hello all,
After witnessing in horror oils rise to $103 a barrel, i did a bit of research on the EIA site.....here is what I discovered
1. currently there is enough gasoline in stocks to last the USA 25.8 days, at current demand. does not sound like much but last time it was this high was early 2002 when oil was $20 a barrel and gas $1.50 a gallon.
2. looking at forward days stock level, there is about 21ish days crude oil in stocks in the USA. This is higher than various times in the past with cheaper oil prices.....like 1996-1997, 2000, and 2004-2005.
3. for last 7 weeks petroleum stocks have continued to climb, yet the prices have climbed too.
so the market isn't as tight as oil companies make it out to be....so why do I pay A$1.479 a litre for my lawnmower fuel? ($5.92 a gallon to americans)
my thoughts....
*Since 1990, world oil supply has gone up by 17 mb/day, yet only 10 mb were from non-opec countries. the extra 7mb/day came out of opec's overall capacity, which is actually only 2mb/day higher than it was in 1972....so we have a reltively thin supply cushion, which exacerbates the geopolitical tension premium built into price....
*A crappy US dollar has meant all commodities have boomed - copper, wheat, gold, silver etc. like noone is talking about peak gold or peak platinum, are they? Could oil just be a victim of a general speculative boom in general? like with oil you only need to pay a 5% margin to buy a contract....this makes it more accessible and now that the stock market is going to hell this makes commodities more desireable thus valuable.
*way oil is traded - 99% of all contracts traded in NYMEX do not yield the purchase of any oil - they are basically buying and selling contracts for the future delivery of a certain good, basically a bit of paper. So they don't really buy/sell oil, they buy/sell bits of paper for the delivery of something that does not yet exist - like how can they exactly predict how much oil is coming to cushing oklaholama? how many contracts are issued? who issues them? who delivers the oil? NYMEX says it is a transperant system. clearly it leaves many questions to be answered....
*oil companies in general - apparently, the likes of shell and exxon are only pricing the future supply of oil at 30-40 bucks a barrel, roughly equivalent to $25 in 1997. Why not price it at $100+? do they think the speculative party will end? or could it be they would rather not spend extra to raise production by 10% to lower their total income by 25%? Seems plausible...
*skills shortage - about 80% of oil industry professionals are due to retire in next 10 yrs and noone is replacing. not just in exploration but the structural/mechanical engineering of platforms, wells etc. not anyone's fault, just they way things have turned out but physically possible to solve nonetheless.
feel free to discuss...