Don’t You Just Love It When A Plan Comes Together?
Vol: 125 Issue: 20 Monday, February 20, 2012
By every market measuring standard, low demand equates to higher supply. In a marketplace free of manipulation, higher supply coupled with lower demand ALWAYS means lower prices. Always.
If you have something for sale that I don’t really need, I won’t buy it. But what I really need is your money — that’s why I am selling my product. So if my price is too high, either I learn to eat whatever I’m selling, or I must lower my price enough to entice you to buy.
That’s how a free market works. It never goes the other way. Never — if it is truly a free marketplace.
While this has been a bitterly cold winter for the Europeans, for North America, it has been pretty mild. Americans used far less heating oil than expected this year. Gasoline demand is down as well, as high prices curtail a lot of discretionary driving.
So why hasn’t the price of heating oil fallen commensurate with demand? Why is the price of a gallon of gasoline still going up as demand continues to go down?
According to MasterCard, whose business it is to know such things, demand for gasoline is at record levels. Record LOW levels . . . and falling. According to the credit card giant, demand FELL by some 3.1 percent over the past week, and is DOWN by 5% over the same period last year.
Drivers bought 8.01 million barrels a day of gasoline in the seven days ending Feb. 10, according to MasterCard’s SpendingPulse report. Demand fell below year-earlier levels for a 24th consecutive time, decreasing 5.4 percent from 2011.
The average pump price rose 3 cents to $3.50 a gallon, 12 percent above a year earlier. The biggest regional gain was in the U.S. Midwest, which saw prices increase 4 cents.
Gasoline use over the previous four weeks was 5.3 percent below the 2011 period, the 47th consecutive decline in that measure. MasterCard’s data goes back to July 2004.
The report from Purchase, New York-based MasterCard is assembled by MasterCard Advisors, the company’s consulting arm. The information is based on credit-card swipes and cash and check payments at about 140,000 U.S. gasoline stations.
Analysts say that the higher prices are the result of Middle East unrest. This week, Iran reacted to sanctions imposed on it by France and Great Britain by cutting off their supplies of crude oil.
“The spokesman for Iran’s Oil Ministry, Ali Reza Nikzad-Rahbar, said on the ministry’s website Sunday that “crude oil exports to British and French companies have been halted.”
“We have our own customers and have no problem to sell and export our crude oil to new customers,” he said. Britain’s Foreign Office declined comment, and there was no immediate response from French officials.
The semiofficial Mehr news agency said exports were suspended to the two countries Sunday. It also said the National Iranian Oil Company has sent letters to some European refineries with an ultimatum to either sign long-term contracts of two to five years or be cut off.”
But France and Great Britain were planning an oil embargo against Iran starting July 1 anyway. The EU’s July deadline was intended to allow time for Greece, Spain, and Italy, Iran’s biggest European customers, to find supplies from other oil producers such as Saudi Arabia, Russia, and Iraq.
Saudi Arabia, Iran’s main regional rival has already said it can meet any shortage in the oil market. So, in marketplace terms, all that Iran did was advance the timetable. France and GB were planning to get along without Iranian oil anyway, weren’t they?
And Saudi Arabia already PROMISED us last year that it would make up the shortfall, in the event of any Iranian-sponsored supply interruptions.
And so, as the run-up toward hostilities with Iran continues to build, one would have expected that the Saudis would be ramping up their output. Or, at the very least, they’d have made preparations to do so when called upon.
So, now that Iran has taken action to affect the global supply chain, it is time for the Saudis to step up to the plate. Isn’t it? Except we just found out that last month, the Saudis REDUCED both its output and its exports by more than a quarter million barrels per day!
That is just about equal to the amount of oil that Iran sells to Europe.
Ok, we’ve been stabbed in the back by the Saudis. Gee, I never saw that coming! Did you? How could the administration have ever allowed itself to be blindsided by the Saudis!
I’m shocked! Shocked, I say! But at least, nobody can blame President Obama for high gas prices. After all, it isn’t HIS fault. Nobody can blame him for what the Saudis do. After all, Obama isn’t king of Mecca — he bows to the King of Mecca!
So Obama can’t be blamed for the national average being up fifty cents a gallon over the past year. One year ago, a barrel of Saudi crude sold for $86.00. Can anybody blame Obama if today we’re paying $103.00?
Last April, Obama was asked about higher gas prices at a “town hall” meeting in Pennsylvania:
“You were talking about the rise of gas prices. I know back in the seventies they were going from our license plates, odd to evens, days we could get gas. I know we’re not at that stage right now but they did lower the prices after that. Is there a chance of the gasoline price being lowered again?”
Remember that this was almost a whole year ago. Pay close attention to how Obama answered the question, “is there a chance of lower gas prices in the future?”
Notice that Obama starts out by promising something unusual — the truth. Then he tells it:
“I’m just gonna be honest with ya. There’s not much we can do next week or two weeks from now. If you’re getting eight miles a gallon you may want to think about a trade-in. You can get a great deal. I — I promise you GM, or Ford, they’re — or Chrysler, they’re — gonna be happy to give you a deal on — on something that gets you better gas mileage. Gas prices? They’re gonna still fluctuate until we can start making these broader changes, and that’s gonna take a couple of years to have serious effect.
What “broader changes” is he talking about? Driving energy prices outside the reach of the ordinary consumer is actually his mad plan. Obama’s solution to high gas prices is for them to go so high that it becomes profitable to buy an electric car.
That is why Obama nixed the Keystone Pipeline. It doesn’t have anything to do with environmental fears — that’s a red herring. Red herring? It is a bald-faced lie.
The environmental risks involved in transporting billions of barrels of oil nearly eight thousand miles by ship, not to mention the amount of fuel necessary to move it, are far more substantial — and expensive — than delivery by pipeline.
Need more proof that the plan is to impoverish the country, even risking national security, in order to advance the green agenda?
Saudi crude oil is currently selling for $103 per barrel — at the well head. Then it must be transported roughly 7,500 miles from Saudi Arabia to the United States for refinement at one of America’s Gulf refineries.
Right now, Canadian crude oil — and Canada’s proven reserves are GREATER than those of Saudi Arabia — is selling for — get ready for this — $65.91 a barrel.
That is how much America COULD be buying oil for. Half the price of Saudi crude. And even without the pipeline, Canadian oil starts out 7,000 miles closer to the nearest US refinery.
“A barrel of Western Canadian Select crude is one of the cheapest barrels of heavy, sour crude available in the world, as the Canadian market grapples with increases in production, pipeline constraints and lack of adequate refinery demand,” said a report by Platts, an energy market news service based in New York.”
Canadian producers eager for additional pipeline capacity were dealt a blow last month when U.S. President Barack Obama denied a permit for construction of the $7-billion Keystone XL pipeline. The 2,700-kilometre installation would be capable of transporting more than 800,000 barrels of crude oil from Alberta to Texas daily.”
How much could America buy Canadian crude oil for if we had a pipeline?
The bottleneck is one explanation for the recent rout in Canadian crude oil, which Tuesday morning was trading at a discount to U.S. crude of about US$33 a barrel, a drop of more than US$10 over the span of just one week, and the largest spread between the two since November 2006, according to Platts data.
WHAT? Canadian crude oil could be had for $33.00 per barrel and we’re paying $103 to ship in it from Saudi Arabia? Is that why we’re paying nearly four bucks a gallon for gas? Well, not exactly. There’s no shortage of crude oil for the refineries. Guess where THEY filled up?
“Refineries in the U.S. Midwest have been filling up on cheap Canadian crude oil and now find their storage tanks full. “They’re starting to feel the pinch of high inventories,” he said.”
“Product prices in the Chicago area are now much lower than in the Gulf Coast,” he said. That’s a reversal of the typical relationship between prices in the two regions.
Meanwhile, Canadian producers continue to bring more product to market.
“The market was not prepared for it. And there’s just not the takeaway capacity to bring all this crude to market in the U.S., or to anywhere else,” he said. “
American refineries have TOO MUCH CRUDE OIL. WE CAN’T REFINE IT ALL! And we didn’t buy it from the Saudis. American refineries bought it from the Canadians! They’re just charging us as if we bought it from the Saudis.
We’re paying four bucks a gallon for gas because the government and the domestic oil companies currently have similar agendas.
Oil companies are in business to make a profit for their shareholders. If they can keep prices artificially high, that is their job.
Obama is in the business of “fundamentally transforming America” into a liberal paradise in which government controls all aspects of daily life.
If, in the process of that fundamental transformation, it ruins a few lives, maybe even including yours, well, you can’t make an omelet without breaking a few eggs.
“Under my plan, energy prices would necessarily skyrocket.” (Barack Hussein Obama, May, 2009)
Don’t you just love it when a plan comes together?