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Wednesday, January 28, 2009

Forcing prices up
In a lesson on how to control pricing and in an effort to help control the latest decreases in oil pricing, US refiners hatched a plan: reduce refinery production of gasoline to stop the fall in prices.
So far, it appears that the plan may be working...
Even though crude oil appears to be lower than in days past, refinement of gasoline has been cut, refiner capacity dropping almost 3 per cent in the last week and that has led to a drop in available gasoline so much so, that today, inventories as reported by the US Energy Information Administration dropped by some 110, 000 barrels. That, combined with robust demand figures that show gasoline consumption averaged just 1.7 per cent below the same time last year, are two chief indicators of what could happen next.
If Big Oil is making a concerted move to reduce production, then it is only reasonable to assume that the plan to support domestic retail pricing in order to support future profits, is working. We may be a little negligent into our own reality of pricing, thinking that we're going to see low pricing for a while. It may very well be that in this case, where Big Oil has let it be known that they're not going to produce gasoline where there is plenty of inventory, we've all become a little too used to prices below a buck a litre.
Maybe it was wishful thinking that prices did fall and would stay down for some time...
The truth is, after today's news from the EIA, it may have been a fleeting dream to most and a stark reality at the pumps in the coming weeks, that gas below a buck a litre was all such wishful thinking after all. The ground has been set and the only factor in the markets that can affect Big Oil's latest move is a drop in demand or worsening economic news that will affect that demand.
No one wants worsening economic news but, are we, as consumers, prepared to cut back on our own needs and affect the demand numbers and help turn the tide back in the consumers favour again?
A buck a litre could be home to stay sooner again than what we think...

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