The oil prices were not always defined by a transparent global market. Current pricing mechanisms from precursors much less transparent.Resurgent American production, combined with restrictions on exports of oil, could disconnect the world market for oil, with unexpected results in the United States.
Editor's Note: this piece appeared on the Energy Outlook, Geoffrey Styles blog'.
If you follow the energy closely, you probably lost the number of times that you have heard an economist, Executive or Government representative explained that the oil prices are defined by the global market and not by the oil companies or the Government of the United States. Although a little too simplified, this statement was valid for about 30 years. However, it has not always been the case. Current trends in the American production, as well as the regulations in force, make me wonder if it remains accurate in the future, as the United States inches closer to what is commonly called energy independence.
The system based on the market price of oil, with its transparency and easy exchange between the regions, did not the day after. Until the beginning of the 1970s, Texas played a role similar to the role of producer current swing of Saudi Arabia within OPEC. Limiting production wells of oil from the State, the Texas Railroad Commission has actually determined the global price of oil - to the extent that it was one-until Texas had no spare capacity left. That pave the way for OPEC, a succession of oil crises and the controls on oil prices which have been imposed in the 1970s to help manage inflation. Is there also no unique, representative of the oil price. Instead, the prices were set by the contractual terms of the manufacturers and discounts large refiners could negotiate, or federally. The current system has emerged in a series of developments in the 1980s.
When U.S. oil price control ended in 1981, oil futures became just underway on the New York Mercantile Exchange. Heating oil contract was launched in 1980, followed by the West Texas Intermediate (WTI) crude contract in 1983. This combined large-scale oil trader with a level of unprecedented transparency. It was also important that the United States, most large consumer of oil in the world, became a major oil importer after domestic production peaked in 1970. Because the refineries on the sides competed for oil supply with refiners on other continents, the price of WTI could not get too far out of proportion to gross imported without creating opportunities for arbitration for traders. And any part of the United States connected by pipeline to the Gulf Coast was actually linked to the price of oil in Europe, the Middle East and Asia.
After that OPEC miscalculated the response to the very high price of that its members claimed in this period-reaching $100 a barrel in oil demand of today $-global decreased 10% from 1979 to 1983, then the non-OPEC production increased by more than 12%. Price soon collapsed, and the domination of oil from OPEC markets faded during the major part of the next two decades, during which the futures markets and trade relations of the modern market oil seized.
Which could undermine the current system of oil prices? He has already resisted recessions, wars in the Middle East, the collapse of the Soviet Union and the explosive growth of Asia, with China, only addition request oil comparable to that of the five largest EU economies. However, given that the current system relies on the free movement of oil between the regions, everything that prevents this stream could undermine the way in which the price of oil is currently set.
Rejecting the scenarios of conflict, consider the potential impact of sustained growth in the U.S., combined production to flat or declining demand and no change in the current ban on exports of crude oil to the United States most. The roundabout differential between WTI and Brent crude UK, reflecting the increase in production in logistical bottlenecks from the centre of the continent and graves, gives an overview of what it could be like. A good part of new U.S. production come in the form of oils lighter than those to which most Gulf Coast refineries have been optimized, keeping the increase we gross production bottled here could result in us divergent crude prices still further world prices, while forcing U.S. refineries to function less effectively and import and export of the finest products. With oil drastically imports and still banned oil exports, oil US price could be influenced more by the global market of refined products, with its different dynamics and the players, as the global crude oil market.
In some respects, this looks a lot like what many politicians and hawks of energy"have sought for years: a U.S. is no longer subject to requirements of price of foreign oil producers. However, this scenario could yield all kinds of unintended consequences, including a less competitive us refining industry and higher or at least more volatile prices for gasoline, diesel and jet fuel. And just as we saw with cheap natural gas, less expensive oil could undermine the economy of non-conventional oil and gas production which makes it possible in the first place.
American oil export policy deserves thorough re-assessment and soon, because a regional impact on a continuous no-export position could become pronounced, even if the United States has never reached global oil self-sufficiency. Such a review should include related regulations, such as the Jones Act shipping restrictions. With oil crude exports to Canada - virtually the only one authorized to export destination for our newly abundant already types of crude growing, some Canadian refineries can be placed to supply the markets of fuel aside East of the United States at less cost than refineries in New Jersey. Of course, which is considered to be an unintended consequence.
A slightly different version of this advert was previously published on the Pacific Energy Development Corporation Web site.
View the original article here
No comments:
Post a Comment