"The Perfect Storm scenario"

Why prices might even crash...

I know...

Seven days showed a 3.9 cent a litre increase and still a decrease for stove and heating oils. Guess they were close...

It made me sick too, just to look at the pump as I drove by. I didn't need any as I topped it all off the night before...

It's my way of putting the screws to Big Oil before they get to do it to me later in the week when I'm back on "w" for "walk".

But, if the storm in the markets has anything to do with it, we just might see a drop at the pumps before the summer driving season hits and we hit the "expected' spike in prices for the summer.

You shouldn't take for granted everything these professional oil analysts are thinking. You might "get use" to what they say and then you'll have to pay the piper.

And that's the reason for this particular post; because I don't take what they're shoving at me for the truth. Matter of fact, I think there's something that the "investor" is not telling you...

If the refining industry is having such a tough time with their refiner margins and oil is becoming hard to acquire because of price, then it must be obvious to the consumer that they are "purposely" keeping capacity down in order to support the retail price to the consumer, right?

If that is true, and prices have climbed to the point that overall demand is being broken and people start to conserve, then that creates a build in inventories right?

Then the following must be true...

Less demand means less need for refined product which in turn means less refining. That would also mean a drop in demand for the raw crude oil product. We have to note here that crude inventories climbed last week possibly because of part of what we're saying here; that crude simply costs too much to buy by the refiner and inventories were allowed to build in the hope that prices may be impacted...

That means there's evidence of an attempt to support gasoline and heating oil prices by the refiner and Big Oil; a "supported" price...

While the price may indeed be supported, there's not a heck of a lot of return for the investment...

What the markets need to see now, or should I say, the consumer needs to see, is the proof that inventory is building and that demand is being impacted. That may bring down the house of cards that OPEC helped create.

We have already reached a point where Big Oil has hit the Law of Diminishing Returns because of rampant investment in commodities like gasoline and heating oils. consumers here in Newfoundland and Labrador have been hard hit this winter with "above normal" heating oil prices. The elderly and those on fixed incomes as well as pensioners, are at the point where they are buying no more.

They now choose food over heat.

I think they like to call it "energy starvation"...

I think that we're going to start to see investors in distillates lose a lot of money...

One can always live in hope...

Regards,

George