The price of oil has come crashing down in recent weeks, but the price of gas hasn't followed (great chart of this is over at Bespoke).
Why? According to AP Energy Writer John Porrettoe:
The price of gas is indeed tied to oil. It's just a matter of which oil.Hey, at least we're back to the longer term mean.
The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.
Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.
But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.
Source: EIA
Anyone see this yet? China loans $25B to Russia for ~2.2B barrels of oil...that's less than $12 per barrel. Peak oil? Hmmmmm....
ReplyDeletehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aq_6uYgEtOmY&refer=home
It looks like the loan and the 20 year 300k barrel / day deal may be two separate items of news:
ReplyDeletehttp://www.forbes.com/feeds/afx/2009/02/17/afx6058197.html
If this trend is to continue, why cant they switch the benchmark used to more accurately reflect what's going on?
ReplyDeleteJake, IMHO the Bloomberg news article seems more clear than the Forbes article. Also, I posted the same comments about the Bloomberg article on http://www.oiltradersblog.blogspot.com/ to see if I could get another view point ... and the blog's response, nothing. In fact, all comments have been deleted and the comment function has been removed to avoid future comment posting. Peak oil? Hmmmmm.... What a sham.
ReplyDeletehttp://uk.news.yahoo.com/22/20090217/tbs-uk-russia-china-oil-sb-4210405.html
ReplyDelete300,000 barrels per day for 30 years it is... BUT the $12 per barrel ignores the time value of money (the entire $25 billion is up front).
either way, thanks for the heads up and i'll think if i can't think of a way to capture in a chart
okay... some quick and dirty math. based on a 15% interest rate (this is russia after all), this comes out to the equivalent of $35 per barrel.
ReplyDeletei'll post something this week going through the math.