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Bob van der Valk

 
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  • Oil's Trending Up, But Speculators Aren't to Blame [View article]
    Crude oil can be explored and produced as a basic raw product to be refined into fuels for $40 a barrel. Any price paid over that amount is profit to the refining and marketing side of the business. Just review the profit statements of the vertically integrated major oil companies, broken down by quarters in the 2007 and 2008, to prove my point.

    Speculators drive up prices by hedging their bets based on rumors of interrruptions and world conflicts and are the cause of the wild fluctuations in the price of oil.

    Plain numbers show they we have only used up about 700 billion barrels of oil of the 7 trillion barrels of conventional and 4 trillion barrels of unconventional crude oil store underground in the world.

    We just have to have the wherewithal and the guts to go after it.

    "Bad Lands" Bob the Gas Guy
    Terry, Montana
    Jun 17 11:19 AM | 1 Like Like |Link to Comment
  • Rising Oil Prices: What We Have to Do ASAP [View article]
    We are back to having the first "normal" year in the last three for the petroleum industry. Summer blend gasolines typically reduce refinery output and along with crude oil price increases are the cause of the recent price spikes at the pump.

    All will be well again by the fall of this year and prices will ebb back down along with crude oil prices. One will lead the other down just as they have in the past. We just started this year out at a lower level than normal.

    We can equate the "real" value of crude oil on what it actually costs to get it out of the ground as is a reality check whenever paper barrels get too far out of line as they did last year. Today even the most hard to drill for oil does not cost more than $50 a barrel to produce i.e. shale oil from the Bakken oil formation or the deep ocean drilling in the Gulf of Mexico. The lowest cost is in Saudi Arabia where one well's output can equal one hundred oil wells drilled somewhere else. And the Iraqi crude oil production has not been fully explored and has vast reserves ready to be tapped.

    The media hypes up the market with articles on crude oil being a scarce resource. The fact of the matter is that we have enough crude oil in the ground right here in the US to keep us going for at least another 100 years.

    We just have to decide on how to explore and produce the crude oil in the most environmentally safe method possible.

    The numbers from the U.S. Geological Survey speak for themselves. The world has 7 trillion barrels of conventional oil and 4 trillion barrels of un-conventional oil i.e. shale oil, tar sands in the ground. We have only used up about 710 billion barrels to date.

    That means we have at least another 1000 years of oil left in the ground.
    Jun 13 09:13 AM | Likes Like |Link to Comment
  • Pricing Oil in Big Macs [View article]
    You have a great concept in starting a movement in using the MacDonald's menu items to the cost of a barrel of crude oil. The media's fixation with reporting of the ups and downs in the price of crude oil distorts the real picture in the pricing of fuel.

    It would be interesting to do the same with the average price @ $3.75 per gallon of gasoline in 2008 that would have bought you one Big Mac. This year we hope to buy a quarter pounder @ $2.75 for the same average price of gasoline. And we started the year off with the just the plain hamburger price @ $1.50 for a gallon of gasoline.

    We could then take to the next step and start comparing Disney Dollars at their various theme parks around the world to the U.S. dollar and Euro. The concept of uniting the entire world under a single currency was first introduced in the 16th century by an Italian nobleman. But we can update the movement and start calling it by its unofficial name "Wally Money".

    Let me know if you want me to lead this new movement.
    Jun 9 09:05 AM | 3 Likes Like |Link to Comment
  • Why Are Oil and Gasoline Prices on the Rise? [View article]
    Curently products are pulling up the price of crude oil as they did in the years prior to 2007. The WTI crude oil price is once again driven by the price gasoline fetches in the market place. Distillates are supporting the crack spreads but refiners live an die by the profits (or losses) they have on gasoline production.

    Interesting statistics in the above article especially the one EIA chart about U.S. gasoline demand returning to some kind of normalcy. That is the tell of the tape for gasoline prices in the next four months.

    I see 2009 as the year we return to some kind normalcy in the petroleum market with the "big" money sitting on the side lines and out of the game due to their overreaching for the last two years. Investors are not wanting to get burned twice from the same fire.

    Bob van der Valk
    Sage of the Prairie
    Terry, Montana
    Jun 2 09:02 AM | Likes Like |Link to Comment
  • What's Been Moving Oil Prices? [View article]
    "Crudomania" is being kept alive by the same entities feeding the media their garbage and the public is by en large eating it. Meanwhile the US petroleum industry is being kept going by the same basics with supply demand factors affecting our gasoline prices more than what the West Texas Intermediate crude oil prices happens to be on a day-to-basis. For that type of intelligence please to my log and web page by googling my name.
    Mar 20 03:47 PM | Likes Like |Link to Comment
  • Gasoline's Short Supply [View article]
    The first three sentences in the comment above this one was taken from one of my Seeking Alpha articles and I still hold to that theory. To the "Greed is ugly" comment I respond that it is the job of the oil company CEO's to provide a maximum return for the investment made by their stockholders in their companies. US energy independence will only come about by having a plan that takes all of the energy components and the costs for investing in alternative energy into account.
    Mar 13 10:41 AM | 2 Likes Like |Link to Comment
  • Cacophony in the Oil Market [View article]
    The "National Clean Energy Project "forum held in Washington yesterday was attended by only those parties interested in promoting alternative fuels. One of the participants,T. Boone Pickens, was interviewed afterwards by Neil Cavuto for Fox News Network . Mr. Pickens announced that the US would have a new energy policy for the first time in forty years. Other than former oilman Pickens noticeably absent were representatives from the major oil companies or their trade organization the American Petroleum Institute. Their intentional exclusion tells the tale of what is yet to come in the world crude oil markets and it does not bode well for anyone looking to invest in this commodity in the near future.
    Feb 24 08:38 AM | Likes Like |Link to Comment
  • Tesoro and Valero Benefit from Higher Gross Margins [View article]
    Crack spreads at the U.S. West Coast refineries are an amazing $35 a barrel today. The differential between the branded and unbranded wholesale gasoline prices is now 25 cents per gallon. That is the main cause for the strengthening int the refinery crack spread as they do not have any surplus gasoline to sell in the spot market.
    Feb 9 10:34 AM | Likes Like |Link to Comment
  • Back to the Future for U.S. Oil Refiners [View article]
    Seeking Truth is correct in his statement about the U.S. petroleum industry being an oligopoly and that they send out smoke signals to each other. First they have Energy Information Agency publishing their inventory statistics through the weekly Department of Energy stock report. Second their wholesale prices are posted to media providers of energy infomation i.e. Platts and Oil Price Information Service. Third, and this the one in most quoted and hardly understood, is The Lundberg Survey publishes its every Sunday update on the average price of gasoline in the U.S to the media. The latter is also the one the major oil companies are using to track each other's Dealer Tank Wagon (DTW) prices. By subcribing to the Lundberg Survey as a third party intermediary they are able to determine each other's DTW prices on a daily basis. Those are prices charged by their competitors in each locality down to the corner gas station. And in turn allows them to control pump prices for gasoline to what the market will bear. It's called zone pricing and I have written on extensively in my previous articles.
    Feb 7 12:43 PM | Likes Like |Link to Comment
  • Back to the Future for U.S. Oil Refiners [View article]
    Crude oil prices would have gone below $40 a barrel if the oil workers strike had come off as planned. With wet barrels already backing up in the pipeline to the refinery system the price would have been further depressed with any interruption at the refinery level. My theory explained in the above article, that crude oil prices will be driven by gasoline prices, uses average costs to determine the possible price crude oil by June 1, 2009. For instance the current Los Angeles Basin refining crack spread is a staggering $32.50 a barrel or 77 cents per gallon. That cost is shown as being shown as a typical 35 cents per gallon average in my graph. Crude oil producers will not allow that kind of profit at the refining level and that in turn will firm up the price of crude oil. Other factors such as demand levels and geo-political events will continue to have an affect as well. What is missing? Answer: The paper barrel crude oil traders dealing in the staggering volumes as they have in the past few years. Crudomania is over! Please see my previous article on that subject.


    Feb 6 07:03 AM | Likes Like |Link to Comment
  • Going Green: Not as Easy as It Seems [View article]
    For the record Wikipedia confirms Jack's comment about Sarnia, Ontario, Canada being the birthplace of the world oil industry: "Oil discovered in nearby Oil Springs led to the massive growth of the petroleum industry in this area. Since Oil Springs was the first place in North America to commercially drill for oil, the knowledge that was acquired there and strengthened in Sarnia led to Sarnians traveling the world teaching other nations how to drill for oil. What is now known as the Chemical Valley, located down river of Sarnia proper, once adorned the back of the Canadian ten dollar bill." Let's give credit to the Canucks for being the first to built an oil derrick to explore for black gold.
    Feb 3 09:20 AM | Likes Like |Link to Comment
  • Who's Kidding Whom on Gas Prices? [View article]
    The price charged for gas in each part of the country is tied to the supplies available from the refineries in that area. Some areas are supplied by pipeline and identify with pricing from the origination point from which the fuel is shipped.

    Las Vegas is a good example of those pricing dynamics at work today. They receive some of their gasoline via the rubber pipeline (tanker trucks) from Salt Lake City where rack prices are about 25 cents per gallon lower than what they are in Los Angeles right now. The Los Angeles refineries supply the majority of the gambling mecca's gas by pipeline. The LA unbranded independent rack price currently is about $1.50 per gallon for regular unleaded gas (before applicable taxes). The average pump price per gasbuddy.com for regular unleaded gas in LV is about 10 cents lower than the LA price, which is at $2.079 per gallon today. Howver, at that price dealers in LA and Vegas are still only making about 8 cents per gallon.

    The branded major oil company stations receiving gasoline from those same racks are charged a Dealer Tank Wagon (DTW) price by their suppliers. But those prices do not necessarily follow the unbranded independent prices. In fact they are inverted today with the major oil dealers having an about 4 cents per gallon advantage. That number is usually about the same amount the other way around.

    I have already outlined the method with which the major oil companies control their DTW prices in one of my earlier comments.

    Hope this helps explain the different prices charged at your favorite gas station in the country today. Thanks for all your constructive comments on my article. You can find my previous articles on my personal web page at 4vqp.com

    Jan 21 02:26 PM | Likes Like |Link to Comment
  • Will Oil Traders Get Squeezed? [View article]
    The difference between now and then is that the speculators have been driven out of the market. The players holding wet barrels are the ones who are actually going to be using it to run their refineries. I just read a report from the analysts at the Deutsche Bank headed by Paul Sankey in New York. He decried the fact that the crude oil market is now devoid of much need speculative investment. Mr. Sankey earned the title "Mega Bear" by the New York Times last November by predicting crude oil prices to possibly head down to as low as $30 a barrel. He added that the current downturn in crude oil prices is sending the wrong signal to refiners and producers. In my opinion the crude oil market is now operating as it should have been before the paper traders took over the market from the wet barrel traders.
    Jan 21 10:27 AM | 5 Likes Like |Link to Comment
  • Who's Kidding Whom on Gas Prices? [View article]
    Oil companies did profit from the "Crudomania" that existed in crude oil prices. The reasons for the current price run up in pump prices, in face of declining crude oil prices, were stated in my current article. Another factor at work is that the refineries typically start switching over to making summer gasoline by the middle of February each year. Some of the major oil companies including BP and Tesoro have already taken down some units at their Carson, CA and Anacortes, WA refineries for the Spring turn-a-round.. This was mainly due to lower demand for their finished products. In addition the Big West refinery, owned by bankrupt Flying J, is now dead in the water without having a crude stream to run the plant. This all adds up to lower supplies of gasoline and diesel at least on the West Coast. The sorting out process in the petroleum industry will continue with more mergers in the works to consolidate them. The last thing we need is for government intervention by either instituting price controls or draconian tax measures.
    Jan 20 07:16 AM | 1 Like Like |Link to Comment
  • Who's Kidding Whom on Gas Prices? [View article]
    "Curious" - I obtained the per gallon breakdown of cost and profit margins for regular unleaded gasoline in California at the following California Energey Commission web site:

    energyalmanac.ca.gov/g...

    I used them only as an example since the CEC is they only governmental agency in the U.S. sanctioned by regulation to obtain the dealer tank wagon and rack prices direct from California refiners and major oil companies. The major oil companies obtain information on each other's competitive pricing from The Lundberg Survey, who gathers the pricing data and other statistics from dealers and other sources willing to submit that information to them. Lundberg the sells this information back to the major oil companies who in turn price their gasoline according to what to market will bear. They continuously monitor their market share and competitive stance in the market very carefully.

    I am of the same opinion as yours that fuel drove crude oil prices down assisted by demand destruction in the last four months of 2008.

    Jan 19 09:30 PM | Likes Like |Link to Comment
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