Energy / Oil Prices

• What's Driving Oil and Gasoline Prices in the US?

  Here I comment on some recent developments affecting oil and gasoline prices.There is no oil shortage in the central United States, and has not been for some time, thanks to increased production from Canadian oil sands, North Dakota, and the Midwest United States:Source: Borenstein and Kellogg (2012).At the same time, demand in the U.S. is down, as Americans are driving fewer miles than in 2008 with more fuel-efficient cars:Source: EIA.The result has been that oil is piling up in the central U.S. With inadequate pipeline capacity to transport that crude so that it could replace more expensive oil imported by…

• Oil Prices Could Follow Gas Prices Down as Demand Decreases

  It’s not entirely a serious proposition — yet.But the point is the global market for hydrocarbons is undergoing a fundamental change, and whether you are a major energy consumer or not, the impact will be felt throughout the manufacturing landscape.In the short term, it is difficult to see how prices can go any way but up. As the Economist Intelligence Unit wrote last week, the price for dated Brent Blend averaged US $125.50 per barrel in March, up from US $119.70 per barrel in February and just US$107.90 per barrel in December 2011.These price movements were driven in large part…

• The Problem with Banning Oil Speculation

  Joseph P. Kennedy II, former Congressional Representative from Massachusetts, and founder, chairman, and president of Citizens Energy Corporation, has a proposal to make energy affordable for all. All we have to do, Kennedy claims, is "bar pure oil speculators entirely from commodity exchanges in the United States." Writing in the New York Times last week, Joseph Kennedy (D-MA) explained why he believes that speculators are responsible for the high price that we currently have to pay for oil: Today, speculators dominate the trading of oil futures. According to Congressional testimony by the commodities specialist Michael W. Masters in 2009, the…

• Should we Limit Speculation in the Oil and Gas Markets?

  Let’s Play ‘Blame the Speculators’Most people would probably agree that speculation in the oil and gas markets is hurting American consumers. Consider the case of Aubrey McClendon. Mr. McClendon is the CEO of Chesapeake Energy, where he sells natural gas for a living. Natural gas prices have now been pushed down — by speculators — to below $2 per million BTU. This is a drop of more than 80% from 2008 prices. With these depressed prices, Mr. McClendon will have a hard time ever matching his $112 million of earnings in 2008. Mr. McClendon’s livelihood has been hurt by speculators.Of…

• How the U.S. Could Protect Itself Against Volatile Oil and Gas Prices

  Global oil prices are driven by a ‘rule of thumb’ that suggests prices will go up when the spare capacity of oil available on any given day is less than 5% of expected global demand.  In today’s high priced oil market that swing in spare capacity is about 2%. This a big deal because traders worry about risk such as events in the Middle East, or with Iran or any other places that supplies oil.  Spare capacity or swing productive capacity is the volume of oil than can be delivered as a percentage of expected global demand in a thirty…

• Why Saudi and US Attempts to Influence Oil Prices are Ineffective

  If you have the power and the desire to bring down oil prices, the best way to proceed is to start bringing them down. The easiest and fastest method would be to make more supplies available to the world market and keep adding until you reach your target price. The less you say about what you are doing, the better. When market participants are filled with uncertainty about your intentions, they have only the direction of prices to guide them. That means the speculative players can help you achieve your goals more quickly as they panic out of their positions.…

• Crude Oil Analysis for the Week of March 26, 2012

  After failing to pierce the previous week’s low at $104.29, May Crude Oil made a low at $104.50 and proceeded to rally sharply higher. The market still closed lower for the week, but the close near the high indicates that crude oil may be developing some upside momentum.The short-term range is $110.95 to $104.29, making $107.62 a key pivot price. A breakout over this price and the market will be set up for further upside action. A failure at this pivot could mean the formation of a secondary lower-top which is often indicative of selling pressure. There is no question…

• Crude Oil Analysis for the Week of March 19, 2012

  May Crude Oil finished the week with a slight gain. It was a quiet week with the market showing a bias to the downside until Friday when prices surged, taking back all of the week’s losses. Two week’s ago, crude oil posted a weekly closing price reversal top which typically leads to a 2 to 3 week break equal to at least 50 percent of the previous rally. Last week the market finished its two week decline but failed to reach its minimum objective of $103.61 before buyers stepped in at $104.29. Although the late week rally didn’t change the…

• The Global Economy is Now More Vulnerable to Oil Prices than Ever

  This paper examines the impact of oil price changes on global economic growth. Unlike some recent studies, this paper finds that oil price rises have had significant negative impacts on world economic growth. A time-series analysis of the data from 1971 to 2010 finds that an increase in real oil price by 10 dollars is associated with a reduction of world economic growth rate by between 0.4 and 1% in the following year. As oil prices approach historical highs, the global economy may be vulnerable to another oil price shock. As oil prices approach historical record levels, the debate on…

• Crisis in Libya Shows the Effects of Production Downtimes

  The spill-over of the political revolutions from the neighbouring countries to Libya and the resulting civil war have highlighted the threat caused by production downtimes in politically unstable countries. Although with an oil production of about 1.65mn barrels/day (2010; some 1.5mn barrels/day of those were exported) the country accounts for only 2% of global production, the price of Brent increased by about 25% between February and April last year. The influence of downtimes on the oil price does not only depend on the quantity of the production shortfall, but on many factors : • Quantity vs. quality: The quality of the…