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Crude Plunges, But Someone Tell The Gas Stations And Refiners: Average Price Of Regular Rises By 2.2 Cents Overnight

Tyler Durden's picture




 

Once again someone forgot to tell gas station operators that the CME is doing all it can to generate a feedback loop which kills commodity prices and general price stability (price plunges, vol surges, leading to margin hikes, leading to more plunges, leading to even more vol and even more margin hikes, etc). After gas prices rose by about a cent yesterday, the rise according to AAA continues, with average gas prices on the verge of a post 2008 high, even as crude prices have taken a nearly $20 hit in the past two weeks. Yesterday the average regular price was $3.984, up from $3.962 yesterday, and unchanged from a week ago.

Yet for all fools who believe the administration will buy such nonsense as "sticky prices" we have a message for you: it won't. After Holder was removed from his carbonite cryogenic bath, when over 3 years we heard absolutely nothing from him, and is now running around shooting oil "speculators" (but not the money printer, never the money printer) with impunity, NBC Washington reports that the DC AG has launched a criminal investigation into a "suspicious" 25 cent price jump. Because there are no trillion dollar crimes on Wall Street....

 

View more videos at: http://www.nbcwashington.com.

 

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Thu, 05/12/2011 - 09:14 | 1267315 jkruffin
jkruffin's picture

The oil crooks did the same thing in 2008. This is the sign that the collapse is coming real soon.  Everything we seemed to not have learned as a country are repeating exactly in the same form as the 2008 crisis initiation. 

 

Look out below!

Thu, 05/12/2011 - 09:38 | 1267390 Quinvarius
Quinvarius's picture

Their hedging losses need to be covered now.  The commodities intervention probably made the problem worse.

Thu, 05/12/2011 - 10:25 | 1267603 SheepDog-One
SheepDog-One's picture

Central planning always makes the problems worse, I dont care what Keynes taught all these clowns.

Thu, 05/12/2011 - 09:17 | 1267316 Xibalba
Xibalba's picture

Yet ANOTHER diversion between the bankers paper and the phyz.

Thu, 05/12/2011 - 09:15 | 1267322 holdbuysell
holdbuysell's picture

Speaking of crimes with a T in them, I haven't heard a peep out of the MSM regarding the imminent debt ceiling breach nor Rolling Stone's tour de force article.

What gives?

Thu, 05/12/2011 - 09:37 | 1267399 tmosley
tmosley's picture

Not imminent.  Past.  As in already happened.

Thu, 05/12/2011 - 09:19 | 1267324 LawsofPhysics
LawsofPhysics's picture

Just more disconnection between the paper world (which is now on fire) and the physical world.  Yeah, your 401k will provide you with a quality retirement, bah ha ha ha ha.

Thu, 05/12/2011 - 09:16 | 1267325 firstdivision
firstdivision's picture

Didn't the same thing happen in '08?  As I recall, oil was in free fall while pump prices were static.  Per usual though, it will take a bit for prices at the pump to fall, even though refiners did not buy oil at the elevated prices.

Thu, 05/12/2011 - 09:29 | 1267364 Johnny Lawrence
Johnny Lawrence's picture

Amazingly, it seems like gas stations will increase their prices intra-day, but when it comes to lowering the price, it takes them longer.

Thu, 05/12/2011 - 09:32 | 1267377 firstdivision
firstdivision's picture

First rule of gas prices, they're elastic upwards but inelastic downwards.

Thu, 05/12/2011 - 09:44 | 1267428 Urban Redneck
Urban Redneck's picture

That could be eliminated by CME sharing insider information about pending margin hikes with all the small business owners who own gas stations and have to forward purchase inventory all the way up, instead of sharing it with the institutional speculators who own the exchange.   

Thu, 05/12/2011 - 10:11 | 1267536 chunkylover42
chunkylover42's picture

I'm skeptical that would make much difference.  The inventory gas stations have on site was purchased at the old prices which are much higher, so of course prices are going to remain high despite the plunge in crude until they get restocked at the new, lower prices.

Thu, 05/12/2011 - 13:03 | 1268332 pan-the-ist
pan-the-ist's picture

Then explain the converse - why do the gas stations raise price on gasoline bought at a lower price?

Fri, 05/13/2011 - 10:59 | 1271757 chunkylover42
chunkylover42's picture

Because when oil goes up they are about to be squeezed if they do nothing.  One dollar of profits won't buy the quantity of inventory that it used to, so they expand margins with a higher price to re-stock.

 

Thu, 05/12/2011 - 09:23 | 1267339 NOTW777
NOTW777's picture

look at silver gyrate around

Thu, 05/12/2011 - 09:36 | 1267395 Long-John-Silver
Long-John-Silver's picture

Snakes do the same thing after you cut it's head off. Has the Comex lost it's head?

Thu, 05/12/2011 - 09:39 | 1267407 tmosley
tmosley's picture

Infinite volatility, paper will trend towards zero as confidence in the system is lost, culminating with a COMEX default (and/or LBMA default, not necessarily in that order).

Thu, 05/12/2011 - 09:24 | 1267346 Sudden Debt
Sudden Debt's picture

OVERHEAD COSTS ARE A BITCH!!

 

 

Thu, 05/12/2011 - 09:25 | 1267348 The Axe
The Axe's picture

crazy trading in the complex...nutty..baby

Thu, 05/12/2011 - 09:25 | 1267350 LoneStarHog
LoneStarHog's picture

Isn't it obvious that this station is owned and operated by someone in Congress?

Thu, 05/12/2011 - 09:32 | 1267380 Baptiste Say
Baptiste Say's picture

How can average prices stay so high? I know markets are not efficient but generally competition destroys margins like these pretty quick.

 

Could there be a minority but significant percentage of refiners/chains who bought crude/gas at high prices and are skewing the average?

Thu, 05/12/2011 - 10:14 | 1267553 chunkylover42
chunkylover42's picture

saw your post after I posted (essentially) this above:

Gas stations still have inventory on site that was purchased at higher prices, so until that is depleted prices will stay high despite the plunge in crude.  As they refill at the new lower cost, gas prices will come down.

Thu, 05/12/2011 - 09:36 | 1267382 Quinvarius
Quinvarius's picture

That is what happens when you put the refiners hedges into the loss category with some BS interventions.  They still have to make those losses back.

Thu, 05/12/2011 - 09:39 | 1267386 Long-John-Silver
Long-John-Silver's picture

Raise the margins! Raise the margins! Raise the margins!

Sound effect: General Quarters Gong sounding in background with explosions.

Thu, 05/12/2011 - 10:31 | 1267619 SheepDog-One
SheepDog-One's picture

Last acts of desperate men seeing their power and controll slipping away...RAISE the MARGINS! And people think this will be the new normal? Ham fisted central planning making the old Soviet Union look free and unfettered by comparison?

Thu, 05/12/2011 - 09:42 | 1267405 Stoploss
Stoploss's picture

WTF, Did they think gas was going to go down after hiking refiner margins? Obviously it was an excellent decision, we shall now have 6$ a gallon gas and 60$ barrell of oil. This will go over well with the serfs.

Thu, 05/12/2011 - 10:24 | 1267599 SheepDog-One
SheepDog-One's picture

Exactly, we could have $60 barrel of oil, and be seeing $6 at the pump...central planning FAILS it never works!

Thu, 05/12/2011 - 09:40 | 1267415 TradingJoe
TradingJoe's picture

A well orchestrated "bounce" will leave all "speculators" empty handed :))!

Thu, 05/12/2011 - 09:47 | 1267434 RobotTrader
RobotTrader's picture

Gasoline will be back down to $3.50 by Memorial Day, $3.00 by Labor Day

This is the most successful "inflation bashing" event we have witnessed since the 2008 crash.

Notice how KSS is skyrocketing up today, along with other retail names.

Thu, 05/12/2011 - 09:49 | 1267451 SheepDog-One
SheepDog-One's picture

Oh I thought you just placed your bet on $2.50 an hour ago....RBOB UP^! Pressure cooker blowoff coming you cant alter reality by placing fines and tolls on it. 

PS- Retail sales plunge.

Thu, 05/12/2011 - 09:53 | 1267460 LRC Fan
LRC Fan's picture

Why fight the Fed and regulators in the short term?  Long term you're 100% right but for the next few weeks, at least, commodities are going to plunge.  Fight the trend at your own risk, and prepare to be vaporized in short order. 

Thu, 05/12/2011 - 09:49 | 1267454 LRC Fan
LRC Fan's picture

Agreed, in the short term (possibly up to November 2012) this is the trend.  They will continue to beat the hell out of gold/silver/oil to try and beat down inflation that the people will notice.  It will end horribly, with mass chaos, but it will "work" enough to probably keep Obama in the White House for 4 more terrible years. 

Anyone who junks your post is a fucking idiot. 

Look out below in any and all commodities...at least on paper.  I wouldn't be surprised to see crude at $80 in a week or two.  However, and this is important, continue loading up on physical silver/gold the entire time.  That is all. 

Thu, 05/12/2011 - 09:54 | 1267464 SheepDog-One
SheepDog-One's picture

Keep all the plates and chainsaws juggling for 18 more months in the face of world economic meltdown? They can hardly do it one day to the next now without disaster flash crashes and such. Never happen, everyones idea this is all about a far-off 'election' is ridiculous.

Thu, 05/12/2011 - 10:40 | 1267672 DaveyJones
DaveyJones's picture

we can juggle plates, but we cant juggle china

Thu, 05/12/2011 - 10:16 | 1267555 Long-John-Silver
Long-John-Silver's picture

Obama in the White House for 4 more terrible years.

 

He will complete the destruction of this 50 (or was it 57) state nation.His promise of "fundamentally changing" America will happen.

This is Soviet Union disintegration II. Texas will go first followed immediately by the old Confederate States because they never officially rejoined the Union after the signing of the cease fire. Other States will break off following internal rebellions.

Thu, 05/12/2011 - 09:50 | 1267458 lizzy36
lizzy36's picture

And with that bashing, comes a flight out of equities, and the $1T spent for #wealtheffect........and its gone.

Thu, 05/12/2011 - 09:46 | 1267441 LRC Fan
LRC Fan's picture

Obama needs prices at the pump to fall before Memorial Day.  The closer to $3.50, the better.  It will help keep him "on a roll" after the birth certificate and catching Osama.  People don't give a fuck about crude, they want to pay less at the pump.  Obviously it will end in disaster, but as long as they can kick the can a bit more, hopefully for them past 2012, all will be well. 

So, I think more margin hikes are coming this week and next week.  I think crude will take another leg down.  They have basically telegraphed this.  Obama is openly waging "war on speculators."  The limits on crude doubled yesterday.  You think that was just for fun?  It's sort of like the SLV $25 July put.  That should have been a huge fucking red flag for all the paper longs.  I think it's the same here...oil is going to plunge, soon, so prices at the pump fall just in time for Memorial Day.  Obama even mentioned it yesterday, saying Americans don't need to pay higher prices at the pump around Memorial Day driving season.  He's putting it all out there in the open, yet no one listens.  They keep trying to catch a falling knife. 

So, I'm buying some out of the money May puts on USO.  Counting on Obama and the CME to manipulate this shit asap and make me some money. 

Thu, 05/12/2011 - 10:21 | 1267583 SoNH80
SoNH80's picture

You are quarterbacking a football game, but the stands are on fire.

Thu, 05/12/2011 - 10:47 | 1267716 DaveyJones
DaveyJones's picture

and the hotdogs are poison

Thu, 05/12/2011 - 09:47 | 1267444 gratefultraveller
gratefultraveller's picture

Same story in silver. Over here in Europe spot prices plunged from over 33 € to 22.70 €, yet silver Philharmonics on ebay hardly budged from their price around 33 €. Obviously people are not buying the market/government BS.

Evidence of people waking up can also be found in the (heavily censored, btw) forum of Der Spiegel, where the ratio of "conform" vs. "non-conform" postings used to be 95% to 5%, whereas now it is the inverse.

Today a columnist in der Spiegel indicated that a recent poll showed that:
- 70% (!) of the interviewed think Germany gives to much money to the rest of Europe
- approx. 50% want immigration to be reduced drastically
- 38% think Islam is not part of german lifestyle and that it menaces german values
- 30% want an "independent Germany without the Euro, and without EU interference"

Yet, face to the growing and ever more transparent and sometimes even desperate globalist propaganda spewed forth by the MSM, the awareness of the people in the street is growing, as the PTB/PTW smokescreen does not resist the impact of real life experiences at the cashier and the pump.

To say it with Bertold Brecht "Would it not be easier in that case for the government to dissolve the people and elect another?"

Thu, 05/12/2011 - 10:11 | 1267540 speedy
speedy's picture

"yet silver Philharmonics on ebay"

 

Ebay is a poor source for spot prices.

 

 

Thu, 05/12/2011 - 10:22 | 1267572 Long-John-Silver
Long-John-Silver's picture

So is the Comex. Physical spot has decoupled from paper spot.

Thu, 05/12/2011 - 10:20 | 1267578 mtomato2
mtomato2's picture

Those are definitely real.

Thu, 05/12/2011 - 17:24 | 1269628 speedy
speedy's picture

More real than the price of silver on the comex.

 

Thu, 05/12/2011 - 10:20 | 1267579 kaiserhoff
kaiserhoff's picture

Great avatar.  Women's lib to believe in;)

Thu, 05/12/2011 - 10:37 | 1267660 The Count
The Count's picture

I lived in Austria and speak German fluently. The Germans are still suffering mentally from decades of Socialist mindfuck. But people like Theo Sarazin show that the folks are awakening much faster than the power elite would have ever imagined.

Thu, 05/12/2011 - 09:51 | 1267452 Bob Sacamano
Bob Sacamano's picture

Just read the financial statements of any c-store operator.  Their gas margins shrink as prices go up (maybe as low a 5 cents per gallon) and margins widen when prices go down (maybe as high as 20 cents per gallon), but over any intermediate term (3-4 quarters) gas margins average 12+/- cents per gallon over the very long run. 

This is not some big oil company conspiracy (understanding conspiracies lurk in every corner and riddle every sector of our economy). Most gas stations are not operated by big oil despite whatever gas flag they may fly.  And oil prices are only part of the equation since cars prefer oil that has been refined.

For those who think the profits are "obscene" I would suggest getting in the gas station business.  You'll see.

Thu, 05/12/2011 - 10:21 | 1267566 SoNH80
SoNH80's picture

No one here is blaming Apu's Convenience Store.  The blame is squarely on (1) the Federal Reserve, and their friends, the money-center banks, for debauching the currency; (2) the corn-ethanol lobby, and their moron Congressional and Iowan cadres (NOTE:  poor corn harvest this year, especially in light of Mid-American floods--- higher prices already, more hikes to come-- and 10% of our gasoline is Ethanol, aka corn); (3) our idiot foreign policy establishment, for its constant whacking of the ME-NA hornets' nest; (4- infinity), I could go on and on.  The lunatics are running the asylum now, and we get to be screwed every time we go to the pump.

Thu, 05/12/2011 - 10:26 | 1267606 mtomato2
mtomato2's picture

Good answer.

Thu, 05/12/2011 - 10:37 | 1267671 SoCalBusted
SoCalBusted's picture

The corn part is a big deal, look for food prices to go up even higher.

Thu, 05/12/2011 - 12:37 | 1268207 MissCellany
MissCellany's picture

Yes...I'm glad to see someone else making the corn connection with outrageous fuel prices...

Thu, 05/12/2011 - 09:53 | 1267461 HedgeFundLIVE
HedgeFundLIVE's picture

I believe if markets continue to decline the support levels for AUD/USD at 1.02, Oil at 91.50, and EUR/USD at 1.34 are crucial.

http://www.hedgefundlive.com/blog/stock-watch-dps-breaking-out

Thu, 05/12/2011 - 10:01 | 1267507 sudzee
sudzee's picture

There is, let's see, paper oil and then there is real sticky black stuff. Wouldn't be surprised to see the price of the real stuff going much, much higher in the next few months. Premiums on physical pm's are way up and buyers don't seem to mind here in my neck of the woods. Paper pm's to $1 but $50 for the real deal. 

Thu, 05/12/2011 - 13:06 | 1268353 pan-the-ist
pan-the-ist's picture

Ultimatly they take delivery on oil as it is consumed, not exactly the same as silver (some of it is consumed) and gold.

Thu, 05/12/2011 - 10:19 | 1267574 boiltherich
boiltherich's picture

As recently as 2006 the rack to retail spread was normally 10-25 cents per gallon RBOB unleaded, the rack being where fuel is loaded onto trucks at the refineries outlets, that is the number you see when you check the daily quote at Bloomberg in the commodities section and it INCLUDES federal gas taxes.  As of a few minutes ago it was $3.03 a gallon which is 30 cents off it's high. 

Part of the problem is that the spread from rack to retail now is more like 70 cents per gallon.  The oil companies pump crude out of the ground at an average cost of 3-4 bucks a bbl even though on paper they claim to have paid 100 for it.  In most cases they are paying that to themselves.  The refiners make a profit though nothing like the majors of the oil industry, and in the last few years the jobbers who transport fuels are just flat out gouging, but there are thousands of them and 50 different states not enforcing laws to prevent it.  Gas stations are actually told what price to charge in most cases, the majority of them are owned by either the distributors or oil giants and in recent years gas only attracts the customers in while convenience store items produce all the profits.  You would think that they would understand that if you totally mug your customer at the pump they are far less likely to go inside for Snapple. 

By the way, here in Oregon today gas is $4.03 on average and you can go across the state line into California where it is $4.46.9 for self serve unleaded regular.  I mention that because all gas in Oregon is full serve, and the oil companies/station owners would like to fire all those who pump our gas for us, they claim it adds to the cost of the fuel, but when you look across the border to the south where equivalent full serve is 76 cents a gallon more than here even though California's gas tax is two cents lower (they also have on average 10% sales tax where we have zero sales tax) it just goes to show how capitalist profit motives turn otherwise good people into lying scum that will stop at nothing to fuck their neighbors and sisters and mothers. 

Thu, 05/12/2011 - 10:31 | 1267638 SoNH80
SoNH80's picture

There is a bigger picture to keep in mind.  The oil we import from Canada, Venezuela, and Mexico (also, a small amount from Nigeria, Saudi, Indonesia, Russia, et. al.) IS sold at high world prices.  The low-cost, high-margin oil you refer to is Texas, Ohio, Alaska, etc. oil, but there's a lot of ancillary costs for domestic production too.  The big major oil companies are middle men, they are indeed making big profits, but I suspect that these profits are mostly eaten seed potatoes, i.e., the U.S. oil majors have been indulging in under-self-capitalization for quite a long time (especially after the early '80s crash that scarred energy people for life).  The oil boys aren't squeaky clean, but they aren't driving the bus, either.  Our stupid government, between its restrictions on domestic production, idiotic Ethanol policy, idiotic foreign policy, and idiotic U.S. dollar policy (Fed/Treasury/bailouts/etc. etc.) is the real mischief-maker here.  Price controls ALWAYS lead to shortages, remember that.

Thu, 05/12/2011 - 10:45 | 1267704 Urban Redneck
Urban Redneck's picture

Have you actually ever read a PSA?  There is no oil company that is paying $3-4 for a barrel of crude oil.  The only part of extraction that might be $3-4 dollars is the labor and electrical bill for running the pumps.  The biggest chunk of profit on crude goes to the land owner- either the State (in taxes or royalties depending on the text of the PSA) or private land owner (royalties).

Thu, 05/12/2011 - 13:28 | 1268492 boiltherich
boiltherich's picture

I was actually referring to post exploratory PRODUCTION costs, the actual pumping and yes some oil costs more to get at, but a global average would be three to four dollars given that much of the oil pumped is nearly without cost to get out of the ground, Saudi Aramco for example gets oil out of the ground for just pennies a gallon.  I am not including tar sands because they are not really petroleum, hydrocarbons yes, but they have to be made into oil for practical discussion.

What a lot of people do not understand is that what appears to be sovereign control over crude fields is actually a lot more complicated than that, Saudi Aramco for example is 100% owned by the government but it is little more than a shell corporation that holds hundreds of global joint ventures, which in turn have partnerships with hundreds more, and with other oil bigs as 50-50 joint ownership of productive subsidiaries.  Between half and one quarter of all Aramco revenues are actually paid to foreign corps.  So when Shell or Chevron pay 100 bucks for crude there they are actually paying a large chunk of that to themselves via joint venture subsidiary.  It is rather hard to find out how much of Aramco revenues (of almost a quarter trillion 2008) are paid to foreign partners, the King is technically in charge and somewhat tight lipped. 

In the world of big oil foreign vs domestic holds little meaning.  It is a global market and most crude is fungible within it's chemical classification, it is harder to refine heavy crude, or sour crude, but it is done, and deep water offshore is more expensive to retrieve of course, but it is also a small part of the market. 

I think some of you confuse paper oil with the real thing.  Accounting is not one of the stronger suits here at ZH it seems, yes they can book a barrel of oil at 100 for cost, but that does not mean they paid 100 or did not buy it from themselves.  If you want to build a refinery and go to a producer to obtain crude to refine then yes you will pay market cost or close to it as quoted at Bloomberg, but if you are a vertically integrated multinational with joint ventures and close ties to the Saudi throne you will pay nothing near that in real terms why do you think even after all the accounting chicanery big oil companies report PROFITS in the 30 to 40 billion per quarter area?  Each, not as an industry. 

 

Thu, 05/12/2011 - 17:09 | 1269545 Urban Redneck
Urban Redneck's picture

The problem is production cost really has nothing to do with the real cost of bringing the product to a market (unless the product is the oil or mining stock of the company making the claim)

In this case, law trumps accounting, but regardless the bigger shortfall amongst ZH contributors is the lack of people who write from the supplier perspective.  States own the mineral and energy rights, and they don't let producers (even state owned producers) extract the wealth for free, even the most primitive States structure the Mining and Petroleum codes such that- as the price of the commodity rises, the revenue accrued to the State rises.  Math Man loves to run around with his $5 silver statistic that was lifted from an annual report or trade rag and repeat it as gospel.  In FASB fantasy land that may be correct.  But even if you have a contract with and license from the government, you can't remove silver from the mining property for $5 without first fighting or buying off the local army and responsible cabinet Minister. 

Aramco is a strange choice for ZH since it's a NOC and not a publically traded company, but the same truths hold.

Oil in Saudi Arabia is owned by the State.  Laws are promulgated by the Monarchy, and the Ministry of Oil promulgates regulations for the oil industry.  Aramco has an operating agreement with the Ministry of Oil.  Irrespective of agreements between Aramco and any other party, the Ministry of Oil is paid for each barrel crude extracted from Saudi territory, and then adds other fees, such as loading taxes before the oil actually leaves Saudi Arabia.

Saudi Basic Law - Article 14 - All Allah's bestowed wealth, be it under the ground, on the surface or in national territorial waters, in the land or maritime domains under the state's control, are the property of the state as defined by law. The law defines means of exploiting, protecting, and developing such wealth in the interests of the state, its security and economy.

Suadi Arabia and Bahrain entered into an agreement to share revenues from Fasht Abu-Sa’fah, which currently yields 300,000bpd of Arabian medium crude and 370 million standard cubic feet per day of gas.  Operation of the field is handled by Aramco under terms of the Production Sharing Agreement with the Ministry of Oil in Saudi Arabia.  With crude over $100 Aramco is paying over $10 per barrel to the Saudi Ministry of Oil and another $10 per barrel to the Bahraini Ministry of Oil.   

Second Clause of the Saudi Arabia - Bahrain Joint Development Agreement Dated 22 February 1958 - This area cited and defined above shall be in the part falling to the Kingdom of Saudi Arabia in accordance with the wish of H.H. the Ruler of Bahrain and the agreement of H.M. the King of Saudi Arabia. The exploitation of the oil resources in this area will be carried out in the way chosen by His Majesty on the condition that he grants to the Government of Bahrain one half of the net revenue accruing to the Government of Saudi Arabia and arising from this exploitation, and on the understanding that this does not infringe the right of sovereignty of the Government of Saudi Arabia nor the right of administration over this above-mentioned area.

Partial List Other Specific Laws & Regulations Impacting Petroleum:
Gas Supplies & Pricing Regulations (GSPR) Of 23 August 2003
Gas Supplies & Pricing Law Of 19 September 2003
The Foreign Investment Act 2000
Royal Decree M/65 Dated 27 November 1974 Imposing Income Tax of 85% Effective 1 November 1974.
Petromin Model Crude Petroleum Sales Contracts
Participation Agreement With Major Oil Companies (Exxon, Shell, BP, Partex, Etc.) Dated 20 September 1972 Signed With Abu Dhabi and Saudi Arabia (Provides 25% State Participation)
Royal Decree No. M/28 of December 1970 Imposing 5% Surtax on Oil Companies.
Agreement of 30 September 1966 Between Arabian American Oil Co. (ARAMCO) and The Government of Saudi Arabia Concerning Income Tax on Crude Oil and Products Sales
Saudi Arabia - Aramco Agreement, Regarding The Elimination of Discounts to Non-Affiliated Third Parties, Signed 30 September 1966.
Agreement Between ARAMCO (Arabian American Oil Co.) and The Government of Saudi Arabia (Dated 24 March 1963).
Agreement Dated 24 March 1963 Concerning The Modification Of Aramco's Obligation To Relinquishment.
Supplemental Agreement Between Arabian American Oil Co. (ARAMCO) and The Government of Saudi Arabia Concerning Prices and Taxes (Dated 24 March 1963).
Royal Decree No. 17/2/28/7634 Of 13 February 1952 Concerning Taxation Of Companies Engaged In The Production Of Petroleum, Together With Letters Relating To Financial Matters

Thu, 05/12/2011 - 17:31 | 1269680 speedy
speedy's picture

The cost for the cheapest barrel is irrelevant. The cost of the last barrel to supply demand is what counts.  If the last barrel to be produced ( and bought) costs $100 that is the price of oil.

Or am I missing something here?

Fri, 05/13/2011 - 01:21 | 1270873 Urban Redneck
Urban Redneck's picture

Suppliers of commodities disclose statistics on per-unit cost of production.  The statistics primary purpose is to create competitive advantage for the producers' equity and debt offerings.  The statistics are meaningless in the context fully loaded cost of production.  What the end user pays for a commodity is: 

(producer's fully loaded cost of production & profit) +

transportation from producer to refiner +

(refiner's fully loaded cost of added value & profit) +

transportation from refiner to reseller +

(retailer's fully loaded per unit cost  & profit)

Thu, 05/12/2011 - 10:56 | 1267773 r101958
r101958's picture

Please give your source for $3-4 a brl. Perhaps you are quoting the cost excluding the initial cost of exploration, R&D, drilling etc, etc?

Thu, 05/12/2011 - 13:40 | 1268543 Bob Sacamano
Bob Sacamano's picture

What's the rationale for the state to dictate full service only??  It certainly adds to the store's operating costs. 

Thu, 05/12/2011 - 14:14 | 1268701 blunderdog
blunderdog's picture

"Safety."

It's a lousy practice, but I admit I have met a few folks who do actually lack the appropriate judgment to be trusted to handle a gas-nozzle.

Thu, 05/12/2011 - 10:50 | 1267759 r101958
r101958's picture

Resources (oil, silver, gold, plutonium, copper etc, etc) are finite and are getting harder to find and more expensive to bring to market. It seems some folks still assume that when the price goes up for these resources that it is caused by speculators and manipulation but when the price goes down it is a result of natural market forces or the manipulators getting their comeuppance. This is a perfect example of self-delusion. We seem to want to return everything to our own comfort level and if it doesn't then we start pointing fingers. People that try to sound the alarm about tightening supplies of natural resources are labeled 'doomers' and are pushed to the curb as 'fringies' because they are folks that no longer paste on a positive smiley face about the current economic paradigm. It is quite easy, really, to be one of those smiley faces.....that is until the cold hard facts surface and grab you by the nads (or whatever) and drag you, kicking and screaming, to the alter of fate. In reality, the folks that are pointing out the facts about current and future shortages hope that they are wrong. Why? Because they, also, will not escape the changes that will be required when the truth is generally accepted as fact. The people in power now (and in the past) are loath to bring up this subject because they would get lambasted and most likely voted out of office by the remaining, self-deluding army of smiley faces.

Thu, 05/12/2011 - 11:01 | 1267793 DaveyJones
DaveyJones's picture

interesting article

http://www.theoildrum.com/node/7901

 

Thu, 05/12/2011 - 11:23 | 1267927 r101958
r101958's picture

Davey- Thanks ....quite interesting!

Thu, 05/12/2011 - 11:51 | 1268069 Spigot
Spigot's picture

13% of gasoline refinery capacity may go off line due to midwest flooding moving down into Louisiana.

Thu, 05/12/2011 - 13:36 | 1268136 Mec-sick-o
Mec-sick-o's picture

Japan has a shortage of Gigawatts due to the earthquake/nuclear plant damage.

Summer is approaching and Japan needs the energy for the hot summer days.  It has enough resources to install "temporary" gas turbine generators and purchase the needed fuel for these.

I will not be surprised to see higher gas/oil due to shift of Japan from nuclear to gas energy generation.  It will further stress the "peak oil" and refinery capacity.

From Wikipedia:

 

Industrial gas turbines for power generation

GE H series power generation gas turbine: in combined cycle configuration, this 480-megawatt unit has a rated thermal efficiency of 60%.

Industrial gas turbines differ from aeroderivative in that the frames, bearings, and blading is of heavier construction. Industrial gas turbines range in size from truck-mounted mobile plants to enormous, complex systems.[clarification needed] They can be particularly efficient—up to 60%—when waste heat from the gas turbine is recovered by a heat recovery steam generator to power a conventional steam turbine in a combined cycle configuration.[13][14] They can also be run in a cogeneration configuration: the exhaust is used for space or water heating, or drives an absorption chiller for cooling or refrigeration. Such engines require a dedicated enclosure, both to protect the engine from the elements and the operators from the noise.[citation needed]

The construction process for gas turbines can take as little as several weeks to a few months, compared to years for base load power plants.[citation needed]Their other main advantage is the ability to be turned on and off within minutes, supplying power during peak demand. Since single cycle (gas turbine only) power plants are less efficient than combined cycle plants, they are usually used as peaking power plants, which operate anywhere from several hours per day to a few dozen hours per year, depending on the electricity demand and the generating capacity of the region. In areas with a shortage of base load andload following power plant capacity or low fuel costs, a gas turbine power plant may regularly operate during most hours of the day. A large single cycle gas turbine typically produces 100 to 400 megawatts of power and have 35–40% thermal efficiency.[15]

 

Thu, 05/12/2011 - 12:49 | 1268257 jmc8888
jmc8888's picture

This is the part in Casino where Joe Pesci says, 'you know you should pay out as fast as you collect'.

Sadly that is never the case.

Nice for ZH to remind the masters of the universe that prices are indeed sticky on the way down.

 

Thu, 05/12/2011 - 21:48 | 1270434 Element
Element's picture

I watch on in protracted disgust as I routinely monitor the way the change in oil price diverges continues to diverge from the pump price, with time, in both the USA and Australia.

It's clearly one of the biggest industry collusion gouge-athons I've ever seen - and the regulators in both countries do ZIP! (i.e. they are TOTALLY toothless useless arseholes that should be unemployed)

The interesting thing I notice is the difference in the pump price paid between Australia and USA keeps holding steady close to the 130% mark, i.e. we keep paying about 30% more than a US at the pump, per litre, since the 2008 peak.

If you think your gas is expensive, sorry, it's cheap compared to the high-grade Tapis crack were smokin.

It also indicates the inflation is greater than the change in oil price implies, with time ... yso ou have to focus on pump prices actually paind in each state, and each city, to understand the effects of it, on damping-down economic activity.

The Cali pump price heat map is a good example of this (spans a 70 cent difference accross the state per gallon).

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