Post by Miss L. Toe Post by Matt Barrow
Hurricane Katrina sent oil prices soaring to $US70 a barrel because it
shut several US Gulf Coast refineries, which turn crude oil into products
like diesel, gasoline and jet fuel.
Wrong - if refineries are not working then logic dictates that less crude
can be turned into petrol/gasoline and therefore there will be excess crude
lying around and prices should fall.
Those who dictate the oil price didn't think logically.
Post by Matt Barrow
"If we don't start now to get more refineries built then fuel prices
Post by Matt Barrow
literally rocket to $US100-$US200 (per barrel of oil) and the world
Post by Matt Barrow
would come to a grinding halt," Branson said in an interview on financial
news network CNBC overnight.
NO - If 'we' DO build more refineries we will allow demand to increase and
prices will rocket, if 'we' DONT build more refineries demand (for crude)
will not be able to increase and prices will change only with supply.
(Obviously if refineries are not built demand for refined fuel will outstrip
supply and alternatives will become more cost effective).
Lady, I'm in the oil and gas business for part of my income, and while I
don't doubt your sincerity, I must admit to having broken in to howls of
laughter, spilt my coffee and had to take a "time out" after reading your
post. I don't know which editorial columnists from which you've gained
your supernatural knowledge of "bidness", but like a hamstrung filly in a
claiming race, you'll not get far or far ahead with the impediement of that
fallacious a position.
I would commend to you any number of books about the extraction and refining
of oil, but I suspect that your perspective is so unalterably skewed,
prejudiced and badly concceived that "remedial education" is unlikely to
.....But as a hint.....Demand for gasoline remains as it has been for a
number of years predictably "inelastic", rising slightly over time. Demand
for diesel fuel has risen (and continues to rise) much more rapidly, as the
trucking business grows. The largest and continuing leaps in demansd are
not for fuels, but in all that myriad of seemingly unrelated byproducts of
refining and "cracking", from medicines to the keyboard upon which you peck
out your numbskulled nonsense.
When hurricanes shut down the platforms in the Gulf from which cometh 20-25%
of US oil, the part closest to the major refineries, speculators and buyers
for companies which refine oil will inevitably bid up the price, worlkdwide,
because oil is a "worldwide" commodity.
When a Gulf hurricane shuts the valves and pumps at major US refineries
(producing among other products, gasoline and jet fuel), in the face of
steady demand, the decreases in supplies cause prices to jump. The
realities of transport and markets being what they are, at least two to
three weeks must pass before higher priced (subject to unmet demand) refined
products from across the seas show up in US fuel terminals.
Of course, Katrina had also closed down the US large Gulf Coast fuel
terminals, further squeezing an element of the supply equation, the buckets
in which to keep gasoline.
Meanwhile, underground, vastly slowing the movement oil and refined
byproducts to the US Southeast and MidAtlantic, a major pipeline shut down.
Supply was even more disrupted, and gasoline prices, especially in areas
most rapidly affected like Atlanta, soared, supply falling, with steady
We're stuck with a capacity for refining gasoline that has not increased in
several decades. Any twitch or kink in the process means importing refined
product and paying higher prices. More refinery capacity will not increase
demand and will have only modest, likely barely noticeable effect on price,
which has more to do with the supply of oil. We've pretty substantial and
continuing evidence that raising the price of gasoline (only now slightly
above the levels of the 50s or early 80s adjusted for inflation) doesn't
diminish demand. Is there a US "price point" at which demand drops? Yes,
probably somewhere in the $5.00 in today's dollars, but even then demand
would be unlikely to decline more than 5-10%. We need more refining
capacity so that our ability to "weather" storms such as Katrina without
rapid rises in gasoline prices (which in my market have actually dropped to
slightly below preKatrina levels).
High oil prices do mean that more folks who make their living exploring and
drilling (their number sadly diminished by years of potential supply
outweighing demand) will look for oil. But there's a basket of problems
with oil.....your magic $70.00 a barrel product is for a "benchmark"
variety, the premium sort in the market, what's called "West Texas Low
Sulphur" or "Sweet Crude", a thin light easy to refine product. Then
there's the cost of delivery (which includes when dealing with heavy oils
frrom cold climates, heating simply to get the stuff in a tank or pipeline),
tankers, pipelines, rail cars (the lowest of low efficiency transport for
crude). Why, there's heavy, high sulphur cruse today trading at bargain
basement prices simply because of where it's located and the cost of
bringing it to market.
You do know of the several hundred years of "supply" squeezed into Canada's
tar sands, just waing for the price to rise to the point of economic
recovery? That's what the Canadians are hanging on for, not all taking
early outs and fleeing, the day upon which they all imagine that they will
become as rich as Saudi prices and Omani oil traders. It never quite works
out that way, since the Saudis and the Omanis will have long before bought
all Canada's assets from the banks which had to foreclose on the collateral.