glojo
Hardcore MB Enthusiast
I agree that they account for the figures your talking about but they talk as a group. I would love to see this cartel disband but will it happen? Sadly they do effect the price and they are all powerful
Oil Prices
- Thread starter kikkthecat
- Start date
hawk20
MB Enthusiast
I don't know how you expect to do that. In June 1999 I sold a wad of shares and the FTSE was 6,900 or so. Allowing for inflation, that would need to be over 9,300 now for there to have been no growth in real terms. But it is not 9,300 is it. It is around 4,000. So it has more than halved in the last decade after allowing for inflation. Ruining pensions.
As for maintaining savings in interest bearing accounts or bonds, even if you get 6% interest, after tax that is 4.8% to a standard rate payer and only 3.6% to a top rate taxpayer. Nowhere near enough to cover the over 5% inflation we are seeing at the present time.
So even though we've had very high oil prices we have not seen the value of savings or pensions protected.
I know the figures have been discussed in serval posts, but I just came across this - seems to sum up the end-end costs quite well:
A pretty slim profit margin (that's against the pre-corp tax figure, which is probably the better one to use as it's difficult to see how that part of the businees can be profitable).
If fuel retailing was profitable you wouldn't have thousands of forecourts closing a year. How many fuel stations do you know of that survive without selling groceries, snacks, magazines, etc. in a forecourt shop?
glojo
Hardcore MB Enthusiast
What do we define as profit and who gets fat before the figures are accessed?
I am NOT suggesting the CEO of any petroleum cmpany gets paid £10m per annum but would that salary be deducted from gross figures before we discuss profits? What other loop holes would there be?
What executive aircraft do these companies own and no doubt these are possibly just part and parcel of the company intrastructure??
Please note these are questions and not statements of fact.
Regards
John
OP
OP
kikkthecat
MB Enthusiast
Ah, but petrol only accounts for about 20% of what is refined from crude oil, so on those figures petrol costs about 6p a litre. The big profits are made from everything else that is distilled from crude oil. You would be hard pressed to find anything in the room you're in now that hasn't been made, touched or processed with some form of petrochemical. All manner of plastics paints and coatings come from crude oil. In the grand scheme of things I suppose petrol could be seen as a by product of the oil industry.
However on the BBC news they showed figures that said the last time oil was at $77 a barrel the average price of petrol was 95.9p a litre and now it's 104.9p.
I started this thread because I wanted to know if there was a ratio between crude oil prices and petrol, if oil = x then petrol = y but there isn't. There seem to be too many dealers, speculators and gamblers in the middle for any ratio to exist.
Still, it's less than half the price of bottled water (motorway services) and about a quarter of the price of the average beer and no matter what price I'd like petrol to be I wont be getting a vote on it anytime soon.
Eh, no. The yeild of petrol from oil is on average about 20% (varies for 5-30 depending on the quality of the oil). So if you were buying oil purely to make petrol you'd have to by 5 times the amount i.e. £1.75's worth to make 1 litre of petrol.
But of course the other 80% of the oil does get used, as as you say some of the other uses may be more profitable than petrol and may be subsidising the refining cost of petrol.
Actually after reading the quote I posted this morning I did some anaylsis on oil price, exchange rate and forecourt price - and came up with the following formula:
Oil Price = X
Exchange rate £/$ = Z
Petrol price = Y
Y = (((100/159)*(X/Z))+50.35)*1.175+8
Couple of examples:
Month - Oil - Exchange Rate - Petrol Price
May ----120 ------1.96 -------------112.4057629
June ---130 -------1.96 ------------116.176139
July ----140 -------1.98 ------------119.4133306
Aug ----120 -------1.87 ------------114.5833063
Sept ---100 -------1.78 ------------108.6777506
Oct ------75 -------1.73 -------------99.1985496
Quite representative of the forecourt prices we have seen (based on my Asda receipts/MPG spreadsheet).
Not a simple ratio - but a reasonable model.
The main difference between when oil was last $77 dollars a barrel is the exchange rate and if I put a 1.98 exchange rate and $77 into the formula I come up with 95.9 - what was that figure you quoted
(I only tried this as I was writing this post honest).
Last edited:
hawk20
MB Enthusiast
Not so. There is a direct link but you just must allow for the fact that the £ was 2 dollars not so long ago and is now often around 1.7 to 1.75.
Then you must allow about 6-8 weeks lag between the world oil price and refining, distributing and getting to the customer.
DC_insider
Active Member
- Joined
- Jul 23, 2005
- Messages
- 259
I'm not sure when oil was last at $77/barrel but I would guess it was over a year ago. If so then the tax on petrol has gone up from 48.35p/litre to 50.35p/litre so even if the exchange rate was the same the fuel would be more expensive.
Birdman
Active Member
The problem as I see it are the great discrepancies between the long-run equilibrium price for oil and short term fluctuations.And it is the short term fluctuations that create the opportunity for profiteering and so are often in the interests of speculatators.
Or putting it differently, the oil market is rigged.
It is an international unregulated market. The same type of unregulated market that gave us derivative trading, credit default swaps, and sub-prime mortgages.
Nobody knows how the 'market' price of oil is arrived at.
Two short months back central bankers, international bankers, financial market analysts and regulators were telling us they understood what the probelms were and were pretty much on top of them.
Now, it seems that they were not simply wrong, they were 'Not Even Wrong' (to repeat the phrase used by a Nobel Laureate to describe theories that had no basis in any known reality).
The same applies to any story you are given about why oil prices are as they are on any given point in the global economic cycle.
Nobody knows and any explanation deserves the description, Not Even Wrong.' IMO.
Because the oil price is derived from is a series of multiple, partially linked, unregulated, opaque, secretive, hugely political markets and these are subject to uncontrolled manipulation for the sake of profit by sovereign wealth funds, corporate players, commodity funds, hedge funds, derivative traders to name just a few.
Just like the banks.
Or putting it differently, the oil market is rigged.
It is an international unregulated market. The same type of unregulated market that gave us derivative trading, credit default swaps, and sub-prime mortgages.
Nobody knows how the 'market' price of oil is arrived at.
Two short months back central bankers, international bankers, financial market analysts and regulators were telling us they understood what the probelms were and were pretty much on top of them.
Now, it seems that they were not simply wrong, they were 'Not Even Wrong' (to repeat the phrase used by a Nobel Laureate to describe theories that had no basis in any known reality).
The same applies to any story you are given about why oil prices are as they are on any given point in the global economic cycle.
Nobody knows and any explanation deserves the description, Not Even Wrong.' IMO.
Because the oil price is derived from is a series of multiple, partially linked, unregulated, opaque, secretive, hugely political markets and these are subject to uncontrolled manipulation for the sake of profit by sovereign wealth funds, corporate players, commodity funds, hedge funds, derivative traders to name just a few.
Just like the banks.
glojo
Hardcore MB Enthusiast
I still cannot understand how an oil company is behaving responsibly when it allegedly sells crude oil on the open market to speculators\traders or whatever else folks want to call them and then buys this same oil back from the speculators at a highly inflated price... Especially when the oil is sold in advance and the speculator never gets to receive the substance, They buy it three months in advance at possibly $40 and sell it back before they receive it to the same people they have bought it from at $60???
I don't understand how this can be right, I don't understand how the oil company is behaving responsibly and I don't understand how it can be legal.
If speculators want to buy the oil then fine, let them buy the stuff, store it and then sell it.
Capitalism rule OK
John
Birdman
Active Member
The free-market argument is that all these transactions eventually cancel each other out but while doing so they happily smooth over price fluctuations that would otherwise occur and maintain price stability.
But the recent experience of the unregulated global investment markets - and the fate of the banks themselves - suggest that unregulated markets have become mechanisms that create speculative bubbles which feed off themselves. The psychology of those who invest in these bubbles is well documented and no organisation is immune to them. Warren Buffet got out of bank stocks in 2005 saying they were certain to end in financial disaster, and he went out of equities and into cash (don't ask me where he put it all).
Oil seems straightward stuff that is turned into manufactured products we all buy, but then money is straightworward enough too if you look at your wallet or paycheque.
It is unregulated markets that screw everybody. No regulation = no rules = no law enforcement = 'gunlaw' capitalism.
Perhaps an epitaph for the Bush era would be: How America fell in love wih Gunlaw Capitalism.
Of course, he had to be an oilman!
hawk20
MB Enthusiast
The oil markets bear little or no resemblance to some of these comments. People bid for oil now or oil at various dates in the future. All open and above board. If you think oil is going to rise and want to have a punt on that, you can buy it 3 months hence, and if it goes up enough you make a profit. What's wrong with that?
The amounts supplied are partly controlled by cartels like OPEC, so they have a huge influence on price as they can and do restrict the supply. So, of course the supply side is not a free market. But the way the oil is sold, and bid on, is an open and fair process; anyone can join in. I don't see what regulations any would want that would help. Suggestions?
The amounts supplied are partly controlled by cartels like OPEC, so they have a huge influence on price as they can and do restrict the supply. So, of course the supply side is not a free market. But the way the oil is sold, and bid on, is an open and fair process; anyone can join in. I don't see what regulations any would want that would help. Suggestions?
hawk20
MB Enthusiast
The banks went down because the govt took housing out of the inflation index it gave the Bank of England to control. So house prices were allowed to rip with no restraint.
The govt said it had cured boom and bust and many, sadly, began to believe that and thought house prices would go on up and up. The banks lent more and more and gullible borrowers were happy to heap more and more debt on their own heads. The crash will provide a salutary lesson for many. Tough world.
The govt said it had cured boom and bust and many, sadly, began to believe that and thought house prices would go on up and up. The banks lent more and more and gullible borrowers were happy to heap more and more debt on their own heads. The crash will provide a salutary lesson for many. Tough world.
CRS
Active Member
They have to sell it reasonably quickly anyways, even sometimes at huge losses otherwise they would have to take delivery of it, which they never will.
Birdman
Active Member
That is what the bankers were saying last week. It's called blind faith in unregulated markets. After the collapse of 293 banks and brokerages worldwide (and counting) and with the impending collapse of many if not most of the hedge funds, the unregulated market platform is becoming rather a crowded ledge for anyone to want to stand on. Besides, who in their right mind would want to spend their last minutes before the big drop with a wunch of bankers.
The oil market is completely unregulated and the trades are totally opaque. That is a recipe for a rigged market. And by definition it's secret, not open. Rather like the derivatives trades, the credit default swap trades and the all rest. We know where that got us - and if we don't we soon will.
So the answer is: bring them into the light of day. Require all trades to be entered on a public register so we know who is buying what and what posititions each and every player is adopting. Why would anyone object to that!
hawk20
MB Enthusiast
Why should everyone know what I buy or sell. If what I do is legal it is my business. You will just end up with a vast bureaucracy like the FSA which has made huge amounts of work, and cost a fortune, and protected absolutely nobody.
The oil market is not remotely like the bank problem. People aren't borrowing and lending money to sub-prime people who can't afford to pay it back. People with loot are buying and selling oil and oil futures. It is totally different.
Birdman
Active Member
The banks went down because they bought sub-prime debt from America not because of the UK housing bubble. That has yet to work its way through their balance sheet whereas most (not all) of the sub-prime debt is already there and hurting them. And we haven't even got to the credit default swap issues yet.
Northern Rock was a special case which had a particular vulnerability because of an unsustainable business model once wholesale bank finance had dried up. At that point the market took a look, didn't like what it saw, and stopped lending to Northern Rock. But the wholesale market got jumpy because of the US sub-prime scandal, not because of defaults with UK mortage business - which still is performing well given the pressure on owners' incomes.
Then Lehmans went down and the current round of awfulness kicked off. The hit on the London banks has yet to be measured and, it ain't over yet. Not by a long chalk. It's going to get a lot, lot tougher than most people think and nobody's job is safe anymore - except perhaps the insolvency practitioners.
Northern Rock was a special case which had a particular vulnerability because of an unsustainable business model once wholesale bank finance had dried up. At that point the market took a look, didn't like what it saw, and stopped lending to Northern Rock. But the wholesale market got jumpy because of the US sub-prime scandal, not because of defaults with UK mortage business - which still is performing well given the pressure on owners' incomes.
Then Lehmans went down and the current round of awfulness kicked off. The hit on the London banks has yet to be measured and, it ain't over yet. Not by a long chalk. It's going to get a lot, lot tougher than most people think and nobody's job is safe anymore - except perhaps the insolvency practitioners.
hawk20
MB Enthusiast
I couldn''t disagree more strongly. Our banks sold plenty of mortgage backed securites too and Northern Rock, and Bradford and Bingley, and HBOS were doing all the things you seem to think only happened in the USA. Britain and America were the central players in this crash. And the UK housing market would have crashed and towed banks down with it, without any help from America. Houses at 7 and 8 times average earnings was unsustainable and bound to lead to a crash. I've been predicting it for over 3 years.
