The Oil Drum

14 comments on A gentle reminder

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Khebab on October 20, 2005 - 7:40am

I still don't understand why higher imports should lower the gasoline price because prices are negotiated within an international marketplace (NYMEX) and it shouldn't matter where the gasoline is coming from.

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qmed2005 on October 20, 2005 - 8:30am

it is the difference in the price of gasoline in Europe compared to the US that has opened up the arbitrage opportunity that gives incentive to importers. A commodity is a commodity but the price is for the product delivered at a specific place and time, for example the NYMEX gasoline price is for wholesale gaoline delivered in New York Harbor. it does NOT mean the same price is being paid for product delivered in Europe or anywhere else.

the import surge in gasoline is similar to what happened in the 73 embargo with oil. when the ambargo was announced so many ships at sea diverted to US and Dutch ports that there was a brief period when oil prices actually went down in the target countries. Entirely a transient effect.

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Heading Out on October 20, 2005 - 1:21pm

This is a loan that has to be replaced.

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qmed2005 on October 20, 2005 - 1:53pm

the drawdown/sale protocols and the ability to "loan" oil from SPR's are essentially different programs. The oil that is sold into the market need not be be replaced, but eventually will be as the SPR continues to be filled. Ironically, the US SPR was just approaching its legal capacity of 700mb right as this happened.