Friday, April 10, 2009

Here come higher gas prices again . . .

It seems the speculators are at work once more in the oil markets of the world. As the Daily Mail reports:

They are laden with fuel. Enough to fill 7 million Ford Mondeos [previously marketed in the US as the Ford Contour].

But the cargo on board these giant oil tankers is unlikely to see a garage forecourt in the forseeable future.

Ten tankers are refusing to unload the equivalent of 340million litres of petrol, because the price of oil is too low.

Instead, as the cost of petrol rises, they have dropped anchor in Lyme Bay off Brixham in Devon as their precious black cargo, worth a potential £321 million [about US $470 million], is the subject of feverish trading.

The oil has already been bought and sold many times during its journey from pipeline to refinery.

But while the price remains in a slump, the tankers will not unload the unrefined crude oil until there is a profit to be made.

Jerry Carter, operations director for the Torbay and Brixham Shipping Agency, said: 'It is indicative of the world market as owners are waiting for prices to rise.

'Today there are ten tankers. It is some time since we have had so many ships in the bay - I can't remember as many since the early 1980s.

'Some of them are here for a few weeks but they are changing over all the time. The oil is bought and sold many times over. Some are destined for Rotterdam, one for Milford Haven refinery. Some are going to Southwold where the oil can be transferred from ship to ship.'

It is believed that some oil producing countries are trying to force such a rise by using their tankers to withold oil from the market.

Traders, meanwhile, are trying to make a profit by buying cheap oil now to store and sell later at a higher price.

On the New York Mercantile Exchange, crude oil was yesterday down $1.26, or 2.47 per cent, at $49.79 a barrel.

In London, Brent crude fell 89 cents, or 1.7 per cent, to $51.35 a barrel. Last year the price of oil hit a high of $150 a barrel in New York.

. . .

AA president Edmund King said: 'Traders and speculators seem to be storing up oil until the price rises.

'Drivers can expect more hikes in the pipeline.'

Bear in mind that this article speaks only of tankers off the British coast. The same thing is happening elsewhere in the world, including off our own coastline. Speculators will happily withhold oil from the markets as long as they can, fighting for every cent of profit they can make . . . and our Congress and Senate will let them go on gouging the rest of us, because of the 'campaign contributions' that these fat-cats make to our legislators.

Makes you sick, doesn't it?



Billll said...

The nearest ship in that picture appears to be empty. Someone's buying.

Sevesteen said...

Doesn't make me sick at all-it is capitalism in action. People and companies must be able to invest in things they think will rise in value, and hold on to them until they think it is time to sell.

MadRocketScientist said...

I'm with Sevesteen, this is market forces in action. These companies are balancing the cost of keeping a ship out of service (and still paying the crew and the money to keep the ship livable) versus the cost of selling the crude. Right now they are gambling that the price will rise and they'll make a profit. Of course, someone else could flood the market with crude, causing the price to fall, and forcing those who are withholding to take a loss.

Also, this is oil we are talking about, not life saving medicine. People are not going to be dying because these guys are holding out.

Wayne Conrad said...

I'm not saying that the free market is always free, or that there aren't dirty dealings out there. It isn't, and there are. But...

"Gouging" is a word invented by the left to impugn the free market. There are other such phrases: If I am selling much lower than everyone else, it must be "predatory pricing." Peter, you got caught in their linguistic net.

If I've purchased a tanker of oil, why might I not hold it until I think I can sell it for the most profit, balancing that against the cost of having the ship sit idle? If the market is working well, we will all benefit from the efficiencies that are generated by the communication of costs through the system. The alternative is that the people, in their anger, have the government, using no constitutionally granted power, force that dirty oil owner to sell his property now. You know, interfere with private property rights. For an example of the benefits of that sort of interference, we can go back to the 70's, when government meddling in the market in response to OPEC rationing caused gas lines around the block. By fixing prices, government stopped the flow of information through the system and created massive shortages of gasoline.