07-12-07 by dugan
I’m no fan of OPEC, though I’m pretty sick of Big Oil describing itself as merely a pawn in the global fuel markets. So a Reuters report yesterday out of an OPEC meeting in Warsaw struck a chord: OPEC retorts that It’s not lack of crude oil driving up oil prices, but refinery shortages and world unrest. Translation: It’s the price of gasoline now driving the price of oil, not any shortage of crude oil.
It’s clearly a unified OPEC message, with Qatar’s energy minister saying the same thing at the same time: Pumping more oil won’t help price, "OPEC can’t do anything about it," the minister said. "The world is facing a shortage of gasoline and diesel, but not crude oil." It’s a claim borne out by federal crude oil supply reports over the past several months.
This could perhaps be dismissed as greedy OPEC excuse-making if the top deputy of the International Energy Agency wasn’t delivering the same message at the same time: " [The oil price is] driven up by supply anxieties. It is driven up by Nigeria, Iran, a number of things. Plus some fundamentals, by … impediments in the refining sector." (The IEA does see a future oil crunch, but in a five-year time frame, not affecting current oil prices).
OPEC actually is just repeating what financial reporters have said for months. Here’s the lead from a May 11 Bloomberg story:
May 11 (Bloomberg) — Crude oil rose on concern the U.S. supply of gasoline would be threatened by refinery halts and Africa’s latest disruptions of production.
OPEC sells crude oil and has little participation in the refining sector. The bulk of the world’s refining, especially of motor fuels, is done close to the places where gasoline and diesel are consumed. And it’s done in the US by the big vertically integrated oil companies, plus a few independent refining companies. In Asia, the second-biggest refining hub, it’s Big Oil in partnerships with government or local companies.
So the next time an oil company guy blames gasoline prices on OPEC, remember who’s doing the refining. Here’s a world refining capacity chart, showing the dominance of the US and Asia (not the Middle East or Latin America, where the OPEC nations are)