What the mainstream media are not telling you about the run up in oil prices

Why Are Oil Prices up?

Oil prices are up substantially since mid-February. Most of the Mainstream Media (MSM) attribute this run up in oil prices to geopolitical tensions. However, a careful examination of recent supply data provided by the US Energy Information Agency (EIA) suggest a different reason–oil importers are bidding against each other for available total petroleum (crude oil + product) imports.

Since the week ending 2/10/06, average daily US net petroleum imports have fallen about 15%, down about two mbpd. Since the week ending 2/24/06, on a smoothed, four week running average basis, average daily US net petroleum imports have fallen about 8%, down about one mbpd. (A comparable time period last year showed about a 2% decline.)

This sharp decline in net US petroleum imports corresponded to the beginning of the recent run up in oil prices.

It is true that we have relatively high crude oil inventories, but note that we don’t know what percentage of crude oil inventories consists of heavy, sour crude, which cannot be used in light, sweet crude oil refineries. Also, total product inventories are up only slightly year over year. It is quite possible that building inventories of heavy, sour crude oil have been obscuring falling inventories of light, sweet crude oil inventories.

Energy Bulletin