean the canal, river etc before the water can be used in the plant. The resulting release water is often cleaner than the original intake.
“I’ve seen several refineries and Chem plants that had to significantly clean the canal, river etc before the water can be used in the plant.”
Yes. Using multiple filters to remove mud, dirt and what have you to protect the cooling water system equipment from deposits, plugging, etc.
“The resulting release water is often cleaner than the original intake.”
No. Only “clearer” water. The back flush of filters using same river water is pumped back in the river. IOW, you saw the clearer water but not the back flush carrying what was in it in the first place because of a different exit point into the river downstream the first one.
Assuming not adding any chemicals to a one through cooling system, the effluent temperature shouldn’t exceed certain temperature according to regulation and may have to be cooled before pumping back to the river.
However, the way I see it lower costs at the pumps benefits all Americans -
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I don’t disagree.
No, I mean skimmers and separators on the intakes. I’m not talking about a visual measurement.
Just a guess but you could move crude in one pipeline but you would have to build dozens of pipes to carry the various distillates.
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