The Hyped Distortion Of Trade Traded Oil Prices And The price You Pay For Gasoline
The value we pay for gasoline is derived in large measure from the value of oil as quoted on the commodity exchanges. We’re advised that these costs are a mirrored image of an unencumbered and freely traded commodity reflecting a real universe of supply and demand. Actually
The U.S. benchmark for crude as traded on the new oil prices for 2017 York Mercantile Exchange (NYMex) is West Texas Intermediate (WTI) crude deliverable in Cushing, Okla. Its price has been hovering close to $ninety/barrel these previous weeks.
This despite the fact that storage capability at or near Cushing is crammed to overflowing. Cushing is practically awash in crude oil and yet the quoted value on the NYMex stubbornly stays in the mid-eighties to nineties vary.
Earlier this month the Monetary Occasions pointed out (far be it for the American press to instruct us on the true formation of oil costs) that “Yesterday there was a $10 differential of Midland WTI to Cushing (WTI). That puts us at $75 a barrel approximately” (“Texas Crude Glut Sparks Oil Price Swings” FT 12.03.12).
Seemingly the pressure of provide and costs in various elements of the country have little or no affect on the traded and posted prices on the commodity exchanges. It’s changing into ever clearer that the exchanges deal in financial instruments which have left all vestige of actual supply not to talk of demand.
The issue is just heightened and brought dwelling by the dramatic differential between surging Canadian oil manufacturing originating in Alberta where producers are promoting their oil at bargain prices of less than $45/bbl for viscous heavy oil. A qualitative distinction sure, but hardly reflective of the huge divergence in worth. (“Canada’s Oil Turns into Cheapest In World Amid Glut In Alberta” FT 12.15.12
It is well past time that our authorities take a serious look on the large discrepancies in the change quoted price of oil, and the worth of wet barrels traded in the sector. The oil firms and those allied to them would of course resist any scrutiny and not to talk of the enablers, the commodity exchanges themselves, particularly if they’ll continue to assist turning excessive NYMex change traded prices as a rationalization for disproportionately excessive and ever greater gasoline costs, in impact fleecing the pockets of all American customers.
Again in April 2011, amidst great fanfare the Obama administration introduced the formation of the ‘Oil/Gas Pricing Fraud Panel’ (Please see “Obama Administration Declares Formation of Oil/Gasoline Pricing Fraud Panel. oil Refinery Plant Actually” 04.27.Eleven). Since then we’ve heard nothing, not a beep, from this august physique. Now, with this administration’s new mandate in hand, it is time for its work to start. The Panel has work to do, and now could be oil prices for 2017 the time to do it!
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