Wall Street Pit: Brent-WTI Spread
International Business Times: Disparity means higher oil prices
Heres a key detail in this situation that I'm guessing not too many people are up on..
"...That also brings up another important point. When we quote oil prices today, we're quoting West Texas Intermediate, which is priced out of the Cushing hub in central Oklahoma. Currently, there's a meaningful bottleneck of supply in the middle of North America. We have a lot of increased oil production out of Canada, the Bakken and the Permian Basin that all congregate in Cushing, Oklahoma; and at the current time, we don't possess the ability to really move that oil out...
The average investor can't take advantage of structural imbalance. Now, the companies involved with transporting oil will look at that price differential and ultimately react by building more takeaway capacity."OK, now I get it. In the USA we have a stable political system, an increasing oil supply base (thanks to the Canadians) and a multi-faceted focus on reducing consumption (including lots of taxes) and since that is apparently creating a glut in the domestic oil storage capacity, the focus now for the oil speculators is to increase the capacity to transfer oil from Cushing, Oklahoma to ports on the Gulf so their oil can be shipped from the USA to foreign lands where it will fetch a higher price for those speculators who essentially gamble with tankers of oil and hope for the blessing of a sudden price spike.
Now, I understand how supply and demand and free markets work. But I have been under the impression that all of our investing in efforts to reduce consumption and increase supply from North American sources were intended to decrease our energy dependency from the ME and thus improve our National Security. In fact I have tried to make the point that for the USA's benefit, perhaps oil should be treated like a public utility So I'm a bit surprised/disappointed to read that now there is actually a glut of oil stored here it has become a mad rush in the murky but legal world of oil speculation to increase the capacity to transfer oil from Oklahoma down to the Gulf and out then to the rest of the world so speculators can take advantage of the price spread between WTI and Brent crude. Of course, as the oil moves out of Oklahoma to ports around the world, it will eliminate the glut and cause prices here to rise to the level in the more volatile regions. Ideally I suppose it would cost the same to all buyers anywhere. Thats the ultimate sign of an open and free market.
I'm not quite seeing how that benefits the USA consumers and taxpayers. I just hope we aren't the ones investing in the pipeline out of Cushing OK that will eventually serve to bring higher prices for oil here. If oil is cheaper here than elsewhere, I don't see any urgency to eliminate the disparity by making us pay more.
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