USCHO Fan Forum
This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!
-
The USCHO Fan Forum has migrated to a new plaform, xenForo. Most of the function of the forum should work in familiar ways. Please note that you can switch between light and dark modes by clicking on the gear icon in the upper right of the main menu bar. We are hoping that this new platform will prove to be faster and more reliable. Please feel free to explore its features.
5 dollar gas...are we ready?
- Thread starter unh_hockey
- Start date
- Status
Re: 5 dollar gas...are we ready?
FWIW, crack spread futures are trending up again. Good news for refiners, not so good news for consumers.
FWIW, crack spread futures are trending up again. Good news for refiners, not so good news for consumers.
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
Actually, it's good news for exporters. Buy West Texas, Sell Brent.
Actually, it's good news for exporters. Buy West Texas, Sell Brent.
Re: 5 dollar gas...are we ready?
That's what refiners are doing to us already. refining margins were at all time high... in 2010 (or was in in 2009), and up 180% in 2011 from 2010.
You can talk about crack spread (west texas $100 vs Brent $118) but at the end of the day, the refining margin would be the same. all time high. The refining MARGIN is totally controlled by few major integrated companies if look at last 5 years.
Pure refiners were LOSING money when oil rose from $50 to $140... reason given high oil prices (low margin), Pure refiners were LOSING money when oil dropped from $140 to $70... reason given, drop in oil prices (cost vs sale price IE low margin). pure refiners are MAKING money now because refining MARGIN has gone up to all time high and going up every year for the last 4 years.
That's what refiners are doing to us already. refining margins were at all time high... in 2010 (or was in in 2009), and up 180% in 2011 from 2010.
You can talk about crack spread (west texas $100 vs Brent $118) but at the end of the day, the refining margin would be the same. all time high. The refining MARGIN is totally controlled by few major integrated companies if look at last 5 years.
Pure refiners were LOSING money when oil rose from $50 to $140... reason given high oil prices (low margin), Pure refiners were LOSING money when oil dropped from $140 to $70... reason given, drop in oil prices (cost vs sale price IE low margin). pure refiners are MAKING money now because refining MARGIN has gone up to all time high and going up every year for the last 4 years.
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
The only way refiners can control price margin based upon the spread between WT and Brent is where the refineries are located. The hit in 2008 is understandable because it was unknown how the general public would react to said prices. Now that they know people are willing to pay it, they don't mind going to their original profit percentages.
The only way refiners can control price margin based upon the spread between WT and Brent is where the refineries are located. The hit in 2008 is understandable because it was unknown how the general public would react to said prices. Now that they know people are willing to pay it, they don't mind going to their original profit percentages.
Re: 5 dollar gas...are we ready?
That is NOT what the crack spread is. The crack spread is a measure of the difference between what the raw materials cost and the finished products sell for. It's certainly an imperfect number (among other things, it assumes that the oil is being bought at market prices, which isn't always true), but it's an easy way to see how the refiners are doing.
If refiners are making a lot of money, it's because there isn't enough supply of refined products to meet demand—there are too many competitors for any one of them to control the market. If that trend continues, then you can be sure there will be a significant increase in refining capacity to take advantage of the market opportunity.
That is NOT what the crack spread is. The crack spread is a measure of the difference between what the raw materials cost and the finished products sell for. It's certainly an imperfect number (among other things, it assumes that the oil is being bought at market prices, which isn't always true), but it's an easy way to see how the refiners are doing.
If refiners are making a lot of money, it's because there isn't enough supply of refined products to meet demand—there are too many competitors for any one of them to control the market. If that trend continues, then you can be sure there will be a significant increase in refining capacity to take advantage of the market opportunity.
bigblue_dl
Armed
Re: 5 dollar gas...are we ready?
Heh, crack spread. I have a different definition for that, actually 2 definitions.
Heh, crack spread. I have a different definition for that, actually 2 definitions.
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
When crack spread was first mentioned on this thread, I was thinking the same thing.
Heh, crack spread. I have a different definition for that, actually 2 definitions.
When crack spread was first mentioned on this thread, I was thinking the same thing.
Re: 5 dollar gas...are we ready?
why keep bringing up the spread of tex vs brent? And I've seen that (spread) brought up by the oil refiner association as the reason why gasoline is priced so high on cspan.
Basically you guys are muddling up the issue with your use of the word crack spread. tex vs brent spread. oil bought vs oil current price spread. at the end of the day it turns into refining margin.
My point is that when crack spread was moving really fast $70 to $140 and back down to $50... pure oil refiners were getting killed with crack spread (as defined by you) in both direction up/down sideways. Because oil integrated companies were making record profits from production of oil they let the refined margin stay flat or even slightly down. When oil prices dropped they left the refined product prices high to recoup their "losses" on the production, hence the refining margin has been increasing 50%+, 100%+, 75%, 180% in the last 4 years. Total control and we (government regulators, people) are letting them get away with it.
why keep bringing up the spread of tex vs brent? And I've seen that (spread) brought up by the oil refiner association as the reason why gasoline is priced so high on cspan.
Basically you guys are muddling up the issue with your use of the word crack spread. tex vs brent spread. oil bought vs oil current price spread. at the end of the day it turns into refining margin.
My point is that when crack spread was moving really fast $70 to $140 and back down to $50... pure oil refiners were getting killed with crack spread (as defined by you) in both direction up/down sideways. Because oil integrated companies were making record profits from production of oil they let the refined margin stay flat or even slightly down. When oil prices dropped they left the refined product prices high to recoup their "losses" on the production, hence the refining margin has been increasing 50%+, 100%+, 75%, 180% in the last 4 years. Total control and we (government regulators, people) are letting them get away with it.
Re: 5 dollar gas...are we ready?
WHAT I KEEP BRINGING UP IS THE SPREAD BETWEEN CRUDE (granted, it's almost certainly a particular crude that may or may not be the typical refinery feedstock) AND A PROXY FOR THE REFINERY END PRODUCTS.
I.E. HOW MUCH THE REFINERS MAKE ON EACH BARREL OF OIL THEY REFINE.
That ought to be simple enough for anyone to understand, but if you're still having trouble, I'll see if I can't simplify it further.
You moron, THAT'S NOT WHAT I KEEP BRINGING UP.
WHAT I KEEP BRINGING UP IS THE SPREAD BETWEEN CRUDE (granted, it's almost certainly a particular crude that may or may not be the typical refinery feedstock) AND A PROXY FOR THE REFINERY END PRODUCTS.
I.E. HOW MUCH THE REFINERS MAKE ON EACH BARREL OF OIL THEY REFINE.
That ought to be simple enough for anyone to understand, but if you're still having trouble, I'll see if I can't simplify it further.
Re: 5 dollar gas...are we ready?
Just to prove that I'm not making this up:
http://en.wikipedia.org/wiki/Crack_spread
Just to prove that I'm not making this up:
http://en.wikipedia.org/wiki/Crack_spread
St. Clown
Liberal Rebel Scum, apparently
Re: 5 dollar gas...are we ready?
Gross profit margin of the refined product. I just simplified further.
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
I am the one that is mentioning the difference between West Texas and Brent. The only thing this affects is whether the crude is handled entirely domestically, or is sold to another country and resold to us. Obviously, any imported oil is charged at the international (Brent) price. Royalty trust companies in this country are harvesting crude oil and selling it at the West Texas price (and consequently is where I get my monthly distribution). The acceptor of that oil then turns around and sells it internationally at the Brent price, thereby making that profit (if there is a profit to be made).
From there, the refineries take the crude oil and manipulate it into the gasoline, plastic, and every other product we use today. There is a certain price paid for that. I don't know if that price is available in the market listing; would someone be able to help with that?
From there, the refined product is then delivered to various locations around the world. A price is paid for that, and is obviously dependent upon distance (which would explain why one location will have lower prices than another).
Once it is delivered, the government will place taxes in accordance with state and federal policy. Another place where certain locations get raped at the pump.
Clear enough?
I am the one that is mentioning the difference between West Texas and Brent. The only thing this affects is whether the crude is handled entirely domestically, or is sold to another country and resold to us. Obviously, any imported oil is charged at the international (Brent) price. Royalty trust companies in this country are harvesting crude oil and selling it at the West Texas price (and consequently is where I get my monthly distribution). The acceptor of that oil then turns around and sells it internationally at the Brent price, thereby making that profit (if there is a profit to be made).
From there, the refineries take the crude oil and manipulate it into the gasoline, plastic, and every other product we use today. There is a certain price paid for that. I don't know if that price is available in the market listing; would someone be able to help with that?
From there, the refined product is then delivered to various locations around the world. A price is paid for that, and is obviously dependent upon distance (which would explain why one location will have lower prices than another).
Once it is delivered, the government will place taxes in accordance with state and federal policy. Another place where certain locations get raped at the pump.
Clear enough?
Re: 5 dollar gas...are we ready?
serenity.
Never said you made it up. Just said refiner rep over use "crack spread" when talking about higher gasoline prices. instead of the simpler refining profit margin.
1. crack spread = refining margin
2. crack spread = futures market "spread trade" : theortical refining margin.
3. crack spread = Differential Brent light vs Tex heavy
Valero had (1)crack spread profit margin (about 150% refining margin increase).
Valero had (2)crack spread loss of $500million (from futures hedging).
Valeor had (3)crack spread profit differential $$$$$ (from Brentlight vs Tex heavy oil).
http://biz.yahoo.com/e/111109/vlo10-q.html
So are you saying 1.crack spread (refining margin) came down OR that 2.crack spread (futures market) tightened?
serenity.
Never said you made it up. Just said refiner rep over use "crack spread" when talking about higher gasoline prices. instead of the simpler refining profit margin.
1. crack spread = refining margin
2. crack spread = futures market "spread trade" : theortical refining margin.
3. crack spread = Differential Brent light vs Tex heavy
Valero had (1)crack spread profit margin (about 150% refining margin increase).
Valero had (2)crack spread loss of $500million (from futures hedging).
Valeor had (3)crack spread profit differential $$$$$ (from Brentlight vs Tex heavy oil).
http://biz.yahoo.com/e/111109/vlo10-q.html
So are you saying 1.crack spread (refining margin) came down OR that 2.crack spread (futures market) tightened?
Re: 5 dollar gas...are we ready?
I'm glad to see we're closer to being on the same page.
I'm not talking about the behavior of feedstock prices relative to each other.
I'm talking about the ways in which we can measure or estimate the amount of net revenue a refiner takes in for refining a barrel of oil. The most convenient aggregate for that is the crack spread futures price. While it won't capture the spot prices, it should be a fairly good representation of how the refiners are doing, particularly considering that it's common for them to hedge against short-term spot price fluctuation by buying futures.
I don't work directly for refiners. I work for a consulting company that does project work for refiners. We are interested in knowing how the refiners are doing, because bad times for refiners signal a sharp reduction in the availability of project work at refineries.
I'm glad to see we're closer to being on the same page.
I'm not talking about the behavior of feedstock prices relative to each other.
I'm talking about the ways in which we can measure or estimate the amount of net revenue a refiner takes in for refining a barrel of oil. The most convenient aggregate for that is the crack spread futures price. While it won't capture the spot prices, it should be a fairly good representation of how the refiners are doing, particularly considering that it's common for them to hedge against short-term spot price fluctuation by buying futures.
I don't work directly for refiners. I work for a consulting company that does project work for refiners. We are interested in knowing how the refiners are doing, because bad times for refiners signal a sharp reduction in the availability of project work at refineries.
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
Fair enough. I'd say the easiest way is to take the price of gasoline you find, subtract the taxes charged, subtract [the Brent crude price divided by 42 (42 gallons to a barrel)], and that would give us refining plus delivery. I don't know what the current going rate for delivery is; perhaps you have a better idea into that.
Fair enough. I'd say the easiest way is to take the price of gasoline you find, subtract the taxes charged, subtract [the Brent crude price divided by 42 (42 gallons to a barrel)], and that would give us refining plus delivery. I don't know what the current going rate for delivery is; perhaps you have a better idea into that.
Re: 5 dollar gas...are we ready?
I was never off the page. I know you didn't talk about feedstock price... but simply pointing out that analyst and refiner reps do it all the time to explain higher gasoline prices. and in that context they use (4) crack spread as = differential in feedstock price.
From looking at the charts (future crack spread, gasoline), looks like (1) crack spread (refining margin) is flat-down q2q and up y2y. While the (2) crack spread (futures contract) is down q2q and flat y2y.
so refiners are in pretty good shape to jack-up the prices (higher margin) in the spring. with all the tension in middle east and Europe crisis as an excuse.
I was never off the page. I know you didn't talk about feedstock price... but simply pointing out that analyst and refiner reps do it all the time to explain higher gasoline prices. and in that context they use (4) crack spread as = differential in feedstock price.
From looking at the charts (future crack spread, gasoline), looks like (1) crack spread (refining margin) is flat-down q2q and up y2y. While the (2) crack spread (futures contract) is down q2q and flat y2y.
so refiners are in pretty good shape to jack-up the prices (higher margin) in the spring. with all the tension in middle east and Europe crisis as an excuse.
Re: 5 dollar gas...are we ready?
I think you can ignore the expense (of delivery) for a refiner. obviously for distribution that cost is important.
So the crack spread in may $30 / $144 = .20 = 20% gross margin. or $30 / $174 = 17% gross margin. either way that's in high tech stratosphere level. so gross margin has gone from <5% to 20% in the last 4 years. I can see them jacking up the refining margin another 100% from this level if they get no political/public backlash (for conspiracy theory: Fed wants higher inflation even at the expense of slower growth to fight deflation).
http://www.investopedia.com/university/ratios/grossprofitmargin.asp#axzz1k2sDBGcM
I think you can ignore the expense (of delivery) for a refiner. obviously for distribution that cost is important.
So the crack spread in may $30 / $144 = .20 = 20% gross margin. or $30 / $174 = 17% gross margin. either way that's in high tech stratosphere level. so gross margin has gone from <5% to 20% in the last 4 years. I can see them jacking up the refining margin another 100% from this level if they get no political/public backlash (for conspiracy theory: Fed wants higher inflation even at the expense of slower growth to fight deflation).
http://www.investopedia.com/university/ratios/grossprofitmargin.asp#axzz1k2sDBGcM
FlagDUDE08
Banned
Re: 5 dollar gas...are we ready?
I'm not going to go into the whole Bilderberg argument on this thread. However, if they are looking to increase profitability margins, perhaps it's time to start investing in the refining companies. Any advantage you have to make some cash while paying low amounts of taxes (qualified dividends at a maximum of 15%) is a good thing.
I'm not going to go into the whole Bilderberg argument on this thread. However, if they are looking to increase profitability margins, perhaps it's time to start investing in the refining companies. Any advantage you have to make some cash while paying low amounts of taxes (qualified dividends at a maximum of 15%) is a good thing.
Re: 5 dollar gas...are we ready?
No idea what Bilderberg is... but If I were to invest .. it would be the integrated oil companies (xom,bp, shell, cop). they control most of the refining capacity and really control the refining margin (1)crack spread.
Although refiners would be a pure play on gasoline (refined product) prices... they really don't have control over refining margin except in few regional areas where they dominate. (TSO in AK etc...). Plus the recent gasoline prices might suggest digestion of the record profit refining margin by the oil integrated... plus it's an election year.
We hit $4 gasoline in 2008 with oil $145... hit $4 gasoline in 2011 with oil $114. so there is your (1) crack spread (gross margin, refining margin, profit margin)... at all time high.
If you look at the 1year chart. it's clear they didn't drop gasoline price with the drop in oil, But recently they are not letting gasoline price rise with the recent oil rise... which might signal rest period of refining margin increases.
No idea what Bilderberg is... but If I were to invest .. it would be the integrated oil companies (xom,bp, shell, cop). they control most of the refining capacity and really control the refining margin (1)crack spread.
Although refiners would be a pure play on gasoline (refined product) prices... they really don't have control over refining margin except in few regional areas where they dominate. (TSO in AK etc...). Plus the recent gasoline prices might suggest digestion of the record profit refining margin by the oil integrated... plus it's an election year.
We hit $4 gasoline in 2008 with oil $145... hit $4 gasoline in 2011 with oil $114. so there is your (1) crack spread (gross margin, refining margin, profit margin)... at all time high.
If you look at the 1year chart. it's clear they didn't drop gasoline price with the drop in oil, But recently they are not letting gasoline price rise with the recent oil rise... which might signal rest period of refining margin increases.
- Status