Shortages
Wolfie — September 15, 2005, 2:57 pm
Even the Saudis are pointing out that the current oil shortage is due to refining capacity issues :
Saudi Arabia, the world’s biggest oil exporter, has given assurances that it will take steps to alleviate any crude oil shortages.
However, Saudi Crown Prince Sultan has said increasing demand and a shortage in refining capacity are the real reasons behind rising prices.
Filed under: politics
Predictable and predicted :
http://www.williambowles.info/guests/backwardation.html
15/03/04 Backwardation – Fast Forward into the future by Edward Teague
“In mid 2003 the the California based Rand Corporation produced a little noticed report, “New forces at work in refining: industry views of critical business and operations trends” by D.J.Peterson and Sergej Mahnovski. The US uses 12 Million barrels per day for transport, trucking miles have doubled in the last ten years and gasoline markets have grown and continue to grow by 1.7% per annum.”
“Refining plants have halved in 20 years and their utilised capacity increased from 75% to 97%. The number of owners has been reduced from 135 to just over 50 in ten years and half the capacity is held by 10 companies. Contrary to popular belief the refiners are largely independent of the oil majors, due to stripping out what they have increasingly seen as a capital intensive, internally subsidised part of the company, where intense retail competition has cut margins to the bone. The oil majors don’t like living on slim margins or in the shadow of federal regulators”.
“The US is short of oil and it shows in US Energy department figures with stocks at the lowest for 20 years and demand the highest. However the Strategic Oil Reserve is at the highest ever, but the SOR is a a one card trick – once the market see the US dipping into it, they see the US on the run.”
The “refining capacity issues” being OPEC deliberately controlling the amount of oil available to the market to keep prices high.
Like it or not, OPEC has us all by the short and curlies.
While I concede that what you say is true its also an oversimplification of the situation. Many of the refining plants are owned and run by British or American companies and they are deliberately under-investing in the infrastructure as a means of enhancing profitability and restricting supply in the market. Thus our problems are not all down to the demon-du-jour.