This article began by asking, Why is gas so high. As most of my readers know, I do cover oil. They may remember, most petroleum products they consume in the United States are refined here.
Many claim it is the increase in demand from the BRICs. If the U.S consumer cannot affot it, how can they? Spend their savings? This time it looks as though the U.S. is creating its own shortage. Net imports of petroleum other than crude oil were 2% of the petroleum consumed in the United States during 2010.
If true, this would have to show somewhere (see graph, background). As a few commentators have said, "Until they get the MidWest pipelines, gas will stay high." The United States Senate is on it.
Right now it looks as though the US is maxed out on rigs that can drill for oil. The big problem is transporting the oil around. The market calls the problem a WTI contango. Expect supertankers storing oil everywhere. Not really. From Senator Landrieu's press releases, one can assume, adding US Flagged vessels will be a step in the right direction. In the current environment, the US cannot expect our government to build (or allow) pipelines, no matter how safe.
Background:
Historically, periods of WTI discount versus Brent have generally been associated with a buildup in inventories at Cushing, OK, the delivery point of the NYMEX crude futures contract. It was thus not surprising that the recent widening of the WTI discount initially coincided with an unprecedented buildup in Cushing crude stocks (Figure 2), thanks to both surging domestic and imported crude supply in the Midwest and a significant expansion of local storage capacity. Seeking to explain the price discrepancy between Cushing and other crude grades, analysts pointed to a lack of pipelines out of Cushing that, in effect, stranded rising crude supplies in the landlocked Cushing and broader Midwestern markets, causing stocks to rise.
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People Port
Copyrighted, 2011, J John Swanko, All rights reserved. This work is licensed under a Creative Commons Attribution 3.0 Unported, It may not be published, broadcast, redistributed, rewritten, without meeting the terms and conditions.
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