Wednesday, December 15, 2004

Heating Oil, Gasoline and Refinery Capacity

Wonder why the prices of fuel oil is likely to rise? Or as "This Week In Petroleum" puts it ""[T]he U.S. heating oil market may shape up to be more interesting than many thought as recently as a week or so ago."

Update: More info here.
U.S. distillate inventories failed to increase last week and Russian oil giant Yukos has filed for bankruptcy, combining to stoke supply concerns Wednesday as wintry weather starts to set in and lifting petroleum futures to their highest levels in two weeks.
"This is like triple bad news for the oil markets -- the supply data shows it could be a long winter, the much, much colder temperatures across the country and the bankruptcy of Yukos -- all are contributing to the rise in prices," said Kevin Kerr, president of Kerr Trading International.

The underlying problem is lack of refining capacity- we need to build more capacity, but the profit margins are low and the cost, including the environmental aspects, is enormously high.

Update #2: Oh, yes, there is a shortage of shipping capacity, too, and that is part of the problem.

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