Stock Markets are closed today, but Holy Cow, Crude is up 4%! Not GOOD.

[TalkingDog]

http://www.marketwatch.com/investing/future/BRENT%20CRUDE?countrycode=ZZ

Gas prices were edging up toward 4 per gallon last time this happened.

[TheCowsCameHome]

1. Opportunity knocks, Big Oil answers the door.

Any old reason to tuck it to the consumer will do.

[snappyturtle]

2. I made a comment like yours last week and was promptly 'corrected'

that the oil companies don't set the selling price; value of dollar does. Although I understand that devaluation of the dollar causes prices to rise, it seems to me that the increased pricing out paces the devaluation hence....gouging. IMHO

[Poboy]

3. Do not be misled by the oil pig apologists.

[TheCowsCameHome]

4. They'd never miss an opportunity to take advantage of a situation.

At least that's my belief.

[Thunderstruck]

9. How are they taking advantage of the situation today? How do they control

the market price for oil?

[TheCowsCameHome]

8. If the water in your basement is up to your ass

you'll pay whatever the repairman charges to fix the problem (NOT a knock on tradesmen, but you get my drift)

[social_critic]

20. Some of it is dollar devaluation, some of it is perceived shortfalls

The increased price does indeed outpace the devaluation of the US dollar. I live in Venezuela and I am a business consultant, and this makes me track the oil market fundamentals very closely. The market is pretty much a worldwide market, although we have to factor in tanker rates, pipeline capacities, and of course taxes and other fees.

When you see the oil price go up in a situation such as this, it means market players are making a guess the oil price may go up in the future due to shortages. In this case the shortage could be Lybia's oil production being shut down. But it could also mean they're skittish because the Arab rebellion may spread to Saudi Arabia. And that would be the mother of all rebellions, don't you think?

So there's no gouging as such going on. Refinery owners who need oil will just ride the market, and will pay what they think they need to pay to keep their refineries working. If they don't, they don't get to sell you that $4 a gallon gasoline you think you have to have to feed your SUV. Oil sellers (a mixed bag, many of them state oil companies, but many are also oil companies of various sizes), will also ride the market - many of them will make a higher GROSS profit, and will therefore pay a higher tax. If you check the stock price for say Royal Dutch Shell, ExxonMobil, and ENI, you'll see their stock value doesn't come close to tracking the oil price - this is because they pay so much tax on the oil they produce, and they also burn fuel in their refineries.

I know it's fashionable to have a knee jerk reaction when oil prices go up, but this business isn't nearly as simple as many of you think it is. And if you think it is that profitable, then you should by all means buy oil company stocks.

[snappyturtle]

22. I appreciate you taking the time to explain your experience. What just

doesn't quite go along with all of this are the record profits oil companies make....that's gotta come from somewhere. It also sounds as if refinery owners are hedging the marketplace.....so that's why the minute we hear of a ripple in the ME the pump prices immediately rise. I am not so afraid of Saudi Arabia rebellion because we don't get most of our oil from the ME, or so I've been told and read. However, I do think that if there's a rise in price of Saudi oil because of political circumstances, oil where ever it originates will join in. imho

[social_critic]

23. Well, let me explain a bit more about this oil business thing

The record profits do come from the higher oil prices. But the profits don't track the oil price - a lot of the money goes to OPEC nations, to governments, state oil companies, etc. Some companies are exceptional - ExxonMobil, for example, has a huge position in tax-royalty regime oil production. Tax-royalty regimes allow the companies to keep the profits when prices go up. Countries such as Angola and Azerbaijan use what is called a Production Sharing regime - they keep most of the money when prices go up.

Overall, it's a good idea to see how the whole industry profit stream goes up and down, their Price/Earnings ratios, their dividends, and their stock prices. If you track it, you'll see they are doing well, but I'd rather have owned Apple stock in 2000, rather than oil company stock, even though oil prices have increased almost 8 fold.

Regarding the comment that we don't get oil from Saudi Arabia, I think I should clarify, even if we don't get much, there's essentially one market. This means that, if Saudi Arabia goes off line, then the countries which do buy Saudi crude (say India, China, and European nations), will start bidding up the price for oil streams which tend to go to the US (say Mexico, Angola, Venezuela). So if the other guys bid up the price for those streams, then US companies have to raise their offers, and this shows up at the pump in Omaha eventually.

This issue is really fascinating, I have a spreadsheet which shows how the oil prices ripple when one country goes up or down. It tells me the oil price setter is Saudi Arabia - because it has the volume and the spare capacity to jerk the chain as it wishes. When Saudi Arabia shuts in, the market becomes incredibly inelastic, and the prices hit the roof even if the emergency stockpiles are drawn down.

And this is why the market is so jittery and bizarre right now. Yesterday there was an opportunity to arbitrage between Brent at Rotterdam and West Texas intermediate the likes of which you couldn't believe. The window already closed as the "speculators" moved in like piranhas to close the gap, so today the prices in Europe are lower and the prices in the US should be a tad higher (and this is the reason why I'm away so late, I track these markets when everybody is asleep).

[Poboy]

5. Gold and silver up big too.

All commodities are flying.

[CountAllVotes]

6. it is already $4 a gallon here

Well, I should say $3.91 a gallon for the super unleaded; $3.75 for the regular unleaded. Last time I filled the car up which was about a week ago, the price was $3.63. That is a $.12 increase in a very short time!

:dem: :kick:

[Thunderstruck]

7. Make that 5.26%...

90.73 +4.53 +5.26%

[xchrom]

10. recommend

[Shagbark Hickory]

11. Holy Shit! $105!

Damn you GW bush!

[prolesunited]

12. Well, that will put a halt to any recovery.

It's one of the things that helped drive the recession and the economy certainly isn't stable enough to handle this. Glad I have a bike that can take me everywhere I need to go.

[TalkingDog]

19. Yep. That was the point in posting.

Repeat: This is NOT GOOD

[rdking647]

13. libya

its due to tensions in libya which is a major crude exporter.

[rdking647]

14. gas not up as much

crude is $5 higher on the nymex but gasoline is only 6.5 cents higher
http://barchart.com/commodityfutures/Energies

[Thunderstruck]

15. There will be a delay between today's run-up in oil prices and the corresponding

increase in RBOB gassoline, I should think, of perhaps as much as a month as the refineries receive, process, and deliver the final product. If I'm wrong about that I welcome a correction from anyone who knows more about it or is at least more certain.

ETA: BTW, I really like that link you provided. Thank you for posting it.

[rdking647]

16. rbob gas

in that case you would see a large increase in later dated RBOB contracts
right now mar,arp,may and june contracts are all up about the same amount (7c or so) after june the increases are less with october and later up only a penny

[social_critic]

21. Last in first out

You'll see it a lot faster than you think, because refiners use the Last in First Out accounting system. I believe LIFO is the most reasonable way to account for costs. But refiners will sell for whatever the market will bear. Which means Last in is First Out, but they won't price the products so high they won't sell. So they watch each other, track their sales, and try to jack up the price as much as they can.

This is what you do when you sell something, you do try to get the price as high as you can get it, don't you? It's just that gasoline is one of those things people feel they have to have, so it's not like other products. You won't walk away from the gasoline pump the way you would be walking away from the light sword with the kung fu grip you wanted to buy for Joey.

What I don't get is, why do you guys keep buying large vehicles and use so much gasoline? I recommend a small four cylinder engine, manual transmission (six speeds), and tires properly inflated. And of course move closer to work or use public transportation. The world is running out of oil, and it's getting hotter out there, so you do need to do your part.

[Thunderstruck]

17. Now up 6.06%

91.42 +5.22 +6.06%

[GSLevel9]

18. I paid 3.85/gal in an LA suburb today.

For 91 premium. Just wait til the neocons roll out the "Drill Baby Drill" line again.

BTW, my gas tank is 26 gallons so it officially costs $100 to fill my tank.

Oh, BTW the only thing worse for DEMS in 2012 than 10% unemployment is $4-$5 gasoline.