Dear Mr. President: Don’t Forget the Refineries

Last night in the State of the Union, President Obama discussed policy for clean energy and big oil.  The government should consider revisiting tax incentives for refineries.

Valuing refined products separately from crude oil and using refineries as independent profit centers is stupid.  Above and beyond that, it is dangerous.  Because some green-eyed accountants showed vertically-integrated refiners how their real profits came from crude oil (duh), they started to look at refineries as separate entities that need to show profits on their own.  In the process, they are missing the point and they run the risk of marginalizing US crude. Read more

High Crude Oil Prices Don’t Add Up

I was talking with Lou Dobbs on his radio show yesterday and we were struggling to come up with reasons that gasoline prices are as high as they are right now, given a steep decline in demand this month – cited as 927,000 bpd by the DOE and at 1.4 million bpd by SpendingPulse, which monitors point-of-purchase sales.  Production should start to decline, soon, as refineries take down units for seasonal maintenance.  But, in the meantime, it is a struggle to justify prices at existing levels at the pump.  They should be half a dollar less expensive, with crude oil prices proportionately lower, based on what we are seeing in terms of pure supply and demand. Read more

Heisenberg and S&P

Werner Heisenberg, a German physicist, determined that our observations have an effect on the behavior of quanta (stuff we measure), according to How Stuff Works (http://science.howstuffworks.com). His observation on the power of observation to influence whatever is being observed is called the Heisenberg Uncertainty Principle. The How Stuff Works webs article explains it very well: Read more

EUnanimity

Bloomberg printed an unattributed story on Thursday afternoon suggesting that Europe may end up delaying the implementation of an Iranian oil embargo for six months.  It does not necessarily mean that the EU will delay its vote on the embargo, currently scheduled for January 23^rd, but it will give the bigger importers (Greece, Italy and Spain chief among these) extra time to work out critical details.  And, it may also give Iran time to return to the negotiating table before the bigger importers of its oil in Europe have actually pulled the plug.
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Petropolitical Grumbles and Seasonal Stumbles

We always talk about the big decline in gasoline demand which comes most years in January.  Over the first two reporting weeks of 2012, gasoline demand, as reported by the DOE, has fallen 744,000 bpd.  SpendingPulse, MasterCard’s point-of-purchase monitor, has suggested the decline is closer to 1.4 million bpd, or 15%.  Either way, we are looking at a huge decline, so far, this year.

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