BLOOMBERG OIL PRICES 10/21/2009

Bloomberg.com: Energy Prices: "PETROLEUM ($/bbl)

PRICE* CHANGE % CHANGE TIME
NYMEX CRUDE FUTURE 78.68 -.44 -.56 00:57
DATED BRENT SPOT 75.93 .25 .33 01:07
WTI CUSHING SPOT 79.09 -.52 -.65 10/20

Oil has gone up quite a bit in the past month or so. Here we are in the early stages of an economic recovery and oil is again climbing in price.

Gas Pricing Analysis

 

Bloomberg has NYMEX Crude at $68.44 per barrel. There are 42 gallons per barrel.

Cost per gallon of NYMEX crude is $1.6295.

The futures price of  gasoline is 1.9546 per gallon.

NYMEX RBOB GASOLINE FUTURE 195.46

NYMEX CRUDE FUTURE 68.44

Here we have $1.9546/$1.6295 = a 19.95% premium. Previous analysis has pegged the nominal pricing premium as a 15% premium for gasoline.

Either crude is selling for less, gasoline is selling for more or some combo of both.

Things are a bit more interesting with pump prices jumping so much in the past month or so. Typically there is about a 60¢ higher cost for gasoline at the pump versus the futures price. The 60¢ is made up of taxes, distribution and profits.

A fueling station near me has 87 unleaded at $2.959.  Currently there is a larger than normal spread between futures and retail pricing. The spread is now 100¢. We are in a recession and miles driven has been declining for some time as a result.

Takeaway:

These prices are not sustainable. There are tankers full of oil parked out in the ocean. As the economy recovers, there will be a rush of oil to market to meet growing demand. Prices should be relatively stable during the growth phase. If growth is  slow as expected it is not unimaginable that crude and gasoline prices will drop considerably.

Crude Oil & Gas Prices: Futures Prices Equalized

 

A barrel of oil is 42 gallons.

Bloomberg has oil prices as “NYMEX CRUDE FUTURE 45.76” dollars/barrel

Bloomberg has Gasoline as: “NYMEX RBOB GASOLINE FUTURE 128.54” cents/gallon

The conversion of oil is to divide price 42 gallons to get the dollar price of oil. Doing so we get a price of $1.0895238. The conversion to cents per gallon is accomplished by dividing by 100. Doing so we get 108.95 cents per gallon of NYMEX Crude.

NYMEX CRUDE FUTURE price is = 108.95 cents per gallon

NYMEX RBOB GASOLINE FUTURE price is 128.54 cents per gallon

There are two ways of looking at this. Either gasoline is more expensive or oil is cheaper. The one that is probably more correct is gasoline as % more than oil. This is likely the case because gasoline is refined from crude oil. The price of gasoline reflects the cost of refining into a product that has few end uses. Crude oil can be made into many different products.

Moving on… Formula: Change in price / base.

RBOB Gasoline is 17.98% more than crude oil on a per gallon basis.

OR

NYMEX Crude oil is 15.24% less than gasoline on a per gallon basis.

SOURCE: Bloomberg Retrieved: 3/11/2009

BLOOMBERG: "OPEC Defers Decision on Output Cut, Seeks $75 Oil "

OPEC has deferred a decision on reducing output quotas. Oil is in the low $50 range right now. This past summer it nearly hit $150 a barrel.

The United States, the largest economy in the world has entered a recession. Since the U.S. is such a large part of the world economy the rest of the world suffers as a result. The U.S. is a major consumer of other nations exports.

One of the best things to happen in the past four months has been the rapid decline in the price of gasoline. Oil is a major component in the price of gasoline. The reduction in gas prices has left more money in household budgets.

As oil falls, gasoline falls, consumers have more money to spend. As consumers resume spending the recession will slowly end and the economy will begin growing again.

Consumers need lower prices to restore their confidence in the economy and in their financial position. If OPEC were to cut output to increase prices in the short term, it is likely that the recession would linger for a longer period of time. At the same time many of the people calling for alternative energy sources will have the ears of more people. Investment in alternatives will likely increase thereby reducing demand for OPEC oil.

OPEC should hold output steady and allow prices to fall. This will get the world economy back up to speed faster. Output cuts only delay this recovery. Any production or quota reductions make OPEC look bad and gives those opposing them greater power, force and leverage. Taking action to increase prices is the wrong decision for OPEC to undertake.


What are your thoughts?



Sources for you to explore

Bloomberg: Energy Prices
Bloomberg: OPEC Defers Decision on Output Cut, Seeks $75 Oil

THE US$

Interesting article on the US Dollar in the LA Times.

Resurgent dollar slams Americans' foreign stock holdings
The once-struggling U.S. dollar suddenly is the strongman of the world’s major currencies. That’s great for Americans’ purchasing power -- but if you’ve noticed, it’s a heavy blow to the foreign stock holdings in your portfolio.

Takeaway:
As the Dollar strengthens foreign holdings are reduced in value upon currency conversion. People/investors appear to be buying US Dollars to invest in safer US based investments.

As the Dollar becomes more in demand its value increases and commodities priced in Dollars become cheaper for people using the US$. This may be part of the reason oil has been dropping. The current price of NYMEX oil can be found on Bloomberg

Hostilities between Russia and the Republic of Georgia may halt or reverse the recent price drops if tensions further increase. Keep a close eye on the situation for signs of further escalation.

RUSSIA VS GEORGIA

There are currently military hostilities between Russia and the Republic of Georgia.

Why is this important?

There is a major oil pipeline in Georgia that transports "1.2 million barrels a day." There are reports that Russia has attacked the pipeline.

"Azerbaijan, which borders Georgia, announced Saturday it had halted oil exports via the Georgian ports of Batumi and Kulevi due to the fighting between Georgia and Russia."

Bloomberg has the Nymex Crude Future at $116.40 [retrieved Sunday 8/10/08]

If the hostilities reduce the world oil supply the price of oil, which has been steadily falling, may begin to climb upwards as a result of new tensions, hostilities and uncertainties.

Where do you think oil prices will be in a week, month, and 60 days?

NYMEX CRUDE FUTURE PRICE

Bloomberg 8-5-2008

Nymex Crude Future $120.38
Change -1.03
% Change -.85
Time 00:38

NYT: "Shipping Costs Start to Crimp Globalization "

From the New York Times:


"When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury roadster for the American market, it had the global supply chain in mind. Tesla planned to manufacture 1,000-pound battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States."

Higher transportation costs are changing the game for global business. The increasing costs of movement [shipping/logistics] are reducing labor cost savings. Those saving are being reduced, reversed and offset by increasing shipping costs.

Tesla is a great example of this. They were going to reduce costs by manufacturing in lower cost locations. The rapid increase in oil prices has made transnational shipping more expensive. Expensive enough to bring manufacturing back the the United States.

What are your thoughts?