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Refineries May Dictate Crude Oil Prices in the Future

motley fool -- Crude oil prices cannot keep rising, can they? The laws of supply and demand simply don't allow that. While it's convenient to keep supply-side issues in the limelight, it defies logic to consider just one side of the coin. Issues pertaining to demand are actually rearing their heads, and this could change the dynamics of the oil and gas industry in the near future.

The problem no one's talking about
Refiners in the U.S. particularly are having a hard time passing on high input costs (read: high crude oil prices) to end consumers, despite 10-month highs in average gas prices at the pump. Why? Consumers are simply driving less. As a result, demand for gasoline is dropping, and we are actually witnessing the classical laws of supply and demand at work.

Prices at the pump have steadily in

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Submitted May 06, 2012 By: mastermariner

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OWENALOTT Champion Author Appleton Posts:2,182 Points:500,095 Joined:Apr 2011	Message Posted: May 8, 2012 1:32:15 AM Ignore OWENALOTT Report Abuse interesting read
SammyAdams Champion Author Tallahassee Posts:3,049 Points:791,770 Joined:Nov 2010	Message Posted: May 7, 2012 10:51:33 AM Ignore SammyAdams Report Abuse To: greywolves Re: Message Posted: May 6, 2012 10:40:25 PM (Printed below) "sammy,the debt is only truly important to those holding it; not those owing it. i.e. the wealthiest 40,000 americans who own 90% of the assets in america. those that used to pay taxes but now lend the money to the treasury instead." ===================================================================== Are you stating that the National debt is of no consequence to the borrower? The third highest budget item is just the interest on the current debt. We all groan and suffer under the consequences of our country's prolific and unconstitutional spending and "borrowing" the money is the easiest way to make this palatable to those of us peons who are asked to pay for this charade. If I misunderstood what you were trying to convey, please feel free to reply, but I just cannot see where our interest in our debt as "payers" is any way diminished than the interest of those who are "payees". They might have cause for WORRY more, but we should have great concern ourselves, because it takes so much of our capital in order for politicians to curry favor with special interest groups for illicit spending.
WalRus49 Champion Author Boston Posts:4,065 Points:866,915 Joined:Nov 2010	Message Posted: May 7, 2012 7:27:42 AM Ignore WalRus49 Report Abuse More organized mayhem and pillage............
dr047 Champion Author Cleveland Posts:2,581 Points:515,495 Joined:Aug 2010	Message Posted: May 7, 2012 7:25:11 AM Ignore dr047 Report Abuse Aren't they acting like OPEC by somewhat dictating gas prices?
jetskijerry Champion Author North Carolina Posts:3,891 Points:771,295 Joined:Mar 2011	Message Posted: May 7, 2012 5:14:27 AM Ignore jetskijerry Report Abuse Just like in the case of airlines, the fewer players will become a monopoly situation.
jetskijerry Champion Author North Carolina Posts:3,891 Points:771,295 Joined:Mar 2011	Message Posted: May 7, 2012 5:13:38 AM Ignore jetskijerry Report Abuse As refineries close, the price will be kept at high levels.
BBopp Champion Author Dayton Posts:6,829 Points:1,936,505 Joined:Dec 2006	Message Posted: May 7, 2012 5:00:57 AM Ignore BBopp Report Abuse Prices should be dictated based on supply and demand. Of course that is just an obsolete notion.
DrCashFlow Champion Author Massachusetts Posts:7,059 Points:1,625,275 Joined:Jun 2008	Message Posted: May 7, 2012 4:38:22 AM Ignore DrCashFlow Report Abuse May? They already do... Big time
anascom Champion Author Hamilton Posts:1,593 Points:553,115 Joined:Feb 2011	Message Posted: May 7, 2012 1:44:30 AM Ignore anascom Report Abuse this is maybe another way of speculations!
stratlinetime Champion Author Kalamazoo Posts:2,271 Points:561,885 Joined:Feb 2011	Message Posted: May 7, 2012 1:10:45 AM Ignore stratlinetime Report Abuse That will cost us
granitestater Champion Author New Hampshire Posts:8,817 Points:1,429,775 Joined:Oct 2008	Message Posted: May 7, 2012 12:50:19 AM Ignore granitestater Report Abuse Demoncrats like Obama have been using "speculators" as their oil price bogeyman for a while because it makes good PR. And like fog, they are difficult to catch. And the big banks are big contributors to the Democratic Party since Clinton turned them to the Dark Side by repealing Glass-Steagal during his term.
granitestater Champion Author New Hampshire Posts:8,817 Points:1,429,775 Joined:Oct 2008	Message Posted: May 7, 2012 12:42:29 AM Ignore granitestater Report Abuse Speculators have little to do with mature futures contract prices. It's like hating the weatherman because he forecast bad weather. See here... [Edited by: granitestater at 5/7/2012 12:42:43 AM EST]
rickfro All-Star Author San Diego Posts:685 Points:328,595 Joined:Nov 2008	Message Posted: May 7, 2012 12:26:01 AM Ignore rickfro Report Abuse Supply and demand have little to do with prices. It's the speculators that need to be reigned in.
graceman Champion Author Baltimore Posts:4,968 Points:1,158,725 Joined:Jun 2008	Message Posted: May 7, 2012 12:22:50 AM Ignore graceman Report Abuse What else is new?
NHLiveFree Champion Author New Hampshire Posts:11,083 Points:1,621,355 Joined:Jun 2008	Message Posted: May 6, 2012 11:49:34 PM Ignore NHLiveFree Report Abuse Sounds more like the usual "shell" game for pricing energy continues. Tesoro did so well with their "refinery closing "for scheduled maintenance" that the entire industry followed. Now its the "low margin, not making any money" scam, so refineries are closed to simply restrict supply. Lots of games by the usual 'expert' players. We all get to pay the price.
DerHahn Champion Author Illinois Posts:13,698 Points:2,112,185 Joined:May 2004	Message Posted: May 6, 2012 11:00:30 PM Ignore DerHahn Report Abuse since when has supply and demand had anything to do with prices. wholesale gas prices took a dive last week and have already started to drop further with the asian markets opening.
greywolves Champion Author Las Vegas Posts:8,660 Points:2,426,275 Joined:Dec 2004	Message Posted: May 6, 2012 10:40:25 PM Ignore greywolves Report Abuse sammy,the debt is only truly important to those holding it; not those owing it. i.e. the wealthiest 40,000 americans who own 90% of the assets in america. those that used to pay taxes but now lend the money to the treasury instead. as the xl pipeline expansion is completed, the efficient but under utilized refineries of the gulf coast will be able to export refined product to west africa and south america at competitive prices and to india and southeast asia through the panama canal at world prices. all analysts show u s consumption trending DOWN AND CONTINUING TO DO SO. will someone postulate why investors will spend billions for a pipeline where no additional local demand for the product exists? or what end consumer will buy this addition production?
djgunrunner Champion Author Salt Lake City Posts:10,094 Points:2,347,630 Joined:Apr 2005	Message Posted: May 6, 2012 10:26:06 PM Ignore djgunrunner Report Abuse Refineries already do. When they export so much fuel that we are short in America and then use the shortage that they caused to raise the price they are dictating the price. The are also gouging us something terrible and obama could do something about it with Natural Gas but will not, for his person reason or gain is the question?
Wanda127 Champion Author Florida Posts:2,489 Points:913,055 Joined:May 2010	Message Posted: May 6, 2012 10:18:49 PM Ignore Wanda127 Report Abuse I think this will happen also humblepie. Or at least go down a lot.
YaBassa Champion Author Michigan Posts:2,420 Points:515,150 Joined:Nov 2011	Message Posted: May 6, 2012 9:56:13 PM Ignore YaBassa Report Abuse Big Oil already regulates the price.
SammyAdams Champion Author Tallahassee Posts:3,049 Points:791,770 Joined:Nov 2010	Message Posted: May 6, 2012 9:33:07 PM Ignore SammyAdams Report Abuse The one problem that most pundits refuse to acknowledge is INFLATION, which is typically referred to the wage-price spiral. But this is the RESULT of "inflation" rather than its cause. Until we can rein in the Federal Reserve, which is monetizing the debt that our spendthrift President and Congress keep giving us, we will continue to see gas and consumer good prices escalate.
brbaritone Champion Author Virginia Posts:2,063 Points:1,696,210 Joined:Jan 2007	Message Posted: May 6, 2012 8:27:34 PM Ignore brbaritone Report Abuse The article concludes: Where are crude oil prices headed? Loss of end-consumer demand due to skyrocketing prices has led to unprofitable refining businesses. The next seemingly obvious step is refineries curtailing input volumes in the U.S. to lower costs. Of course, this is easier said than done since refineries will have to operate at full cost. But crude prices can't keep going up indefinitely. Additionally, for those harping on a growing demand for energy from emerging economies to push up oil prices, the ride is going to be much rougher. Whispers of a Chinese hard landing are getting louder. The BRIC nations are still looking sluggish, with any real growth in energy demand a long way off. The basic laws of supply and demand will eventually catch up. A timeline is hard to predict, but I won't be surprised if crude oil prices retreat in the next six months. Upstream companies may soon have to face a reality check -- especially those companies who bank on higher crude oil prices to boost profits.
Jkent1953 Champion Author Salt Lake City Posts:1,981 Points:438,985 Joined:Dec 2011	Message Posted: May 6, 2012 8:17:24 PM Ignore Jkent1953 Report Abuse Refiners have to pay the price that is on the commodity exchanges. If not, they won't receive the product. Global demand will dictate the price.
toadNY Champion Author Albany Posts:7,037 Points:1,512,175 Joined:Apr 2008	Message Posted: May 6, 2012 7:59:23 PM Ignore toadNY Report Abuse The whole world would have to cut back on oil an gas for prices to drop.
northeast2 Champion Author New York Posts:3,849 Points:1,007,200 Joined:Mar 2008	Message Posted: May 6, 2012 7:06:27 PM Ignore northeast2 Report Abuse I don't think users in China and India give a whit about profit margins at U.S. refineries. It's a nice idea, but GLOBAL demand would have to drop off significantly for refineries to be telling the oil produces what they are willing to pay.
Rockyguitar Champion Author Tampa Posts:2,557 Points:1,200,820 Joined:Sep 2008	Message Posted: May 6, 2012 7:05:02 PM Ignore Rockyguitar Report Abuse Lift stupid redundant regulations! [Edited by: Rockyguitar at 5/6/2012 7:04:57 PM EST]
Night Owl Champion Author Toronto Posts:7,545 Points:1,785,625 Joined:Jul 2004	Message Posted: May 6, 2012 6:33:39 PM Ignore Night Owl Report Abuse The laws of supply and demand haven't controlled oil prices for years. Greedy oil speculators are dictating oil prices now.
hubie24 Veteran Author Michigan Posts:315 Points:204,080 Joined:Jul 2010	Message Posted: May 6, 2012 6:29:47 PM Ignore hubie24 Report Abuse when haven't refineries determined prices?
pscamp Champion Author Ottawa Posts:3,270 Points:473,310 Joined:May 2011	Message Posted: May 6, 2012 6:27:58 PM Ignore pscamp Report Abuse we will see.,..
humblepie Champion Author Toledo Posts:34,147 Points:2,369,420 Joined:Mar 2006	Message Posted: May 6, 2012 6:14:55 PM Ignore humblepie Report Abuse after obama is gone, prices will plummet
leraar2 Champion Author Massachusetts Posts:3,754 Points:785,730 Joined:Mar 2011	Message Posted: May 6, 2012 5:38:42 PM Ignore leraar2 Report Abuse NATIONALIZE the oil companies.
JagXKR Champion Author British Columbia Posts:3,149 Points:1,089,580 Joined:Dec 2009	Message Posted: May 6, 2012 5:33:32 PM Ignore JagXKR Report Abuse Stricter regulation of the industry may be necessary for the future stabilization of the economy.
lou30 Sophomore Author Miami Posts:187 Points:320,315 Joined:Mar 2011	Message Posted: May 6, 2012 5:24:14 PM Ignore lou30 Report Abuse It'll create bidding wars. Unless they come to an agreement behind closed doors.
MAJB Sophomore Author Indianapolis Posts:226 Points:109,435 Joined:Oct 2005	Message Posted: May 6, 2012 5:13:50 PM Ignore MAJB Report Abuse This is exactly how the free market works!
asog75 All-Star Author Indiana Posts:836 Points:278,405 Joined:Aug 2011	Message Posted: May 6, 2012 5:07:09 PM Ignore asog75 Report Abuse interesting problem!!!
52MPG Champion Author Dayton Posts:7,254 Points:1,740,670 Joined:Apr 2006	Message Posted: May 6, 2012 5:03:46 PM Ignore 52MPG Report Abuse Supply and demand balance in the end.
uglytom Champion Author Florida Posts:7,464 Points:1,542,015 Joined:Jul 2007	Message Posted: May 6, 2012 5:01:18 PM Ignore uglytom Report Abuse It's a tough job, but someone has to do it!