[J-Rod]

I came across this blog whilst reading some ROE newsgroups. I thought it was interesting enough to share.

$this->bbcode_second_pass_quote('', 'T')he key point is that non-OPEC light sweet crude went from 41% of 66 mb/d to 34% of 70 mb/d from 2000 to 2004, a drop of 3.26 mb/d. OPEC added 1 mb/d of light sweet crude over the same period resulting in a global reduction of light sweet crude of over 2mb/d showing that global light sweet crude has peaked and is now in decline.

[Jack]

Interesting post! This would explain the present market action - the divergence in price between light sweet crude and heavy sour.

So...if the price consequences of a peaking in one grade of oil are starting to cause discomfort, what will the main event cause?

[UIUCstudent01]

Yep.

That's probably the reason why we have slightly higher prices as opposed to astronomical prices. (Well, that and fear I guess..)

[BabyPeanut]

$this->bbcode_second_pass_quote('Jack', 'I')nteresting post! This would explain the present market action - the divergence in price between light sweet crude and heavy sour.

[Eli]

The peak of light sweet crude is here and this is the main event.

We need oil in such amounts that the refinerys cannot process the heavy sour fast enough due to the problems that BP said.

You have to use higher grade steel in the cokers because of the increased corrosiveness of the high sulfur oil which makes the whole process more expensive. And it wipes out old equipment fast.

The price of a barrel of oil could go anywhere right now up or down. No one in the market knows for sure what to make of where it will go, we are all every one in the world guessing. It has seen a major major run up, so there is lots of people getting out and covering there butts by taking profits now.

But I am betting we will see a super spike of over 100 dollars a barrel. The laws of supply and demand are coming into effect and I do not see demand destruction happening over night to high enough degree to lower the price anytime soon.

[MD]

I'm in the other camp. Economic brakes are squealing as we speak. $40 oil and recessionary economies by spring, for sure.

[frankthetank]

I'm going to agree with MD, but just because i'm sick of paying 2.60 to fill up my car

[J-Rod]

I have XM in my car, and was listening to Springer today on Air America. Part of the segment was on gas prices, and he was pushing the idea of the whole EPA paper that wasn't released so that the energy bill would go through. He was right, in that we would be using less overall if most of the cars and SUVs weren't so damn wasteful. I called like 20 or 30 times trying to get in, to get him and other listeners to look at the big picture. Nothing but busy signals, everyone was basically complaining about how bad it is now. All I can think about is what's going to happen when we start hitting the real market prices, and not the artificially low ones we have been enjoying for so long.

[Sgs-Cruz]

$this->bbcode_second_pass_quote('MD', 'I')'m in the other camp. Economic brakes are squealing as we speak. $40 oil and recessionary economies by spring, for sure.

[clv101]

$this->bbcode_second_pass_quote('Sgs-Cruz', '')$this->bbcode_second_pass_quote('MD', 'I')'m in the other camp. Economic brakes are squealing as we speak. $40 oil and recessionary economies by spring, for sure.

[Eli]

People will know very well we are in an energy crisis.

With the UK and US hitting peak natural gas everyone will know we are in an energy crisis regardless of the price of oil because the lights will be off along with the heat in the winter.

You guys may be right but I do not think so 67 dollars is no peak at all for oil prices. If the world falls into recession because of that it just seems to easy to me.

[Pfish]

One idea that popped into my head is what happens if the price of gas goes up and everybody keeps buying it? Hell, it is not having an impact on the freeways in San Diego as far as I can see. Inflation?

PP

[Sgs-Cruz]

$this->bbcode_second_pass_quote('Pfish', 'O')ne idea that popped into my head is what happens if the price of gas goes up and everybody keeps buying it? Hell, it is not having an impact on the freeways in San Diego as far as I can see. Inflation?

PP

[CARVER]

$this->bbcode_second_pass_quote('Eli', '
')... With the UK and US hitting peak natural gas everyone will know we are in an energy crisis regardless of the price of oil because the lights will be off along with the heat in the winter.

[Pfish]

$this->bbcode_second_pass_quote('Sgs-Cruz', '
')
Well that can't really happen for very long. People only have so much money, at some point they can't afford any more gas

[clv101]

$this->bbcode_second_pass_quote('CARVER', '[')url=http://www.econbrowser.com/archives/2005/08/sweet_and_sour.html]sweet and sour[/url]. Contains some graphs from the EIA about the spread between light sweet and heavy sour.

[nero]

THe Econobrowser article is very good. But I would quibble with it in one respect. While heavy sour refinery capacity is limiting and the spread has widened, the price of heavy sour crude is also increasing so you can't blame the runup on refinery capacity constraints alone.

Another factor is that refining has been a very poor business to be in for a couple of decades. So it could be argued that the increase in spread is simply the return of rational price differentials now that there is no longer a glut of refining capacity.

[Cool Hand Linc]

Interesting times we are living in.