Saudi's pumping more oil - no panacea for higher prices
Submitted: Monday, Jun 16, 2008 at 09:34
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The Landy
Will news that Saudi Arabia is about to increase oil production help us at the pumps?
Firstly, there is no shortage of oil for immediate delivery although the price is being driven higher by consumers and speculators concerned about the long-term price of oil and the ability of producer Nations to supply demand over the next decade
What is odd about the latest announcement is that Saudi officials and other OPEC Nations have insisted for months that pumping more oil was not the answer. Instead, they have blamed higher prices on a weakening US dollar and the increasing involvement of speculative hedge funds in the commodities market. The Saudi Oil Minister recently said that soaring prices were not justified by the fundamentals of supply and demand.
One of the biggest problems facing consumers of refined petroleum products is that there remains a global shortage of refining capacity, not a shortage of oil to refine; at least not at the moment.
Most of Saudi Arabia's excess capacity consists of heavy and high-sulphur crude, which is harder to refine into products like petrol and consequently is in much less demand. Refiners not only would have to go to more trouble to refine the heavier crude, they also would have to be willing to spend money to put large amounts of the oil in storage at the risk that the price of oil falls before they are able to refine it. After all, that is what the Saudi’s are trying to do – get the price lower.
This announcement by the Saudi’s is most unlikely to be the panacea that most are looking for….
I think that one of the longer-term issues is that as demand for refined petroleum products drops in response to high prices at the pump, refiners margins will decrease (what they make from refining oil into petroleum products), this in turn will only exaggerate the lack of global refining capacity as the economics simply won’t stack up for investment in new refining capacity. The US has not built one new refinery in 30 years….
As a footnote; I’ve noticed a few posts recently about whether the fuel price has curtailed travel plans for some. Fuel is only one part of travel costs, but I also believe that the price is ‘elastic’ as it goes up we will see less recreational travel. Bear in mind that other cost imposts, like rising interest rates, are also impacting house-hold budgets. This will eventually feed into lower resale prices for recreational 4WD vehicles and caravans – a hidden cost that should not be overlooked.
Reply By: Member - David P (VIC) - Monday, Jun 16, 2008 at 09:59
Monday, Jun 16, 2008 at 09:59
And as the price of crude goes UP the Fed Gov't tax take goes Down which is a problem if we expect them to either buy more guns OR spend more on health/education etc. Huh?
Well we may have forgotten the taxes on petrol is a FIXED ammount, but if we reduce our consumption by whatever means, we REDUCE gov't revenue.
So the gov't wants lower prices too in order to maintain a stable tax base through stable consumption per-capita.
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Follow Up By: howesy - Monday, Jun 16, 2008 at 10:27
Monday, Jun 16, 2008 at 10:27
Only part (although the larger part) of the is static. GST is charged on parts of the fuel cost other than the tax and is therefore not static. the more the price goes up the more GST is raised to complement the static tax.
Check on how much GST was raised through fuel 12mnths ago compared to now.
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Follow Up By: Member - David P (VIC) - Monday, Jun 16, 2008 at 10:57
Monday, Jun 16, 2008 at 10:57
which goes to the states not the fed
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Follow Up By: howesy - Monday, Jun 16, 2008 at 11:10
Monday, Jun 16, 2008 at 11:10
Wasnt that what one of the recent fights were about because Little johnny wasnt passing on all that gst, and it still goes to the fed. and then they distribute.. what they do with it is irrelevant.
At the end of the day who cares the fact is they get s@#t loads of tax both static and gst and gst therefore total tax revenue only increases with the price no matter who the break up is and plenty of people are p#ssed at the prices.
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Follow Up By: Member No 1- Monday, Jun 16, 2008 at 13:32
Monday, Jun 16, 2008 at 13:32
they are going to get their Tax's from somewhere...no matter what...if it aint fuel it will be something else...eg food, tyres water/electricity etc etc ?
beer and wine and spirits next now that realise those alco-pops aint going to give em the tax grab they were after
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Follow Up By: madfisher - Monday, Jun 16, 2008 at 14:45
Monday, Jun 16, 2008 at 14:45
4wd values have already dropped dramiticaly. Stacks of even the sought after prados for sale. Redbook are out of touch they have dropped that fast.
Cheers Pete
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Reply By: Member - Andrew (QLD) - Monday, Jun 16, 2008 at 10:53
Monday, Jun 16, 2008 at 10:53
Why do you have to post a new thread every time about fuel? Why not keep all the information together in the one thread, especially as the other thread is still "fresh" (today!)
Andrew
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Follow Up By: The Landy - Monday, Jun 16, 2008 at 11:51
Monday, Jun 16, 2008 at 11:51
Many threads on fuel, many of which are quite different? Is there one on this partuclar topic that I have missed?
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Follow Up By: The Landy - Monday, Jun 16, 2008 at 12:21
Monday, Jun 16, 2008 at 12:21
Thanks Andrew, I missed that one.
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Follow Up By: Member - Andrew (QLD) - Monday, Jun 16, 2008 at 12:23
Monday, Jun 16, 2008 at 12:23
yw
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