Petroleum Update for Week Ending 1/27/06

[BoeingBoy]

U.S. crude oil imports averaged 9.6 million barrels per day last week, up 339,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged over 9.6 million barrels per day, a decrease of 153,000 barrels per day from the comparable four weeks last year.

U.S. commercial crude oil inventories (excluding those in the SPR) increased by 1.9 million barrels from the previous week. At 321.0 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year.

U.S. crude oil refinery inputs averaged over 14.7 million barrels per day during the week ending January 27, up 42,000 barrels per day from the previous week's average, as, apparently, some refineries continue to undergo maintenance. Refineries operated at 87.0 percent of their operable capacity last week.

With the recent increases in crude prices, jet fuel prices rose to the highest level since Oct/early Nov before dropping some during the week covered. On Jan 27, spot jet fuel prices closed at:
NY Harbor - $1.8950/gal
Gulf Coast - $1.8450/gal
Los Angeles - $1.9850/gal

WTI crude closed at $67.81 on 1/27/06, compared to $68.10 as of 10:10 this morning per Bloomberg (before the EIA report was released). NYMEX was at $67.55 shortly after the report was released.

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Jim

 

[FWAAA]

Those are still some ugly numbers. And that's with an unseasonably warmer winter across much of the midwest and northeast. Imagine what happens to JetA prices if February and March turn bitterly cold? Or the Iran faceoff continues?

 

[SpinDoc]

Those are still some ugly numbers. And that's with an unseasonably warmer winter across much of the midwest and northeast. Imagine what happens to JetA prices if February and March turn bitterly cold? Or the Iran faceoff continues?

Since it is my normal M.O. to chime in on every Petroleum update, I will do so.

Let's be real here. Oil prices do not reflect anywhere near the actual cost of exploration, processing, and transporting the product to the refineries. In fact, they are higher, much higher than the actual market price.

Why do you ask? I'll tell you why. Because there are market speculators and analysts who lie like crazy to get investors to buy into the market by making irrational statements about terrorism and supply fears. It drives the cost of oil stocks artificially higher than the actual cost, and it makes big profits for oil investors and Big Oil companies.

Unfortunately, it is continuing to hurt a large sector of the economy, including ordinary Americans who don't have the resources to invest in the artificial "boom", and it hurts transportation including airlines. Someone needs to intervene and stop the madness before the entire U.S. economy is destroyed.

I swear to the almighty that if I were G.W. Bush, I would be putting all of my attention and energy into finding a way to collapse the current oil futures market. That in and of itself would cause an economic boom that would surely win the next election for the GOP. Instead, G.W. is pandering to his oil buddies and Wall Street. What a loser.

 

[TechBoy]

Let's be real here. Oil prices do not reflect anywhere near the actual cost of exploration, processing, and transporting the product to the refineries. In fact, they are higher, much higher than the actual market price.

Just like software, computer chips, laundry detergent and bottled water.

The issue is not the cost of production. The issue is that demand is greater than the supply. And so prices go up. That's how markets work.

 

[FWAAA]

Just like software, computer chips, laundry detergent and bottled water.

The issue is not the cost of production. The issue is that demand is greater than the supply. And so prices go up. That's how markets work.

I agree. My suburban Los Angeles house is currently "worth" (based on recent sales prices of neighboring homes) multiples of its replacement cost, even after I subtract out nearly $30/sq ft for the lot. Cost of production has nothing to do with the "value" of a given good or service. What matters is what someone is willing to pay, and for the last year or so, people have been willing to pay an awful lot for oil.

For some reason, I just don't think that oil is currently where it is because of speculators, as SpinDoc believes. Looks to me like the economy is adjusting fairly well to recent oil price spikes, so no need for him to do anything to bring down the price (if there even existed such a mechanism for him to collapse the price in the first place, which I doubt).

I've said it before, and I'll say it again - I'm actually in favor of higher oil prices, for several reasons, some of them quite selfish. One is that high gas prices will eventually convince the working poor that they really can't afford to drive and clog the freeways the way they could when gas was a dollar a gallon.

Another reason I'm in favor of high oil prices is that it will encourage people to use it wisely. There is a finite supply of easily-extracted oil, and we really shouldn't waste it.

There are other reasons as well why $70/bbl oil may actually be a better idea for our economy and our planet than $15/bbl oil.

 

[SpinDoc]

I agree. My suburban Los Angeles house is currently "worth" (based on recent sales prices of neighboring homes) multiples of its replacement cost, even after I subtract out nearly $30/sq ft for the lot. Cost of production has nothing to do with the "value" of a given good or service. What matters is what someone is willing to pay, and for the last year or so, people have been willing to pay an awful lot for oil.

For some reason, I just don't think that oil is currently where it is because of speculators, as SpinDoc believes. Looks to me like the economy is adjusting fairly well to recent oil price spikes, so no need for him to do anything to bring down the price (if there even existed such a mechanism for him to collapse the price in the first place, which I doubt).

I've said it before, and I'll say it again - I'm actually in favor of higher oil prices, for several reasons, some of them quite selfish. One is that high gas prices will eventually convince the working poor that they really can't afford to drive and clog the freeways the way they could when gas was a dollar a gallon.

Another reason I'm in favor of high oil prices is that it will encourage people to use it wisely. There is a finite supply of easily-extracted oil, and we really shouldn't waste it.

There are other reasons as well why $70/bbl oil may actually be a better idea for our economy and our planet than $15/bbl oil.

Just what we need on this forum. Tree huggers. No offense, I just don't believe in the "junk science" that the Global Warming "theory" is based on. Planetary temperature and weather changes have occurred many times throughout history, and the use of fossil fuels is not the reason for recent changes in weather patterns.

So, you're saying that the price of oil is not hurting the economy? Guess again. It is killing the airline industry right now, including the Wall Street darling JetBoo Hoo. Every legacy airline, with the exception of American is or has been in Chapter 11 in the past three years, and it most certainly has a lot to do with the higher cost of oil.

Prices on everything are slowly rising to keep up with the cost of oil, and at some point, the economy will be unable to support continued price increases. When that happens,
the U.S. will be in serious trouble. So don't say the government doesn't need to rein in the oil futures speculators and the greedy oil companies. Without speculators eagerness to buy inflated futures contracts, the price of oil would not continue to go up as it has. A significant segment of the oil futures market is driven by false information, including unsubstantiated terrorism fears, and unsupported supply disruptions. Big Oil wants us to believe this crap, because it lines their pockets.

Oh, and watch your real estate values carefully. The bubble can't last forever, especially when the rest of the economy is falling into the tank. Good luck sir.

 

[BoeingBoy]

Every legacy airline, with the exception of American is or has been in Chapter 11 in the past three years, and it most certainly has a lot to do with the higher cost of oil.

Just nitpicking - while Continental has been in BK, it's been a lot longer than 3 years.

Jim

 

[FWAAA]

Just what we need on this forum. Tree huggers. No offense, I just don't believe in the "junk science" that the Global Warming "theory" is based on. Planetary temperature and weather changes have occurred many times throughout history, and the use of fossil fuels is not the reason for recent changes in weather patterns.

So, you're saying that the price of oil is not hurting the economy? Guess again. It is killing the airline industry right now, including the Wall Street darling JetBoo Hoo. Every legacy airline, with the exception of American is or has been in Chapter 11 in the past three years, and it most certainly has a lot to do with the higher cost of oil.

Tree hugger? Not me. I drive an Escalade. I'm a right-wing Republican. Always have been, always will be. I don't believe Global Warming exists. Never have, never will.

But I couldn't be happier that oil is finally relatively expensive again. My oil company stocks are performing very well.

Hurting the economy? Huh? Hardly. Today I heard that the nation's unemployment rate fell below 5% last month. Interest rates are still fairly low, unemployment is very low. What more do you want? Sure, the airline industry is in the toilet - that's because we haven't seen the shutdowns of airlines that we need to see.

Spin it any way you want - oil is just today's scapegoat for those who have failed, like Neeleman and Tilton and Grinstein and Steenland and Arpey. Failures, all of them. Whiners who can't price their prouct at profitable levels due to the current glut of domestic airline seats. So what do they do? They cry about the price of oil.