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Someone here may have an explanation..

rickoricko Posts: 98,724 ✭✭✭✭✭
I see in the news and other venues that there is a glut of oil on the market. Yet, gasoline

prices continue to rise and there is talk of $80 a barrel in the near future.

Why??? Cheers, RickO

Comments

  • mariner67mariner67 Posts: 2,746 ✭✭✭
    Often you hear excuses like "production temporarily down due to refinery maintenance issues closing refineries" etc.
    All BS in my opinion.
    Then…there is the conspiracy price manipulation stuff.
    $80 a barrel? Don't count on it anytime soon.
    JMHO.
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  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    I never noticed a drop in motor prices throughout the entire fiasco.

    Could be that the retailers so far refuse to recognize supply and demand. It's not like people are gonna stop driving until the retailers fall in line.


    Some good insight from a knowledgeable, outside-the-box thinker:

    MISH: "Think Beyond Oil And Gold"

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • lkeigwinlkeigwin Posts: 16,892 ✭✭✭✭✭
    I have no doubt that refiners manipulate. But it is also true that when oil is cheap some development is not economical. Which reduces supplies and pushes prices.



    Here in CA we suffer from a requirement for a special, reformulated blend. Naturally, it is more expensive to produce.

    Lance.
  • AUandAGAUandAG Posts: 24,759 ✭✭✭✭✭
    Originally posted by: lkeigwin

    I have no doubt that refiners manipulate. But it is also true that when oil is cheap some development is not economical. Which reduces supplies and pushes prices.



    Here in CA we suffer from a requirement for a special, reformulated blend. Naturally, it is more expensive to produce.

    Lance.




    We have no such requirements in Nevada but get all our gas from California so just have

    to put up with their restrictions.



    bobimage
    Registry: CC lowballs (boblindstrom), bobinvegas1989@yahoo.com
  • piecesofmepiecesofme Posts: 6,669 ✭✭✭
    Originally posted by: lkeigwin

    I have no doubt that refiners manipulate. But it is also true that when oil is cheap some development is not economical. Which reduces supplies and pushes prices.



    Here in CA we suffer from a requirement for a special, reformulated blend. Naturally, it is more expensive to produce.

    Lance.




    Untrue. Refiniries run constantly, they may slow things down because of lack of crude to refine, but they don't shut down. It easier to run slower than to restart a shut down line.



    Now what happens when something runs constantly? It can't be worked on because it's running, and eventually, things break down and they have to work on repairs.

    Repairs take place at a very slow pace for safety concerns thanks to overbaring OSHA laws, and then as mentioned, restarts are quite entailed, taking more time.



    Meanwhile, demand is still taking from supply that isn't being added to. The result? The consumer pays more for the refined product.



    Additionally, the newest (I say that with a smerk on my face) Refinery was built in 1972 in Joliet, IL and the Government will not allow any more Refiniries to be built. So, 45 year old equipment...at a minimum, is being ran constantly. And yet another thing...when repairs are made, imagine the fun trying to put new parts with old existing parts.



    Take it from someone in the biz for 21+ years, speaking to your statement about Refiners manipulating the market, that is untrue. Now TRADERS of the commodity that aren't forced to actually take delivery of the product manipulating it, that's where the manipulation rubber meets the road.
    To forgive is to free a prisoner, and to discover that prisoner was you.
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    The news or MSM is often the last to tell you that something has bottomed or topped. By the time they trumpet an oil recovery, it will have been 1-2 years rallying. News of gluts are invariably followed by "unexpected" news of shortages and under-production. Recall that that back in December it was all but a sure thing that gold was heading under $1,000, even down to $600-$800. It was "inevitable." Just like the dollar index was headed to 1.10-1.20.



    It's taken oil 7-1/2 years to hit the $26 low this past February. And it's recovery since then would seem to suggest $60-$75 could be seen in 2016/2017. After such a brutal correction, especially the quick drop from $101 to $26, you'd expect some sort of 50-62% retrace. From a time perspective, 7-1/2 years down would often be followed by a 2-3 year recovery bounce.



    The oil chart is interesting in that the monthly Fib sequence hits pretty close to peaks and troughs over the past 7-1/2 years (esp months 5, 8, 13, 21, 34, 55). The Feb low occurred 90-91 months into the sequence, fairly close to the 89 Fib level. I suspect a number of other commodities have put in major 5-8 year lows as well. Look at the sugar chart with its 20 year triangle. Oil is just another commodity that cycles. Fundamentals (ie gluts) can easily be run over by technicals and sentiment after extremes have been reached.



    What factors and sources are the MSM using to determine the current "glut" status. If we have a glut status today, and every oil rig is taken out of production, won't we still have a glut tomorrow? At what point though will everyone realize things are going to flip right back the other way?
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    Lower oil barrel prices are the direct result of overproduction. This overproduction is an intentional effort to nip growing US shale oil competition in the bud, which it has. Overproduction is also being used as an economic weapon to dampen the income of select nations such as Russia.

    Oil prices will eventually find a much higher equilibrium. Artificial prices, unless written in stone by law, remain in affect only as long as the effort is made to keep them artificial. One of the unintended consequences of overproduction is the loss of income to the producing nation itself, i.e. Saudis and Venezuela. The Saudis and Venezuela now desire and need higher prices. As the lower oil income for these producers more affects their economy, the need to reduce production grows.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • rickoricko Posts: 98,724 ✭✭✭✭✭
    Well thanks for all the information. As a result, I am more informed, but really not more knowledgeable...image And now I realize that no one really can explain - with indisputable facts - the reason behind the current situation. Fun times indeed...Cheers, RickO
  • jmski52jmski52 Posts: 22,808 ✭✭✭✭✭
    Pretend that you owned some big crude oil storage tanks and had the money to fill them up with oil on the open market @ $26/bbl if you desired. Wouldn't you at least start to fill them up?

    Refer to Roadrunner's post. Crude prices bottomed in February and the tankage in Cushing has been running pretty full for some time now (and so have other parts of the system, as well).

    This tells me that either some new tankbuilding activity needs to take place soon, or prices for crude will start back down when the discounting gets serious. Zerohedge has had satellite pics of two of the main shipping corridors being backed up with supertankers full of oil. Until demand catches up with all of this supply, I wouldn't expect crude oil prices to take off. (This may indeed cause some pain for the folks who bought lots of crude oil to store for price speculation).

    On the product side, most refiners operate on fairly thin margins, much, much thinner than an Apple or a Microsoft. The refiners aren't likely to see much in the way of streamlining their operations for cost savings. They also aren't in any position to speculate or to cut their own prices.

    The retailers and distributors will always play the game of raising prices as soon as possible, and also of hanging onto higher prices as long as possible even when the prices have backed off. In this state, the last gasoline crunch (2001?) resulted in the state issuing several suits against retailers for price gouging.

    Bill O'Reilly always rants against the oil companies, but he really doesn't know what he's talking about, in that respect.

    Oh, those guys who buy crude at $26 to fill up a couple 150,000 bbl tanks or so - if the price keeps dropping and goes to $18/bbl - you will begin to see new ownership as they go bust. It's The American Way.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • s4nys4ny Posts: 1,568 ✭✭✭
    Oil (West Texas Intermediate) has almost doubled since mid Feb, gasoline has gone up.

    Must be manipulators at the CME. image
  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    Originally posted by: s4ny
    Oil (West Texas Intermediate) has almost doubled since mid Feb, gasoline has gone up.

    Must be manipulators at the CME. image

    The oil cartels don't need the help of CME. They are called cartels for good reason.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • s4nys4ny Posts: 1,568 ✭✭✭
    The "cartel" was not strong enough to prevent oil from falling by over 80%.

  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    Originally posted by: s4ny
    The "cartel" was not strong enough to prevent oil from falling by over 80%.


    Were they strong enough to overprice it by 80%? Current over production is a not an accident, it was a temporary effort to tank prices. The temporary will likely be hard to recover from.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • cohodkcohodk Posts: 19,076 ✭✭✭✭✭
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!

    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    Originally posted by: cohodk
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!


    Yep, we know, markets are not manipulated. Yet the bankers keep paying those big fines even though they're innocent. image

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • cohodkcohodk Posts: 19,076 ✭✭✭✭✭
    Originally posted by: derryb
    Originally posted by: cohodk
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!


    Yep, we know, markets are not manipulated. Yet the bankers keep paying those big fines even though they're innocent. image




    Whats funny is how folks continue to play a game they believe is so manipulated. They are so arrogant in their belief they will beat the game they ride it to their demise. Arrogance and ignorance are a very bad combination. Thats something not even derryb could argue against.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • derrybderryb Posts: 36,778 ✭✭✭✭✭
    Originally posted by: cohodk
    Originally posted by: derryb
    Originally posted by: cohodk
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!


    Yep, we know, markets are not manipulated. Yet the bankers keep paying those big fines even though they're innocent. image



    Arrogance and ignorance are a very bad combination.

    Dat's what I've been trying to tell you for years now. Thanks for summing it up nicely.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • cohodkcohodk Posts: 19,076 ✭✭✭✭✭
    Originally posted by: derryb
    Originally posted by: cohodk
    Originally posted by: derryb
    Originally posted by: cohodk
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!


    Yep, we know, markets are not manipulated. Yet the bankers keep paying those big fines even though they're innocent. image



    Arrogance and ignorance are a very bad combination.

    Dat's what I've been trying to tell you for years now. Thanks for summing it up nicely.


    So if you agree, and don't want to hear me, then at least hear yourself.

    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • jmski52jmski52 Posts: 22,808 ✭✭✭✭✭
    Everything is a conspiracy.....its the answer to everything.

    Funny how a year ago the drop in oil was a sign that the economy was tanking (I read that right here in this forum), now the drop is due to purposeful overproduction. I love this place!!


    Oil is almost always about politics, domestic politics and geopolitics.

    Ben Nelson traded his swing vote for obamacare and got Nebraska an exemption to it so that his owner's (Warren Buffet's) Burlington Northern could haul the oil from Canada's tar sands instead of building a much more efficient pipeline. This cost consumers directly on both fronts but we all know that the politicians aren't in it for the people that they represent.

    The US Strategic Oil Reserve was tapped a couple summers ago so that consumers could enjoy lower gas prices, right? That's a strategic move now? No, I would contend that the politicians knew exactly what was coming down, and that sale from the Strategic Oil reserve coincided with the US plan to punish Russia and to deprive them of excess oil revenues by tweaking Saudi at the same time, to overproduce and drive prices down. Now, I'm sure that the Strategic Oil Reserve is being filled back up, much more cheaply.

    At the same time, do you remember not too long ago when Russia cut off Europe's natgas supply in the dead of winter so that they could extract higher gas prices from Ukraine, who was incidently stealing gas from the pipe that runs through the Ukraine? The big issue has always been - who will build the big pipeline to transfer oil from the Mediterranean to Europe? Russia or the Western oil companies?

    It's always been about profits and politics. Don't tell me that there's no conspiracies surrounding oil. There's nothing BUT conspiracies around oil.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • TwoSides2aCoinTwoSides2aCoin Posts: 44,272 ✭✭✭✭✭
    Greasing the wheels of commerce takes a lot of petrodollars.
  • cohodkcohodk Posts: 19,076 ✭✭✭✭✭
    Jmski52, what happens when the use of oil becomes an afterthought?

    That time is closer than you think.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • jmski52jmski52 Posts: 22,808 ✭✭✭✭✭
    cohodk, what are you talking about? You're saying that nobody is going to be using oil, except as an afterthought? Please clarify what you mean.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
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