I believe in supply and demand, and the US monetary policy has trashed the dollar despite Benny holding rates (short-term) low. PADD oil may not be terribly fungible because of pipeline and transportation costs and logistics, but it is generally so in my opinion. Bakken crude at $70 because of transportation bottlenecks with a $50 differential to Brent is crazy IMO. Tar sands Calgary oil just above $100 equally so IMO. We consume a quarter of the oil in the world and our demand is just that, a quarter. The rest of the world is growing, evidenced by the number of cars owned and built in China, just to cite one example. The recent production gains in this country have helped, but demand has increased more so as other places have come off-line, such as Iraq, Lybia, and Africa from time-to-time, not to mention the GOM.
Our boutique fuels are a problem for gasoline prices, with each refinery having its oligopoly of sorts. States through the Clean Air Act crafted their own requirements and the consumer paid the price. Here is one area where there has been zero leadership. Standardization would cost a fraction of building new capacity or drilling yet it is not pursued and it would drop prices quickly, with extra funds going to fund consumer discretionary items.
Watch prices crash if China has a hard landing. Supply and demand do matter, and our printing of money, debasing it endlessly, makes a dollar-denominated commodity such as oil worth a lot more per unit. Don't believe me, look at the price of gold. |
