record glut of crude

Discussion in 'Economics' started by silk, Jun 4, 2007.

  1. silk


    With crude at $66 and oil stocks making all time highs, you wouldn't think this story could be possible. Is supply and demand working? Wait till the Dems run with this one.

    LONDON, June 4 (Reuters) - Oil firms have booked space on tankers to store up to 19 million barrels of crude in the U.S. Gulf amid refinery outages and a lack of onshore storage capacity, shipping industry sources said on Monday.

    "There are a number of factors playing into this but in the main we have onshore storage capacity issues and the contango in U.S. crude markets is able to pay nicely for it," one source said, referring to higher forward prices in the futures market. Firms were paying $50,000 to $60,000 a day to store the oil

    Analysts at Simpson, Spence & Young (SSY) in London said the lack of storage space had been caused by a spate of U.S. refinery glitches either "through planned maintenance or unexpected outages" which had seen less crude being processed.

    "Refineries have struggled to process the crude quickly enough and refinery utilization rates have only just moved above 90 percent," said SSY's Claire Grierson.

    "In addition, crude imports have been rising rapidly since March and there has been a greater crude flow from Canada into the US mid-West, which has caused a large crude build and squeezed onshore storage capacity," she said.
  2. silk


    If it was not a big oil oligopoly, i do not think small players would be using floating storage to make room for more inventories. I have forwarded this to the house committee on energy and commerce.
  3. Forwarded it to the politicians???? LOL! What do you think they're going to do? Pass a law banning offshore storage?

    Back to Economics 101 son. There is more to price than simply supply. And there is more than one "crude market" than West Texas Intermediate. And then too, it might be nice to have plenty of oil to refine, as the peak gasoline season approaches. But I'm sure you and the House committee know that.

  4. This all brings up some interesting political questions.

    The left can scream "war for oil" and "Bush's oil friend's are getting rich" but the Gore Co2 emissions crowd is going to do little for the American gasoline consumer. Other than raise gas taxes that is.

    It's going to very hard for credible candidates to run simultaneously on a cheap oil/clean environment platform. Or to say explore alternatives but build new refineries.

    My guess is we'll see $5 gas sooner than later......
  5. Considering what the price for a lot of stuff is out there...$5/gal is certainly a possibility.

    And if the FED had a spine, a 1-2% increase in rates to combat this perennial inflation problem.

  6. I don't see gas prices as an inflation problem. Rather, gas prices are a refinery problem. Plenty of crude around, just not enough refinery capacity. Higher rates doesn't solve that problem.

  7. Now you can't have it both ways my dear amigo. :)

    Oil is after all $70 a barrel. That price either means not "plenty" or "inflation problem."

    I think we can all agree it's a bit of both.

    Oil's rise is less exorbitant to European's than to greenback paying Americans. And despite higher prices consumption is increasing.

    Higher rates would presumably boost the dollar which in turn would put pressure on dollar denominated commodities.
  8. dtan1e


    like the way they command the diamond prices
  9. Inflation not a problem? Maybe because you have rental prop, you don't like the idea of higher rates but...

    Housing is *still* way overpriced in many areas.

    People keep buying too much crap from overseas sending the $ down the sewer.

    Commodities are all at extremes and it's not a "China problem". It's a China problem because people recklessly buy all kinds of garbage from them thanks to low rates on their HELOC's.

    Raise the rates a bit and many of these problems would go away and people might actually start to save again!

    Many people overseas now laugh at the american $/consumer for being so damn stupid.

  10. It's not really just current supply and demand levels. It's also expected and/or perceived supply and demand.
    #10     Jun 5, 2007