Monday, September 19, 2005

IMF Oil Price Joke

The IMF is telling the world that we need more crude oil in the market and actually refinery capacity has nothing to do with recent price hikes. I always thought that the IMF is a serious institution, not a joke producing organism.

In the oil price arena always one spate goat is always pointed out. And it is OPEC. The secretary general of OPEC has been saying many times that they are producing more than enough and the market in fact is well supplied. Unlike the IMF, I am sure the OPEC guys check the numbers before they say something. At least this time they are right!

According to the most prestigious and respected oil market analysis (IEA’s Oil Market Report) supply is bigger than demand. And yet, the IEA (the same institution that produces that report), IMF, G8 and all the other company are crying for more oil from OPEC. Something is wrong here.

If they are right, which I do NOT believe, what does the following Financial Times piece on mean? (September 19, Opec seeks to deflect oil price pressure by C. Hoyos)

“When Washington offered the market a total of 30m barrels of oil two weeks ago, companies ended up buying only 11m barrels. That was largely because Hurricane Katrina damaged key US Gulf refineries, forcing them to shut down and turn away their suppliers of oil, many of them Opec countries.”

“Indeed, Venezuela and Mexico have been forced to take their oil into storage. Kuwait itself has had trouble finding customers.”

Can anybody tell me why the hell refineries didn’t get that available oil if they really needed it? Because they either don’t need it OR they don’t want to OR they can’t. Most probably they can’t.
Even though it is not THAT important, after the Hurricane Katerina, the US refiners were unable to process crude oil into petrol and that has led to a shortage in refined products. There was another Financial Times story (September 19, by S. McNulty, refiners defer maintenance to keep oil flowing) saying

“The Energy Department told refiners informally that they should boost production after the storm severely damaged oil and gas facilities in the Gulf of Mexico, sending petrol prices rocketing to record highs. Although the refiners say no formal request has been made, they admit that the White House made its position known. Several US refiners have since said they would cut back on maintenance.”
These bring me to the following summary: Refiners don’t want extra oil because they don’t need but OPEC is pushed to produce more. OPEC says there is more than enough oil in the market but crude prices are heading up.
Something is wrong here. Oh yes, by the way, international elite community found another claim. They say that there may be enough crude in the market but what we want is light, sweet crude. Our refineries simply cannot process that available crude. But even if there were more light sweet crude they could not process sit because they even cut back on maintenance. I would understand that they work close to their full capacity. So, our light, sweet crude has no place to land indeed. Yuck!
Alo IMF, do you see any logical inconsistency here?


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