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Strategies & Market Trends : New US Economy Policy
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From: Arthur Tang6/29/2007 5:08:35 PM
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In the old days, Feds were lazy and took the contract price of commodities as real at the exchanges. Today, the energy consumer index is at the pump of average price, seasonally adjusted and fudge factor(federal tax) added on. Crude oil had many grades. sweet is full of water and alcohol. black grease is only $5 per barrel from Mexico and Venezuela. one barrel can become 9 barrels of sweet crude. The price is posted at the refinery, and they know how much to pay based on the sour sulfur content. 4% sulfur is now diluted with water to become less than 2 % allowed. I have the price paid each year in Wyoming from one well delivered locally to a refinery. They never could get the price same as NYMEX pit traders want. US oil wells rigs count are way down to about 1100 still pumping. we are using alcohol for gasoline since 1998.

This understanding has to be known, oil is either spot(small quantity business Iraq $8, Indonesia $12, Mexico $5); others are all on contract($24), so the price is fixed each year, it does not go with NYMEX pit traders wishes.

So, if you ask Feds, they don't get too excited with commodity exchange prices. Feds can get the price posted at the fence at any refinery. NYMEX is just good gambling if you want to lose some big money to jump out of the 13th floor to commit suicide.
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