I will believe the Saudis don't see any upcoming problems with Ghawar when they cancel one of their projects due to low oil prices. If they continue to be full steam ahead with increasing their capacity then I think they are aware that Ghawar may not be as robust in 5 years time as they would like us to believe.
Posted: Fri Jun 13, 2008 9:08 pm Post subject: The Rising Cost of Crude Oil's Effect on Gasoline Prices
As crude oil rises in price it's share or effect on gasoline, jet fuel, and diesel prices will be much more sigificant.
In 2007, the price of crude oil averaged about $68 per barrel and accounted for about 58% of the national average retail price of a gallon of regular grade gasoline, while in 2000 to 2007 it averaged about 48%.
At $100.00/barrel it was 68 % of the pump price of gasoline.
In April, 73 percent of the price of gasoline was the cost of crude oil.
At $134.00/barrel it must be well over 75%.
Connect the dots about the quick rise in the cost of gasoline we can expect as we head towards $140.00 and beyond.
_________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: Apr 27, 2007 Posts: 4352 Location: The Great Sonoran Desert
Posted: Fri Jun 13, 2008 9:18 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
Well - just off the top of my head.
Aug 31, 05 - Katrina - oil went to $75 and gas in Phoenix was around $3.50
We should be at $6 gas today in Phoenix.
We will be...very soon. _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Posted: Fri Jun 13, 2008 10:28 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
When you look at charts at sites like gasbuddy.com you can see that crude oil has "decoupled" from gasoline. Refiners must be taking a loss with their crude stock being so expensive. At some point the two must merge. And I don't think that crude oil is going to come down halfway...
Posted: Sat Jun 14, 2008 12:05 am Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
Crude oil and gasoline are two different commodities, that's why there's a commodity futures contract for each.
http://www.nymex.com
If *hypothetically* the price an oil refinery got paid for refining crude into fuel was constant, say $25. Then there would be no need to have a separate commodity futures contract for gasoline. The formula would simply be
gasoline = crude + $25.
An oil refinery's profit margins Crack spread can vary widely.
I think in the future crack spreads will go up. The price of almost everything is going up. Building a refinery is more expensive these days thanks to the cost of raw material inputs going up like steel, just one example.
Iron ore prices increase 5 fold since 2001 --> increase in steel prices --> makes it more $$$ to build an oil refinery --> crack spreads will go up
Exactly how much will this go up in relation to rising crude prices, I don't know. If I did I'd be a very rich man.
Posted: Sat Jun 14, 2008 10:13 am Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
With the US process of refining approx. 45% of a barrel of oil gets converted to gasoline. The other 55% is turned into kerosene,jet fuel, diesel, fuel oil and other petrochemicals including asphault.At 42 gallons per bbl. and $135 per. 21 gallons of gas is just under $70 just from a basic OIL cost, not including transport, refining, distribution.
Joined: Dec 06, 2005 Posts: 871 Location: Stopped at the border.
Posted: Sat Jun 14, 2008 10:42 am Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
Don't forget about what is also happening when it comes to near source supply of crude depleting. Mexico in particular, and to some extent Venezuela, are losing the battle to maintain production levels. Because of this the string of tankers from farther places has to become longer. When there aren't enough tankers in the world to make such a long string in a market timeframe, then the US has to outbid the rest of the world not just for oil, but for tankers. The result is that the stocks of oil go down. All of this flies in the face of demand destruction at home, where the stocks of gasoline are actually going up.
The thing is not in equilibrium. I don't think it has a chance of reaching it either unless aggregate oil demand in the US comes down on a permanent habitual basis. We'll see what the rising dollar can do, but at the end of the day using currency exchange to freeze the competition out of the market is only a short term solution. What, when gas comes back down to $2.90 a gallon is it logical for the SUV culture to go back to business as usual? _________________ "Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."
Joined: Jun 30, 2005 Posts: 743 Location: northern California
Posted: Sat Jun 14, 2008 11:20 am Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
evilgenius wrote:
Don't forget about what is also happening when it comes to near source supply of crude depleting. Mexico in particular, and to some extent Venezuela, are losing the battle to maintain production levels. Because of this the string of tankers from farther places has to become longer. When there aren't enough tankers in the world to make such a long string in a market timeframe, then the US has to outbid the rest of the world not just for oil, but for tankers.
A string of tankers stretching from the middle east to North America is sort of like a pipeline. The longer the pipeline, the more oil is needed just to fill that pipeline to keep oil flowing at the accustomed rate. Needing suppliers that are farther away means a higher MOL, or minimum operating level. This permanently takes those several million barrels of crude off the market, and further tightens supply. _________________ "When men yield up the privilege of thinking, the last shadow of liberty quits the horizon."
Thomas Paine
Joined: Dec 06, 2005 Posts: 871 Location: Stopped at the border.
Posted: Sat Jun 14, 2008 11:26 am Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
dunewalker wrote:
evilgenius wrote:
Don't forget about what is also happening when it comes to near source supply of crude depleting. Mexico in particular, and to some extent Venezuela, are losing the battle to maintain production levels. Because of this the string of tankers from farther places has to become longer. When there aren't enough tankers in the world to make such a long string in a market timeframe, then the US has to outbid the rest of the world not just for oil, but for tankers.
A string of tankers stretching from the middle east to North America is sort of like a pipeline. The longer the pipeline, the more oil is needed just to fill that pipeline to keep oil flowing at the accustomed rate. Needing suppliers that are farther away means a higher MOL, or minimum operating level. This permanently takes those several million barrels of crude off the market, and further tightens supply.
Yes, exactly, at least until the conduit is full and what comes in per day is what goes out per day. Even the shock of putting it in place, though, is alarming. That is why I think that you can't even begin to reach equilibrium until you halve the US demand. Combine that with other world demand destruction and then you can start to handle the rise of China and India, who will also be in competition for what is left and trying to outbid the US and Europe. _________________ "Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Sat Jun 14, 2008 12:29 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
In additon to what dunewalker and evilgenius said, it should be noted that US refineries are not only optimized for a certain output of products but require a certain type of oil input too.
While there is some leeway, a refinery that for example uses high quality oil from Nigeria can't replace that with a lower quality crude.
Even declining volumes of heavy crude from Catarell in Mexico must also be replaced by a similar heavy crude from somewhere else.
Adjusting a refinery to new inputs or outputs outside of certain range is not only expensive, but takes a long time. With uncertainty as to where supplies will come from, it's not surprising then that refineries are slow to adjust to changing oil market conditions. _________________ It's already over, now it's just a matter of adjusting.
Posted: Mon Jun 16, 2008 9:17 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
Just out:
Quote:
EIA analysis of the petroleum market points to the cost of crude oil as the main contributor to the record high gasoline prices that we are now experiencing.
The cost of crude oil now accounts for about 73% of the gasoline pump price. World crude oil prices are at record highs due mainly to high worldwide oil demand relative to supply. Other contributing factors include political events and conflicts in some major oil producing regions, as well as other factors.
Posted: Mon Jun 16, 2008 9:52 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
One thing I haven't seen mentioned is the rising value of the oil and gasoline that are required for MOL (minimum operating levels). 270 Mbbls of oil at $50 per barrel is quite another matter when oil is $135. Since keeping the MOL is a requirement for the oil suppliers and refiners that is a significant chunk of change that they need to keep on the books. Let's see, if oil hits $200 the value of the MOL is up to $54 billion dollars? At $5 per gallon it is another $35 or $36 billion for the MOL of gasoline? I think this could encourage producers to keep as close to MOL levels as they can. _________________ Civilization is a personal choice.
Posted: Mon Jun 16, 2008 11:24 pm Post subject: Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices
Electric_Economy_2025 wrote:
Every $20 dollars for crude oil is about $1 dollar for gas so $140 oil is $7 gas, also gas prices are normally 2 to 3 month behind crude prices.
How do you figure?
Oil at $100.00/barrel was only $3 not $5.
With the percentage of oil's cost rising from 46% to 73% in just a few years, there is no formula.
All we can say with certainty is that the rising cost of oil is going to have a greater impact on gasoline price at the pump than ever before. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
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