Crude Facts about Crude Oil 2012

By Patricia L Johnson

The above graphic is from the United States Department of Energy and represents the split in how much we pay for in a gallon of regular gasoline, as of January 2012.

If you’ve filled up lately you know for a fact the retail price of $3.38/gallon in January 2012 isn’t even close to what we’re paying in February of 2012. The average retail price for February 20, 2012 has jumped to $3.59/gallon and will continue to go up.

Why does the cost of gasoline fluctuate so much in this country?

The simple reason is the law of supply and demand. In 2010 we produced 5.5 million barrels of crude oil per day, while our petroleum consumption exceeded 19.1 million barrels per day. We are the world’s largest petroleum consumer at 22 percent.

That basically means we have to import a significant portion of crude oil and petroleum products.

In 2010 our imports came from the following sources:

· Canada (25%)

· Saudi Arabia (12%)

· Nigeria (11%)

· Venezuela (10%)

· Mexico (9%)

According to the EIA there are at least seven factors that have an effect on imported crude oil prices as follows:

· Supply: Non-OPEC

· Supply: OPEC

· Balance: OECD inventories & WTI futures spread

· Spot Prices:

· Financial Markets:

· Demand: Non-OECD

· Demand: OECD

Chart data on the above items are updated monthly and/or quarterly.

Fear is a significant force when it comes to crude oil pricing. Concerns about Iran halting oil shipments to the UK and France sent Brent crude oil prices soaring to the highest level in nine months. On February 23, 2012 oil futures closed at $107.83, which is up $9.73 from a year ago.

Although the price of crude oil has increased significantly, a significant portion of the recent increased cost in a gallon of gasoline appears to be due to domestic problems.

On December 1, 2011 Sunoco, Inc. announced that due to deteriorating market conditions (translated I think that means their profit was lower than expected), they were going to shut down their Marcus Hook, PA refinery immediately while it seeks a buyer.

Sunoco also has plans to sell its Philadelphia PA refinery and are planning on closing this facility by mid-2012. If ‘market conditions’ warrant, they will be closing sooner.

ConocoPhillips has also announced its intent to idle its Trainer Pennsylvania refinery, also located in southeastern Pennsylvania.

These three refineries are all in PADD 1 and in 2010 comprised more than 50% of the total refining capacity in the Northeast.

The West Coast is also having refinery problems. A week ago a fire at the BP Cherry Point 225,000 bpd refinery in Blaine, Washington shut the refinery down for at least three weeks. This refinery represents 8.7 percent of the crude oil refining on the West Coast.

We could have all the crude oil in the world, but if we don’t have operational refineries we’re going to pay the price at the pump.

The United States has a total of 148 operational refineries, but only 137 are operating as 11 are idle.

© Patricia L Johnson

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