Philip Gvinter

Petroleum Inventory Data Show an Interesting Trend

You may be correct in pointing out that refiners have greater ability to change input vs producers ability to change output. That having been said the real point of my article is that the refiners will have more pricing power during a demand upswing and more spare capacity to take advantage of shifting market trends than the producers. Regardless of cause this still puts them at an advantageous position in relation to producers once demand begins to pick up.


On Feb 12 09:29 AM Jebeatsfish wrote:

> I think the refiners have more control on the inflow of crude to
> their refineries, whereas the raw crude producers have a greater
> difficulty in shutting down production. Think about it, is it easier
> to prevent delivery of crude to your refinery or is it easier to
> shut down an ocean rig or a derek in Alaska. Oil production is
> a much more difficult engineering process. I doubt refiners are
> more adoit at identifing market demand than producers, refiners just
> have greater flexibility in controling the process.

Cramer: Dow Could Drop Another 14%, Oil's Going to $50

Inflation is no longer the enemy. Deflation is here and here to stay for a while. Is there a single economy which will benefit from a combination of falling consumer demand in the US and EU and falling prices for commodities? The EU and US economies are all over-leveraged and still have credit losses and housing corrections to work through. Under such a scenario China and India have excess capacity for manufacturing (China) and outsourced professional labor (India.) Brazil, Russia, Venezuela, the gulf states and Australia are all commodity producers who will also take serious hits. During a period of global deleveraging and a crisis of confidence investors will run to the reserve currency which is currently the USD and potentially to gold. The issue with gold as a hedge at this point is that it serves no economic purpose and is typically an inflation hedge, one which may not hold up during a deflationary period. Whether through dumb luck or a nefarious conspiracy the US seems destined to keep its position at the top of the hill in the short to intermediate term simply because there are no cash rich buyers in this overleveraged and highly intertwined global economy.