GDS

Yesterday's Crude Spike: Most Cut-and-Dry Case of Speculation Yet

Bullish on Oil my butt! Ike put the double whammy on the shorts, no crude, no delivery. This too will soon pass. You might say the shorts took it in the shorts.:)

Did Big Oil Take Advantage of Light, Sweet Crude?

Charts are interesting, however most any data can be presented to support one's basic premise. You have failed to include the rack-to-retail (wholesale price paid versus the retail price it was sold for) spread of gasoline. Actually the EIA data is very limited to the rack-to-retail areas covered. A source like OPIS is much more detailed and accurate for the rack-to-retail spread. If you would have included a rack-to-retail study, you would find a margin squeeze when crude spikes and a spread as crude declines.

I would imagine you could show the crude prices were the inverse to the financial sector during these same periods as players moved their money from one sector to the other, which I might suggest is more accurate. Just look at last week’s crude price spike. Using the EIA’s data would have indicated a big price drop, however the financials outlook outweighed crude inventories hence a short lived crude spike. That is not to say that crude won’t rise over the long run.

One final point, the Big Oil Companies are not the largest retailers of gasoline in the USA. Branded as well as unbranded wholesalers have a much larger market share. Most branded i.e., Exxon-Mobile, Shell, Chevron, etc., retail units are owned and operated by independent wholesalers. Virtually all home heating oil is supplied by independent wholesalers. Very few of these companies are publicly traded.