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EducateWorthington.org

The 912 Project - Glenn Beck

912 Group of Central Ohio

Please let me know if you'd like your link added

This is an example of "hording" and it is being done by "producing COUNTRIES", and it still isn't doing diddly to the price of oil. This is how you would truly manipulate the market, you impact supply and demand. Problem is this is a world market, and unless everyone gets on board, all that effort will do nothing but waist storage costs. Renting those ships isn't cheap, and sooner of later they will flood the market with that oil, depressing it even further.

HOUSTON: From the Indian Ocean to the South Atlantic to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns through the sea, heading nowhere.

The ships are marking time, serving as <b>floating oil-storage tanks.</b> The companies and countries leasing them for that purpose have made a simple calculation: the price of oil has fallen so far that it is due for a rise.

Some <b>producing countries are trying to force that rise by using the tankers to withhold oil from the market,</b> while traders are trying to profit by buying cheap oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.

<b>Only six months ago, companies up and down the energy pipeline were rushing oil to market, struggling to keep up with galloping demand and soaring prices.</b> Now, with the global economy slumping and people driving less, demand for oil has plunged — and the same companies are acting in ways that would have been unimaginable until recently.

<b>Oil producers are shutting down rigs, refiners are producing less gasoline, and investment planning throughout the industry is in turmoil.</b>
http://www.iht.com/articles/2009/01/15/business/15oil.php

<b>The continuing volatility is sending waves of anxiety 9read fear) up and down the complex production and investment chains of the oil world.</b>

<b>A year ago, oil producers and refiners could not move their products fast enough to meet growing world demand</b> and chase rising prices. <b>Now, with demand and prices slumping,</b> they are sitting on 327 million barrels at tank farms around the country, particularly at Cushing, Oklahoma, a major storage hub and a crossroads for pipelines. That is more than <b>40 million barrels more in storage than this time last year, and more than 30 million barrels higher than the five-year average.</b>

BTW, in economics we call this a "surplus" and the only way out is lower the price to clear the market, or somehow increase demand, or both. In most cases, prices will fall.

The mounting buildup has come during the last 100 days or so, as <b>consumption of oil fell behind imports and domestic production.</b>

With storage tanks filling up onshore, private and national oil companies, refiners and trading companies are storing another 80 million barrels aboard 35 supertankers and a handful of smaller tankers, the most in 20 years, according to Frontline Ltd., the world's largest owner of supertankers.

For all of you that have heard our discussion on understanding futures pricing, here it is in black and white. I must highlight that it explains it in a manner exactly as I have explained it, but he is mistaken in presenting it with an arbitrage opportunity. Any fool could pick up a phone and sell short the future and buy long the cash to capture that $10, so this condititon rarely exists in the real world.

Adam Sieminski, chief energy economist at Deutsche Bank, noted that a trading company could buy oil at the spot price of nearly $40 a barrel, store it and sell a contract to deliver it in a year for about $60. "You pay between $6 and $10 a barrel to store it, and you can make $10 a barrel," he said. "That's why Cushing is filling up rapidly and people are leasing tankers."

This chart shows you the contract prices, and across all time periods futures are more expensive than cash reflecting the storage and delivery costs. Note the longer term contracts all have much lower volume and initerest than the near term contracts.
http://www.nymex.com/lsco_fut_psf.aspx

This is the danger of blaming speculators: It highly disrupts long term planning. Long term futures contract would allow them to plan with certainty their future cash flow.

One small example of how the price uncertainty has affected behavior is the Devon Energy Corporation, an Oklahoma City company that in recent years has excited the energy world with announcements about expensive new investments in Canadian oil sands and deepwater oil exploration projects. The company recently put off announcing details of its drilling program. Chip Minty, a Devon spokesman, said: "The volatility we have seen in the last year, and particularly the last few months, is making it more difficult to plan a drilling program that is funded through cash flow. Everybody is laying down rigs."

http://www.iht.com/articles/2009/01/15/business/15oil.php

Spooked by the signs of surplus, traders drove the spot price of oil down to $37.28 a barrel on Wednesday, a drop of 1.3 percent.

Gasoline, meanwhile, has become pricier at the pump because refiners have been producing less of it. Profits from refining have been so thin over the last several months that refiners have been earning little, or even losing money, on producing gasoline. So now they are storing oil or selling it to traders, or retooling their refineries to produce less gasoline and more products with better profit margins, like heating oil, diesel or jet fuel.

http://www.iht.com/articles/2009/01/15/business/15oil.php?page=2

Rising development costs push up oil futures curve

By Matthew Robinson - Analysis

NEW YORK (Reuters) - Rising costs for oil companies are driving up prices for crude oil futures through 2016, keeping supplies struggling to match growing oil demand outside the United States.

Despite worries a potential recession could clip U.S. demand, forecasts for increases from other OECD nations and emerging markets like China should counter tepid growth in the world's top energy consumer.

The increase in consumption will come as increasing finding and development costs trim supply growth from energy companies, according to experts, driving up price expectations over the next few years.

"The continued strength of long-dated prices amid ongoing industry cost inflation poses, in our opinion, the strongest upside risk to our forecast," Goldman Sachs said in a report.

After trading around $70 a barrel for much of 2007, longer-dated crude oil futures on the New York Mercantile Exchange began to surge in September as front-month crude started its run to a record $100.09 hit in early January.

With near-month crude futures now holding above $90 a barrel, U.S. oil contracts from November 2008 and beyond are now trading in a range from $89 to $85 a barrel, flattening the curve in later months as short-term factors compete to tug front-month prices higher and lower.

Analysts said the rise in part reflects the rising costs energy companies must pay to pump oil in producer nations within and without OPEC. Countries such as Venezuela and Russia, flush with profits from high oil prices, have tightened contract terms for access to their vast, low-cost reserves.

http://www.reuters.com/article/reutersEdge/idUSN1128994320080111

[We could say [Democrats] spend money like drunken sailors, but that would be unfair to drunken sailors. It would be unfair, because the sailors are spending their own money. --Ronald ReaganAl Gore didn't invent the internet, he invented global warmingThe welfare of humanity is always the alibi of tyrants - CamusThe person who advocates government planning of the economy always assumes that it is his plan that will be put into effect. --Hayek]

Just like 0bama...he has no idea what he is doing.

CHU JUMPS IN 'DEEP END OF THE POOL'

Energy Secretary Steven Chu may be a Nobel laureate Ph.D. in physics, but his first forays into energy policy suggest he's a neophyte when it comes to the ways of Washington.
 
At a forum with reporters on Thursday, the head of the department that has traditionally taken the lead on global oil-market policy, was asked what message the Obama administration had for the Organization of Petroleum Exporting Countries at its meeting next month.
 
"I'm not the administration," the Cabinet secretary replied. "I will be speaking and learning more about this in order to figure out what the U.S. position should be and what the president's position is."
 
Chu, who is still without a deputy, said he feels "like I've been dumped into the deep end of the pool" on oil policy.
 
The day before, reporters asked him about OPEC output levels after a speech to a group of utility regulators. He responded that the issue was "not in my domain."
 
Later, in a conference call to reporters, he said his answer reflected "more of my naiveté than anything else."

http://firstread.msnbc.msn.com/archive/2009/02/20/1803006.aspx

Blah blah blah, the speculators are driving the price of gas higher. Not. Neither Bush nor Obama will touch the "speculators" because they understand they are the only things keeping the price of oil DOWN!!! Without speculators there is no long term planning, and with no long term planning there is no long term supply. Markets are adjusting to expected decrease in supply going forward, they are locking in supplies today before the Obama insanity really hits. That is why oil is going higher, not speculation, 100% sound economics. Jets don't fly on wind power, so airlines are locking in future supplies today to guarantee they have oil when they need it.

Crude stockpiles plunge as summer driving gears up
http://finance.yahoo.com/news/Crude-stockpiles-plunge-as-apf-15489002.html?sec=topStories&pos=6&asset=&ccode=

What Obama Needs to Do to Get the U.S. Off Oil -- for Good
http://finance.yahoo.com/tech-ticker/article/261455/What-Obama-Needs-to-Do-to-Get-the-U.S.-Off-Oil----for-Good?tickers=GM,F,^IXIC?sec=topStories&pos=9&asset=&ccode=

Oil soars above $71, hitting 2009 high
http://finance.yahoo.com/news/Oil-soars-above-71-hitting-apf-15488306.html?sec=topStories&pos=4&asset=&ccode=

[We could say [Democrats] spend money like drunken sailors, but that would be unfair to drunken sailors. It would be unfair, because the sailors are spending their own money. --Ronald ReaganAl Gore didn't invent the internet, he invented global warmingThe welfare of humanity is always the alibi of tyrants - CamusThe person who advocates government planning of the economy always assumes that it is his plan that will be put into effect. --Hayek]

I am loath to reopen this can of worms...but recent evidence seems to lean toward supply and demand.  I am regretting this already.

Gas Prices Explained
Solving the deep mystery of gasoline price fluctuations

http://reason.com/archives/2010/08/31/gas-prices-explained