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Oil's Well that Ends Well

John Kerry's victories in Tennesee and Kerry seem to mean nothing. Other than Wisconsin, if Edwards and Dean want to stick out, no state is going to give the Kerry man a knockout blow in the primary circuit. Bush is obviously girding, and happy to be facing the junior senator from Massachusetts. But more on that later. Just remember we told you first the race would distingrate into Dean-Kerry-Clark. Oops. Okay so I thought it would, Dean, Clark, and Edwards....

But the news that is a real shocker, and we don't mean the Martha Stewart Trial, is that OPEC apparently knows something we( meaning anyone who reads this thing) do not. The reason for this is that oil prices are generally not bought at the spot market. Nobody needs so little oil to buy it like you would an apple. But, if you want to read the tea leaves, consider that it has been a particularly cold winter in the East. The major refineries always have to consider how much oil to refine into heating oil and how much to refine into gasoline during the winter. As soon as the weather warms, up they must swtich out to a new form of gasoline. Combined with increasing travel during the start of spring March and April tend to be tight months for oil purchasing.

But you ask, why cut? Well the reason is going to surprise you. There are two separate hypothesis and both of them involve the Saudi Royal Family. The first is that OPEC fears Iraq's oil machinery may be operational soon. If that comes to pass, the cartels days could be numbered by flooding (no pun intended) the world with cheap oil. The other guess is that the devaluation of the dollar is hurting the Saudi economy (as they tend to keep a huge amount of their assets in US Dollars in American banks) and as a result, the "petro-dollars" are being devalued and need to readjust the balance of power within currencies. Of course, this also means that gas prices will rise. Of course, you might ask if this means something else. After all, the last cut was due to the appearance of an American-coached Iraqi oil minister in Vienna. However, the other thing to keep in mind is that gas prices have seldom broken the $3.00 mark in the US and if that happens during a long run up to summer production, it will be a sight to see.
posted by Thomas at 10:27 PM 0 comments