Jan 14 2009
Where Is Oil Going?
Crude oil prices over the past six months have been nothing less than baffling. In the sweltering summer gas was over four dollars a gallon and it felt like it would soon be permanently parked at more than $5. Since then, the price has declined by more than 70% which is about the only positive note for consumers in the midst of the economic slowdown.
Oil producers are shutting down and rigs and refineries are producing less gasoline. The problem is not just the slowdown, but the price volatility is adding to the sense of shock and uncertainty.
With storage tanks filling up onshore, private and national oil companies, refiners and trading companies are storing another 80 million barrels aboard 35 supertankers and a handful of smaller tankers, the most in 20 years, according to Frontline Ltd., the world’s largest owner of supertankers.
The different players have different reasons for storing oil, whether onshore or offshore.
National oil companies are hoping to reverse the price slide by holding oil off the market. Iran alone is reportedly using as many as 15 tankers to store crude oil in hopes that higher prices will prop up its economy, which is dependent on oil exports.
Private trading companies like Vitol and Phibro are storing oil in expectation of higher prices. They are taking their cues from commodity traders who buy and sell contracts for future delivery of oil, which are signaling higher prices down the road.
Be prepared for higher prices to come and fill up your tank today.
This is not good news. I’ve been watching the price of gas to slowly inch up above the $2 mark. Looks like a repeat trend of last year. If we can just get off our oil dependency, that would be awesome.