Oil Prices...

[legion]

Oil has dropped to $36 a barrel today.

At the pump, prices went up to $1.95 around town.

When oil was at $39 a barrel, pump prices were at $1.55.

What gives?

[ruf-porsche]

Originally Posted by legion

Oil has dropped to $36 a barrel today.

At the pump, prices went up to $1.95 around town.

When oil was at $39 a barrel, pump prices were at $1.55.

What gives?

Prices go down, but taxes remain.

[Rikao4]

same here in SA, Tx .
last week 1.65
today 1.90 premium...

Rika

[dhoward]

Originally Posted by ruf-porsche

Prices go down, but taxes remain.

Huh?

[kach22i]

Cold be the weather having an affect on distribution, or home heating oil demand.

It's been cold, what can I say?

[legion]

That's a good point with the weather.

[sammyg2]

The price of oil and the price of gas are not directly tied to each other. They will tend to follow parrallel paths during times of high demand but in other times (like now) they can be reverse indicators.
This is wintertime and that is typically when oil refineries shut down parts of their plants for much needed maintenance (to keep them from burning to the ground).
When refineries are not producing that does two things:
1) they aren't consuming crude oil so the crude demand goes down, the price goes down.
2) they aren't producing gasoline so the gasoline supply goes down, the price goes up.

BTW, when oil was $39 and gas was $1.55 they were losing money on it. They were paying 93 cents for the oil and selling the gas for 95 cents. that does not even come close to covering refining costs. They could not and would not keep that up for very long.

Right now in the new york harbor, wholesale spot prices are $1.11 for unleaded regular. At $36 per bbl oil is costing them about 86 cents per gallon. that means the refiners are getting a gross profit of 25 cents. Typical refining costs add up to around 20 cents per gallon, so they are making 5 cents per gallon right now and they are partying.
5 cents is huge in this business as they are so used to making less.

[kach22i]

Have you read about this?

New nav hazard: Parked tankers?
http://www.boatdesign.net/forums/open-discussion/new-nav-hazard-parked-tankers-25590.html

Originally Posted by marshmat

This from the Toronto Star today. It looks like a few commodity speculators are chartering VLCCs for a few months, loading the tanks to the brim, and paying the crew to sit at sea and watch movies for a few months until the oil prices pick up again. This isn't exactly a new strategy, but it seems there are a lot more speculators trying to pull it off this time:

Originally Posted by http://www.thestar.com/Business/article/563455
Canny traders stow cheap oil at sea
Crude stored in tankers to cash in on next year's contract delivery prices
Jan 08, 2009 04:30 AM
Tyler Hamilton
Energy Reporter

For sale: two million barrels of offshore oil. No drilling required.
General expectations for a rebound in oil demand during the second half of the year have opened the door for traders to play a high-stakes game of arbitrage.
They're chartering massive vessels known as supertankers in growing numbers to capitalize on unusually large spreads between current oil prices and prices being paid for future deliveries.
For example, oil for December 2009 delivery is priced $15 (U.S.) a barrel above current levels.
To capitalize on this, the traders are stockpiling huge volumes of oil at today's prices, while locking in a profit by contracting to make future deliveries at richer prices.
Their customers are willing to pay future premiums based on expectations that oil's supply-and-demand picture will eventually tighten as the economy regains health.
Oil prices have been rebounding in recent weeks, but they were clobbered yesterday as renewed fears of a glut surfaced. Crude prices for delivery next month fell 12 per cent, the largest drop in seven years, after a U.S. report showed an unexpectedly big jump in supply.
But stowing crude at sea is "exactly what we'd expect to happen if people today think the price is too low," said Joseph Doucet, a professor of energy policy at the University of Alberta.
He said traders renting tankers for arbitrage purposes are taking a chance, but there's nothing illegal about stockpiling. "What you're not allowed to do is collude with another party to influence prices."
A barrel of sweet crude for February delivery plunged to $42.63 (U.S.) on the New York Mercantile Exchange yesterday, after the report from the U.S. Energy Information Administration showed commercial crude inventories last week increased by 6.68 million barrels.
Still, the prevailing economics have traders excited by an opportunity called "contango" – a situation when a non-perishable commodity such as oil gets more expensive as deliveries extend into the future.
Based on yesterday's closing price, buyers of oil are prepared to pay $47.39 a barrel for March delivery, $54.41 a barrel for July delivery and finally $59.49 a barrel for delivery in January 2010.
Analysts say the opportunity to buy oil at less than $43 and sell it in the futures market for 40 per cent more, for delivery a year from now, is too profitable to resist.
It's just one of many ways traders play the market, and part of the reason why it's so difficult to get an accurate handle on the mysterious and often volatile movement of day-to-day oil prices. "If I could do that, I'd be on the beach someplace," joked Doucet.
Frontline Ltd., one of the world's largest owners of supertankers, revealed yesterday that oil traders have tried to charter as many as 10 vessels. That's on top of about 25 supertankers reportedly already reserved for storage purposes.
The big tankers, if stood on end, would be as tall as the 102-storey Empire State Building in New York.
"The carriers hold about 2 million barrels of crude and traders are seeking to lease the ships for three to nine months," wrote Addison Armstrong, director of research at Stamford, Conn.-based Tradition Energy, in a research note.
Even including storage, insurance and other costs, the potential payoff is generous. Traders can also take advantage of bargain charter rates prevailing for supertankers.
The practice of physically storing oil at sea isn't new but often stirs up controversy, particularly when pump prices climb and commodity speculators attract anger.
It was reported last month that the U.S. Commodity Futures Trading Commission is investigating energy traders who store oil in tankers as part of a larger study of wild volatility in the market.
With files from Star wire services

[legion]

Hmm...flooding the market with a commodity when the prices are high and expecting them to stay high?

Seems like a winning strategy to me...

[jyl]

Originally Posted by legion

Hmm...flooding the market with a commodity when the prices are high and expecting them to stay high?

Seems like a winning strategy to me...

You missed this part

To capitalize on this, the traders are stockpiling huge volumes of oil at today's prices, while locking in a profit by contracting to make future deliveries at richer prices.
Their customers are willing to pay future premiums based on expectations that oil's supply-and-demand picture will eventually tighten as the economy regains health

Look here http://www.nymex.com/lsco_fut_cso.aspx

Feb 09 is $35 but May 09 is $50
Buy today at $35, contract to deliver in May for $50, 43% profit in 5 months, is annualized +100% profit. Less carrying cost (charter, insurance, and interest), still probably pretty attractive.

Also read this for more detail http://www.safehaven.com/article-12248.htm

Interestingly, oil tanker stocks are still near their lows.

[Chocaholic]

Not hearing much complaining from retailers these days either. Hmmmm.