All of these things are adding up. |
At the same time, what this attack demonstrates is not just how much the Saudi oil machine is a target for attacks, but also how prepared the Saudi oil company and military are, and how effective they are at thwarting attempts to disrupt oil production and exports. There are two sides to this. |
Geopolitical factors have been the major factor pushing us higher and they will get worse before they get better. |
Heightened geopolitical risk profoundly changes the meaning of fundamentals. |
If it actually produced as much as it could, obviously, it would add tremendously to oil supplies, and it would push the price down. |
If it is rhetoric, it is to balance the perception that that they are responsible for the high prices. |
If it's not rhetoric it's an effort to recapture the share of the oil cut that they gave away to deep conversion refiners, |
If we have colder-than-normal weather, we'll see a bit of a shock to the economy, ... I plan to put a sweater on at home. |
In the short term, the main market problem at the refining level is the shortage of product, not inputs. It's mostly a problem of product (gasoline), not crude oil. |
It's late in the game. The only policy changes that would have an immediate effect would be demand restraints, such as increases in gasoline taxes, alternate driving days or enforcement of speed limits. |
It's new in the sense that this is the boldest attempt to strike at the heart of a Saudi oil-production complex. So far they had been confined to office buildings and housing units. |
It's quite likely that the impact of Katrina on energy production will end up dwarfing that of Ivan, |
It's quite likely that the impact of Katrina on energy production will end up dwarfing that of Ivan. |
Overall, I think it sent the right message. But at the end of the day, the physical impact of the IEA release was much less than you would have expected. A lot of the market adjustment came from other sources than IEA countries. |
Refinery activity has been very depressed because of damage caused by hurricanes last year and deferred maintenance. There was a huge surge in imports after last year's storms but that has ended. At the same time refinery activity has not recovered. |