What is the price of oil?
Can any one please tell me how much is the price of oil?
My common sense tells me that my costs + profit should equal my selling price...
But in case of oil this equation is not valid at all... In fact I guess any trading of commodities goes against this equation...But, just for our udnerstanding, how much does it really cost to tap the oil reservers, extract them, refine them?
Let us first try and see, what is the total supply and demand of oil as on date, so that if there is a huge mistmatch between them, then we may understand that companies are trying to take advantage of the supply shock and hence hte prices are high...
Demand for oil is: 86 million barrels per day
World oil production growth trends, in the short term, have been flat over the last 18 months. Global production averaged 85.24 mbbl/d in 2006, up 0.76 mbbl/d (0.9%), from 84.48 mbbl/d in 2005.[32] Production in Q3 2007 was 85.08 mbbl/d, down 0.62 mbbl/d (0.7%), from the same period a year earlier.
So the average production of oil is around 84-85 million barrels per day
So, the gap between supply and demand is not tremendous. Inspite of that, the oil prices which were hovering around $30-40 in 2005 have almost touched $100. So, isn't this is a matter of simple speculation which is leading to the tremendous increase in oil prices than the supply shock.
Now, let us identify what exactly are the costs of getting the oil to a consumer...
The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs, and finally the retail station costs and taxes.
As per the latest breakdown for the retail price, the coss are as follows:
Distribution Costs, Marketing Costs and Profits: $0.15
Crude Oil Cost: $2.28
Refinery Cost and Profits: $0.34
State Underground & Storage Tank Fee: $0.01
State and Local Sales Tax: $0.25
State Excise Tax: $0.18
Federal Excise Tax: $0.18
Clearly the crude oil prices are the ones which form the major part in determining the prices. But...Iam not yet convinced at the crude oil front...
My common sense tells me that my costs + profit should equal my selling price...
But in case of oil this equation is not valid at all... In fact I guess any trading of commodities goes against this equation...But, just for our udnerstanding, how much does it really cost to tap the oil reservers, extract them, refine them?
Let us first try and see, what is the total supply and demand of oil as on date, so that if there is a huge mistmatch between them, then we may understand that companies are trying to take advantage of the supply shock and hence hte prices are high...
Demand for oil is: 86 million barrels per day
World oil production growth trends, in the short term, have been flat over the last 18 months. Global production averaged 85.24 mbbl/d in 2006, up 0.76 mbbl/d (0.9%), from 84.48 mbbl/d in 2005.[32] Production in Q3 2007 was 85.08 mbbl/d, down 0.62 mbbl/d (0.7%), from the same period a year earlier.
So the average production of oil is around 84-85 million barrels per day
So, the gap between supply and demand is not tremendous. Inspite of that, the oil prices which were hovering around $30-40 in 2005 have almost touched $100. So, isn't this is a matter of simple speculation which is leading to the tremendous increase in oil prices than the supply shock.
Now, let us identify what exactly are the costs of getting the oil to a consumer...
The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs, and finally the retail station costs and taxes.
As per the latest breakdown for the retail price, the coss are as follows:
Distribution Costs, Marketing Costs and Profits: $0.15
Crude Oil Cost: $2.28
Refinery Cost and Profits: $0.34
State Underground & Storage Tank Fee: $0.01
State and Local Sales Tax: $0.25
State Excise Tax: $0.18
Federal Excise Tax: $0.18
Clearly the crude oil prices are the ones which form the major part in determining the prices. But...Iam not yet convinced at the crude oil front...
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