Oil Rises to Record $60; Demand Strains Rigs, Pipes, Refineries
Jun 24, 2005
Concern About Stockpiles
Oil has gained about 20 percent in the past month on concern U.S. refiners will strain to store enough distillates, or heating oil and diesel, for the northern hemisphere winter while they meet summer gasoline demand.
No refineries have been built in about 30 years in the U.S. and about a decade in Europe, and some plants are unable to process more of the low-quality crude, the type for which OPEC can increase output.
Oil Imports
China's crude oil imports in the first five months of the year increased 5.1 percent to 52.3 million tons, figures from the Beijing-based Customs General Administration of China showed.
Heating oil for July delivery, a contract which serves as a proxy for jet fuel prices, surged 3.3 percent yesterday, capping a 64 percent gain in the past year. It was trading at $1.6746 a gallon on Nymex today. Its record-high was $1.6950 on April 4.
`Less Fuel-Intensive'
Last week, the chief U.S. economist at Goldman, Sachs & Co., William Dudley, reiterated a view from the securities firm that a disruption in supplies may send oil to $105 a barrel.
http://www.bloomberg.com/apps/news?pid=10000086&sid=adTmZ5u6pS9c&refer=latin_america
it's unlikely that the Arab world will cut off its nose to spite its face. As a Kuwaiti oil official told Reuters recently, "how can we support our Palestinian brothers if we do not have revenues?"
http://www.cato.org/dailys/04-24-02.html
Some unknown history of the OPEC oil embargo of Oct 1973
The OPEC oil embargo October 17, 1973 Arab oil ministers announced an oil embargo on the United States, while increasing prices by 70 percent to western Europe. In fact, the embargo never actually achieved a shutoff of OPEC oil imports to the United States. All but about five percent of the need supply found its way to America by a circuitous route as allocations to other nations were surreptitiously redirected. But the base price of a barrel of oil did eventually more than quadruple by the time the embargo was called off in March 1974. (page 46)*
Why did the price of oil go up? Well, in August 1971, President Nixon closed the gold window after the British ambassador formally requested $3 billion in gold bullion from the US Treasury. This effectively detached the dollar from anything but an abstract notion of its value. As the price of gold went up to $140 from its historic $35 an ounce (from the FDR days), foreign oil producers, especially Arabs spooked by the dissociation of money from gold, sought to raise the dollar price of their oil. *(Source: page 218, The Long Emergency by James Kunstler)
Price controls imposed in August 1971 by the Nixon administration prevented major oil companies from passing on the full cost of imported crude oil to consumers at the pump. "Big Oil" did the only sensible thing: It cut back on imports and stopped selling oil to independent service stations in order to keep its own franchisees supplied. By the summer of 1973, gasoline prices were exploding, pumps were running dry, and long lines were commonplace. And that was before the Arab oil embargo or production cutbacks were announced.
Congress responded by making matters worse with the September 1973 Emergency Petroleum Allocation Act. Gasoline distribution would henceforth be rationed and the price of "new" oil - including imports - was decontrolled even though "old" oil was not. Perversely enough, this exacerbated the shortages that the EPAA was trying to remedy. That's because long-term contracts - the means by which most oil was sold at the time - did not rise to meet spot prices. Contract holders thus had a strong incentive to stockpile as much oil as they could at the very time when inventories should have been released on the market.
----
CIA lied to Pres Carter and told him there was an oil shortage and that the Soviets would have to invade the middle East to get oil. The plan was to change Pres. Carter's mind about increasing defense spending and for him to give military aid to Arab countries hostile to Israel. During Pres.Carter's term, the oil shortage was engineered by US oil companies. (Source: Loftus, John The Secret War Against the Jews, New York: St Martin’s Press)
----
The Iranian revolution of 1979 and the country's war against Iraq in the 1980s temporarily interrupted flows of oil from the two countries, sending the cost of oil for U.S. refiners to $35.24 a barrel in 1981, according to the Energy Department. That's $75.44 in today's dollars.
http://www.bloomberg.com/apps/news?pid=10000086&sid=adTmZ5u6pS9c&refer=latin_america
Concern About Stockpiles
Oil has gained about 20 percent in the past month on concern U.S. refiners will strain to store enough distillates, or heating oil and diesel, for the northern hemisphere winter while they meet summer gasoline demand.
No refineries have been built in about 30 years in the U.S. and about a decade in Europe, and some plants are unable to process more of the low-quality crude, the type for which OPEC can increase output.
Oil Imports
China's crude oil imports in the first five months of the year increased 5.1 percent to 52.3 million tons, figures from the Beijing-based Customs General Administration of China showed.
Heating oil for July delivery, a contract which serves as a proxy for jet fuel prices, surged 3.3 percent yesterday, capping a 64 percent gain in the past year. It was trading at $1.6746 a gallon on Nymex today. Its record-high was $1.6950 on April 4.
`Less Fuel-Intensive'
Last week, the chief U.S. economist at Goldman, Sachs & Co., William Dudley, reiterated a view from the securities firm that a disruption in supplies may send oil to $105 a barrel.
http://www.bloomberg.com/apps/news?pid=10000086&sid=adTmZ5u6pS9c&refer=latin_america
it's unlikely that the Arab world will cut off its nose to spite its face. As a Kuwaiti oil official told Reuters recently, "how can we support our Palestinian brothers if we do not have revenues?"
http://www.cato.org/dailys/04-24-02.html
Some unknown history of the OPEC oil embargo of Oct 1973
The OPEC oil embargo October 17, 1973 Arab oil ministers announced an oil embargo on the United States, while increasing prices by 70 percent to western Europe. In fact, the embargo never actually achieved a shutoff of OPEC oil imports to the United States. All but about five percent of the need supply found its way to America by a circuitous route as allocations to other nations were surreptitiously redirected. But the base price of a barrel of oil did eventually more than quadruple by the time the embargo was called off in March 1974. (page 46)*
Why did the price of oil go up? Well, in August 1971, President Nixon closed the gold window after the British ambassador formally requested $3 billion in gold bullion from the US Treasury. This effectively detached the dollar from anything but an abstract notion of its value. As the price of gold went up to $140 from its historic $35 an ounce (from the FDR days), foreign oil producers, especially Arabs spooked by the dissociation of money from gold, sought to raise the dollar price of their oil. *(Source: page 218, The Long Emergency by James Kunstler)
Price controls imposed in August 1971 by the Nixon administration prevented major oil companies from passing on the full cost of imported crude oil to consumers at the pump. "Big Oil" did the only sensible thing: It cut back on imports and stopped selling oil to independent service stations in order to keep its own franchisees supplied. By the summer of 1973, gasoline prices were exploding, pumps were running dry, and long lines were commonplace. And that was before the Arab oil embargo or production cutbacks were announced.
Congress responded by making matters worse with the September 1973 Emergency Petroleum Allocation Act. Gasoline distribution would henceforth be rationed and the price of "new" oil - including imports - was decontrolled even though "old" oil was not. Perversely enough, this exacerbated the shortages that the EPAA was trying to remedy. That's because long-term contracts - the means by which most oil was sold at the time - did not rise to meet spot prices. Contract holders thus had a strong incentive to stockpile as much oil as they could at the very time when inventories should have been released on the market.
----
CIA lied to Pres Carter and told him there was an oil shortage and that the Soviets would have to invade the middle East to get oil. The plan was to change Pres. Carter's mind about increasing defense spending and for him to give military aid to Arab countries hostile to Israel. During Pres.Carter's term, the oil shortage was engineered by US oil companies. (Source: Loftus, John The Secret War Against the Jews, New York: St Martin’s Press)
----
The Iranian revolution of 1979 and the country's war against Iraq in the 1980s temporarily interrupted flows of oil from the two countries, sending the cost of oil for U.S. refiners to $35.24 a barrel in 1981, according to the Energy Department. That's $75.44 in today's dollars.
http://www.bloomberg.com/apps/news?pid=10000086&sid=adTmZ5u6pS9c&refer=latin_america
posted by T. Scott Brineman at 11:16 PM
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