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188 comments on DrumBeat: November 14, 2006

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TJ on November 14, 2006 - 9:01am Permalink | Subthread | Parent | Comments top
It's easily answered by the majors.  Just release the refinery margins for Aug-Oct vs May-June.
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Robert Rapier on November 14, 2006 - 9:18am Permalink | Subthread | Parent | Comments top
How would that answer it? Margins were better in May-June, because prices were higher. Supply and demand.

What answers the question is to look at refinery utilization versus supply. If supply was falling and refinery utilization was down for some unexplicable reason, then you have an actual suspect.

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AlanfromBigEasy on November 14, 2006 - 10:00am Permalink | Subthread | Parent | Comments top
I am watching the gasoline-middle distallates spread.

This is subject to manipulation by a handful of refiners.  Refine a mix biased towards gasoline (lean on diesel) despite market signals and this will affect "pump prices".  Other reifners go in the opposite direction, but are limited by constraints in operation.

Thay can claim some issues with very low sulfur diesel production to explain their actions.

Impossible to prove, but I have NEVER seen such spreads !

Alan

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Robert Rapier on November 14, 2006 - 10:34am Permalink | Subthread | Parent | Comments top
This is subject to manipulation by a handful of refiners.

Actually, it would take a good deal more than a handful, and they would have to work together across multiple companies.

However, I am not saying that governments can't manipulate prices. They can. By not filling the SPR, you can lower demand and put downward pressure on prices. By toning down the rhetoric on Iran, you can calm the markets and put downward pressure on prices. Both have been done, with the likely intent of keeping prices down. But no oil company has the stroke to do this.

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AlanfromBigEasy on November 14, 2006 - 11:56am Permalink | Subthread | Parent | Comments top
In theory, if Exxon-Mobil, Shell, Chevron-Texaco and BP shifted their refining mix towards gasoline when the market demand was for more diesel/av fuel/home heating oil, it could dramatically widen the delta between those products (note VLS diesel has limited capacity for that large product segment).  Those 4 oil companies have enough refining capacity to tilt the spread between gasoline & middle distillates world-wide.

Over time, other refiners would compensate and the spread would narrow despite uneconomic behavior by the named four.  But several months would be required by the rest of the industry.

The recent spread was astounding IMHO !

Alan

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Robert Rapier on November 14, 2006 - 1:57pm Permalink | Subthread | Parent | Comments top
In theory, if Exxon-Mobil, Shell, Chevron-Texaco and BP shifted their refining mix towards gasoline when the market demand was for more diesel/av fuel/home heating oil, it could dramatically widen the delta between those products (note VLS diesel has limited capacity for that large product segment).

But since distillate inventories are reported on a weekly basis, such a move would be quite transparent. I think most refiners would love to make more distillate, but they have contracts with gasoline customers that must be satisfied.  

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mbkennel on November 14, 2006 - 10:12pm Permalink | Subthread | Parent | Comments top
Funny you mention that.

Here in San Diego, Diesel fuel is 10-15c more than premium gasoline.   Diesel is $2.70 or so and regular unleaded $2.25.

That's very unusual in my observation.

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toilforoil on November 15, 2006 - 12:38am Permalink | Subthread | Parent | Comments top
From landline magazine here is a report of how some in the fuel business have left truckers steaming:

Fires still burning on hot fuel issue http://www.landlinemag.com/todays_news/Daily/2006/Nov06/111306/111406-01.htm

Since August, The Kansas City Star has done an excellent job covering an issue that makes truckers' blood boil - the issue of oil companies manipulating the temperature of fuel at the pump to overcharge consumers.

The OOIDA Foundation contributed to the original series by Star reporter Steve Everly, who brought the issue to the mainstream.

Petroleum fuel expands and contracts in hot and cold temperatures, so about 100 years ago, a standard was put in place to measure fuel volumes at its optimum temperature of 60 degrees Fahrenheit.

As Everly pointed out, with support from OOIDA Foundation's John Siebert, American consumers are being cheated out of between $1.2 and $1.7 billion each year as companies manipulate fuel temperatures.

It's all legal, at least for now, Everly stated in his series.

The latest story, published Sunday, Nov. 12, was called "Loophole enhances `hot fuel' profits."

The story focuses on how the same oil companies are also using the manipulation of fuel temperatures while paying federal fuel taxes - meaning they are buying low and selling high in a "legal loophole."

The companies may continue to profit from hot fuel, but neither the Star nor OOIDA are backing down from informing people that the practice is unethical.

"The nation's truckers take fuel-tax issues personally," Siebert stated in the article, which can be found by clicking here.

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