looks like oil prices are on the rise again. $55 a barrel since yesterday with news that the dept of energy is going to increase the emergency crude stockpile by 100,000 barrels per day.
Heading towards $3 a gallon again? Well, I am thinking it will mostly settle at $2.50/per gal and slightly fluctuate once in a while. Of course, if we go to war with Iran then just forget everything I just said.
That's what I don't get. I mean around my town it is already up to $2.50 in some places after being as low as $1.89 less than a month ago. What's the cause?
^ Supply and demand. A few weeks ago there was a fire at one of the refineries that completely knocked it out of commission. Now the supplies of gas (and oil because OPEC is trying to keep the price up by pumping/sending us less oil) are falling and demand is continuing to rise. I think the prices will level off for a while but summer driving months are coming up and unless we get another calm hurricane year like last year, I can see gas price getting into the $3s easily. Also some of the spike was because of the cold weather we had in parts of the country. They had to use the oil they were getting for heating oil and therefore had less oil for gasoline. Warm weather should drop prices or at least stabilize them. ps. Refineries are a good stock to own right now. The spread (the price difference between what it takes to make the gas (mostly oil price) and the price they can sell the product) is huge for this time of year. I'm fairly well diversified and I lost a lot of paper money on that 400 DOW drop day but I'm already ahead again solely because of the refinery stock.
There is a limitless supply of oil as it is naturally produced in the mantle of the earth. The organic signatures come from microbes that consume and live in the oil. The oil market is controlled in the same manner as the diamond market -- diamonds are not a particularly rare gem at all yet their market value is outrageous.
The oil is naturally produced in the mantle and eventually works its way up to the crust -- thus forming the familiar reservoirs from which we pump our crude.
What you say is only a theory which is not acknowledged by modern day scientists. Look up what fossil fuel is...
The theory of 'fossil fuels' was developed in the mid 18th century -- so yes I will follow the lead of modern day scientists. Russia is leading the way in abiotic oil formation research -- the rest of the world should follow suit.
Modern day scientists believe these Russians are just wasting their time They probably couldn't get funding for any other projects... so they possibly got forced into taking upon this patriotic nonsense (since a Russian was a founder of this theory) .
Abiotic theory of oil formation -- HA HA !! Nonsense. Sincerely, Adnoc Amerada Hess Anadarko Apache BG Group BHP Billiton BP BPCL Burlington Cepsa ChevronTexaco CNOOC Canadian NR ConocoPhillips Cosmo CPC Devon Energy Dominion Ecopetrol EGPC El Paso EnCana ENI EOG Resources Exxon Mobil Fortum Gazprom Husky Energy Idemitsu INA INOC IOC Kazmunaigas Kerr-McGee KPC Libya NOC Lukoil Maersk Marathon Mol Murphy Newfield Nexen NIOC Nippon Oil NNPC Noble Energy Norsk Hydro Occidental OMV ONGC PDO PDV Pemex Pertamina Petro-Canada Petrobras PetroChina Petroecuador PetroKazakhstan Petronas Pioneer Pogo Premcor PTT Qatar Petroleum Reliance Repsol YPF Rosneft Royal Dutch/Shell RWE-DEA Santos Sasol Saudi Aramco Sibneft Sidanco Sinopec SK Corporation Socar Sonangol Sonatrach Statoil Suncor Sunoco Surgutneftegas Syrian Petroleum Talisman Tatneft Tesoro Petroleum TNK Total Fina Elf TPAO Unocal Valero Energy Vintage Williams Wintershall Woodside Petroleum XTO Yukos
It's not just that. During this time of year refineries have to schedule downtime for planned maintenance. They traditionally do it now (and a bit in the fall) b/c demand is seasonally lowest right now after the winter heating oil season and before the summer driving season. As a result, a lot of refineries run below capacity for a few weeks while they undertake their maintenance programs. In a tight high demand market, which today is, the lower refinery runs cause inventories to be reduced dramatically (b/c people still keep consuming refined products while the refineries are down) which then causes prices to increase.
You guys are trying to rationlize an irrational market, which is also highly manipulated. That's the problem...
http://money.cnn.com/2007/03/12/news/economy/gas_prices/index.htm?source=yahoo_quote The case for $3 gas Some experts say high demand could push pump prices past last year's highs. Others say relief is in sight. By Steve Hargreaves, CNNMoney.com staff writer March 12 2007: 3:03 PM EDT NEW YORK (CNNMoney.com) -- Nearly everyone agrees gasoline prices are headed higher in the next few weeks as Americans start hitting the road ahead of summer driving season. But whether motorists will again face $3 a gallon at the pump is a matter of some debate. Fueled by high demand and problems with domestic supply, gasoline prices have already jumped 20 cents over the last two weeks and now average $2.55 a gallon, according to the nationwide Lundberg survey of about 7,000 gas stations. A number of fires and other accidents at refineries, along with regularly scheduled maintenance and retooling to make cleaner-burning summer gasoline blends, have slowed gasoline production. Major refiners in the U.S. include Valero, Exxon Mobil, Chevron, ConocoPhillips, and BP. March auto madness In addition, waterways used to transport ethanol, the gasoline additive that makes it cleaner burning, have been iced in due to cold weather in the Midwest. But the real mover behind the bump in prices is demand. "It's through the roof," said Steven Schork, head of the research and trading firm that bears his name. Schork cited demand numbers over the last three months from the federal government's Energy Information Administration (EIA) that he said were running 5 percent above the average for the last five years. "If you extrapolate that out into the summer months, your looking at record highs," said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. "That would translate into significantly higher prices than we see at present." Barakat said prices could top the record of $3.06 a gallon hit in September 2005 following Hurricane Katrina. The figure, reported by the AAA motorist group, is not adjusted for inflation. Gas hit a high of $3.03 last summer, according to AAA. Schork didn't think prices would quite reach that level, but pointed to demand and said "we'll certainly be paying close to it." But despite the apparent rise in gasoline consumption, there are some reports indicating that higher gas prices are actually causing Americans to drive less. According to a recent study from Cambridge Energy Research Associates, the number of miles the average American drove last year actually dipped to 13,657, the first decline in 25 years. And sales of big gas-guzzling SUVs have been slowing, and cited as one of many of the problems afflicting Detroit automakers. So what's causing EIA's demand numbers to be so high? Both Schork and Barakat blamed ethanol. Barakat said adding the corn-based fuel to gasoline makes it 4 to 8 percent less efficient, thereby causing drivers to use more. But one analyst questioned whether EIA's demand numbers painted an accurate picture of consumer demand. Tom Kloza, chief oil analyst at the Oil Price Information Service, speculated that wholesalers were taking stocks from refiners, but then holding them to sell over the next few months, when gasoline prices will presumably move higher. Kloza thought gas prices would rise in coming weeks but peak well before Labor Day - and well below last year's $3 level - as wholesalers release supply and consumer demand turns out to be less robust than people think. He predicted prices would hit $2.50 to $2.70 a gallon early this spring everywhere except the West Coast, which will have higher prices due to a lack of refineries and more stringent environmental standards. "We've already had the screaming this year," said Kloza. "There is just nothing to take it onward and upward."
Here is another good article on oil vs gas prices. http://www.thestreet.com/_yahoo/pom/pomrmy/10343882.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA Profit From High Gasoline Prices By Daniel Dicker TheStreet.com Contributor 3/13/2007 7:33 AM EDT Because the high price of gasoline has been making the news so often over the past few weeks, an oil trader's perspective could be quite valuable. To get that, you'll need a short education in the role of the refiner. Simply put, you'll have to know how the system works, how the commercial players are gaming the market, how the public is getting gamed and how you can at least try to make some money off the whole deal, as opposed to being a victim of it. Fortunately, Dano's here to the rescue. The Basics of the Business First, realize that crude oil has absolutely no value on the retail market. It can't be burned for fuel, and it has no other commercial use. Only after crude oil is refined into retail products does a barrel of crude have any value at all. Most modern refineries are set up to release gasoline and heating oil as their two main products. The process of converting crude oil into these products is known as "cracking." The general convention is that three barrels of crude oil will "crack" into two units of gasoline and one unit of heating oil. Remember, this is only a convention. Refineries are all a little different in the absolute ratios they produce, and when crude is refined, it also gives off many other petroleum by-products. Using this convention, however, is convenient for refiners that are looking to hedge their forward price risk. They can buy 3 units of crude oil (CL) and sell 2 units of unleaded gasoline (HU) and 1 unit of heating oil (HO). Cracks were quoted in this 3:2:1 ratio for a long time, but the convention has been practically abandoned these days. Now, everyone quotes cracks using one unit of crude to one unit of a product, whether gasoline or heating oil. Refiners have no control over the price of either their input crude or their output product. A higher margin (crack) means better profit, of course, but refiners have a more consistent goal that they can better control: They want to try to have buyers ready for every bit of product they refine. In other words, they want supply to mirror demand perfectly. Storage costs money and cuts into profits very quickly. In a nutshell, then, you know the reason for the "refining shortage" that Washington has been bleating about for the past three years. Consumers may want an oversupply of gas and oil, but to put it simply, nobody wants to be in the refining business when cracks are cheap. I remember once, early in my trading career, when cracks went negative. Refiners were losing money on every barrel they refined. It taught me that anything can happen in trading, but it also taught the refiners a lesson they never forgot: Don't build fresh refineries unless you're sure the product can be entirely accounted for beforehand. That policy keeps product-refining capacity on the absolute edge of demand. A Look at the Charts For example, during the 1990s, cracks traded mostly between $5 and $10. A Look at Cracks Recently, though, the increase in demand for refined products both in the U.S. and overseas, combined with a reticence in the industry to build fresh assets, has resulted in a far wilder chart: More Dramatic Action Be sure to look at the scales on the right. Cracks that traded in the $2-to-$10 range in the 1990s have seen levels between $15 and $30 seven times in the past three years alone. In the most recent "squeeze" on gasoline, a few mostly innocent factors combined to create the spike. Refineries that normally shut down for maintenance in late winter to be ready for the peak summer driving season were down longer than expected. In addition, a number of refinery fires shut down some remaining capacity at the Tesoro (TSO - Cramer's Take - Stockpickr - Rating) California refinery, the Valero (VLO - Cramer's Take - Stockpickr - Rating) McKee unit in Texas, the Imperial Manticoke unit and the PetroCanada Edmonton refinery. Poof, you've got an $8 crack move in three weeks. Can we benefit from all this information? Let's try. First, don't call your futures broker and get long crack spreads. They are violent and can separate the best oil traders from their heads in a matter of days. This latest move was difficult to call from fundamental factors alone, although some hedge funds try to game it by spending countless hours keeping track of refining capacity, maintenance schedules, outages, demand numbers, the works. Tough game. Instead, let's look at two pure refinery stocks: Tesoro and Valero. Their five-year charts, shown below, reinforce a very important point: Refining has been a flat-stock-price, no-growth, supremely lousy business until very recently. But now and going forward, both stocks look like a value player's dream come true. They have forward price-to-earnings ratios in the single digits and offer tremendous return on capital to investors. Plus, that tiny dividend continues to increase, which will keep you warm at night, to boot.
